A new beginning

Malta's accession to the European Union is now a reality. But I have already been very much immersed in the reality of belonging to the EU and working within its institutions. This was particularly the case during this last week when I had to shuttle between Brussels and Luxembourg in connection with my current duties as one of Malta's representatives on the European Parliament (EP) and with my imminent duties at the European Court of Auditors.

European Parliament

In the EP I attended a full session of the Economic and Monetary Affairs Committee whose agenda included the hearing of the new Commissioner for Economic and Financial Affairs, Mr Almunia, who is replacing Solbes Mira, after he was appointed minister in the new Spanish government.

Mr Almunia gave a good performance, although he was pressed quite hard on the stability and growth pact, in particular on whether there is need to make it more flexible to take into account better the business cycle.

Many MEPs expressed the view that the current stability and growth pact needs to be more flexible and the deficit limits in particular, take into account better the slowdown that has happened over the past two years, which has led to higher unemployment in most of the big economies of the Eurozone.

Others are worried that such increased flexibility could be the thin end of the wedge which leads to fiscal excess, and an undermining of the financial system in the EU. The new Commissioner had to manoeuvre delicately to tackle the issues raised, without departing too much from the current Commission stand of defending the stability and growth pact. I anticipate interesting times ahead in this area, especially as the new Commission later this year starts to take over from the old one.

The committee also had the regular exchange of views with Mr Trichet, president of the European Central Bank (ECB). He also presented the new format annual report of the ECB. The euro has recently eased a bit against the US dollar, giving some relief to many European exporters who have been suffering from the sharp appreciation of the single currency, especially over the last year.

Most of the technical papers presented to the committee in preparation for this dialogue, were rather critical of the ECB for leaving the interest rate much higher than in the US, and generally for not giving enough attention to stimulating economic growth and influencing the euro to more healthy levels for exporters.

Trichet, as always, was the perfect diplomat, very difficult to have him commit himself to a particular direction for the future ECB policy.

European Court of Auditors

This week I had the opportunity to visit the headquarters of the European Court of Auditors (ECA) in Luxembourg where I also had a meeting with the current president, Dr Juan-Manuel Fabra Valles. As provided for in the Treaty of Nice, every EU member state has the right to nominate one of its citizens to sit as member on the ECA. Hence, the ECA will now be composed of 25 members and the president is elected from among them. He is referred to as primus inter pares (first among equals).

I found Dr Fabra Valles to be not only extremely competent but also a very pleasant person indeed. He is truly a scholar and a gentleman, who made every effort to make me feel at home in what will be my new working environment for the next six years. Something which I greatly appreciated.

I have already written briefly about the remit of the ECA. It has been aptly described as the 'financial conscience' of the European Union, with the task of and duty to reassure EU citizens that the EU budget has been managed properly and implemented effectively. Not merely checking that all revenue is properly collected and all expenditure fully accounted for but also assessing the efficacy of the measures on which the money is being spent and the efficiency with which these are being implemented.

The areas that the ECA must cover are quite wide-ranging and a simple overview of how its work is currently subdivided is enough to give a feel for the extent of its responsibilities. Without going into too much detail, it is enough to say that these are split into four clusters, referred to as 'audit groups', plus an additional focus on audit methodology and quality assurance. The four audit clusters are the following:

1. Agricultural policies: Almost half the EU budget is allocated to agriculture. Special attention is therefore given to the evaluation of expenditure linked to this sector. These include assistance schemes in support of arable crops, milk products, beef and veal, animal and plant products markets, rural development and fisheries plus the export refunds mechanism and other related expenditure.

2. Structural and Internal policies: Regional development funding accounts for about a third of the EU budget. The ECA is therefore closely involved in the audit of expenditure under the EU's regional, cohesion and social policies, what are more commonly referred to as the structural funds. There are also other subsidiary expenditure headings on priority internal policies, such as employment and research, which are also addressed as part of this particular audit group.

3. External actions: Part of the EU's budget is spent in support of actions outside of the EU's boundaries. Although co-operation with third countries accounts for only five per cent of the EU budget, the audit of the relevant expenditure presents an additional challenge and hence the need for a special focus. External expenditure covers co-operation with developing countries in general, the European Development Fund for assistance to specific African, Caribbean and Pacific States as well as assistance to the Balkan countries and to those Central Eastern European States which are not part of the Union, plus expenditure linked to contacts with Russia and the other territories of the former USSR.

4. Audit Group 4: There is always the need for an 'others' category and Audit Group 4 brings within its focus a number of diverse areas of expenditure. These include all the administrative expenditure incurred by the Institutions of the EU in the execution of their functions, namely by Parliament, Council, Commission and Court of Justice. (The expenditure by the ECA is subject to an external audit). Similarly covered is all the administrative expenditure by the various Community agencies (e.g. the European Central Bank and the European Environment Agency) and the other decentralised bodies that function under the EU umbrella. Similarly audited are the banking, borrowing and lending activities of the European Investment Bank.

In addition to the above, Audit Group 4 also monitors and assesses, on an ongoing basis, the EU's own sources of revenue. These are derived from customs duties on goods entering the Union, from a percentage applied on VAT revenue collected within the member states and from a direct payment levied on each member state in direct proportion to its Gross National income. All these three sources of revenue involve the application of pre-defined formulae which require the systematic verification of certain underlying parameters. This is why there is a need for the ECA to oversee also this facet.

The way in which the ECA functions requires the distribution and assignment of the specific responsibility for the above audit tasks among the individual members of the ECA, although overall responsibility remains with the ECA, as a whole. Hence, at this moment, I am eagerly awaiting to learn which particular aspect of the ECA's remit I will be assigned to. In the meantime, however, a number of institutional and legal steps have to take place beforehand.

Tomorrow, the Budget Control Committee of the European Parliament will formally express itself on the hearings carried out by the undersigned and by the other nine nominees for members on the ECA.

The position adopted by the Budget Control Committee will then be presented for endorsement by the European Parliament sitting in plenary and subsequently for the endorsement by the Council of Ministers, possibly on Wednesday. However, it is rumoured that two nominees from other accession countries may face some difficulty in getting the green light from parliament. This could complicate matters since unanimity at Council is required. It has also left the timetable for the appointment of even the other new members of the ECA somewhat in a state of uncertainty.

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