Unmasking the Trillion Euro Shadow: The True Cost of Corruption in Europe

A groundbreaking study by RAND Europe has revealed the staggering extent of corruption’s financial drain on the European Union, estimating annual losses of up to €990 billion (£781.64 billion). This figure dwarfs previous estimates, highlighting a far deeper and more systemic issue than previously understood. The research, titled “The Cost of Non-Europe in the Area of Corruption,” exposes not just blatant bribery but also the insidious ways power is misused, from preferential treatment in public services to rigged public contracts.

This eye-opening figure, commissioned by the European Parliament, significantly surpasses the European Commission’s earlier estimate of €120 billion (£94.74 billion). RAND Europe’s innovative methodology delved into both the direct and indirect repercussions of corruption. Direct costs encompass lost tax revenue and inflated public procurement expenses. Indirect costs, however, paint an even bleaker picture, including the chilling effect on business investment and overall economic stagnation caused by a corrupt environment.

One particularly vulnerable area highlighted in the study is EU public procurement, where corruption is estimated to siphon off around €5 billion (£3.95 billion) each year. This can manifest in various forms, from favoring specific organizations to manipulating tender processes with unreasonably short deadlines, effectively excluding fair competition.

To combat this pervasive issue and reclaim a portion of these monumental losses, RAND Europe proposes three key policy measures, which could initially recover €71.12 billion (£56.16 billion) annually for the EU:

• Expanding the Cooperation and Verification Mechanism (CVM): Applying the CVM, previously successful in Bulgaria and Romania before their EU accession, to other member states could yield a dramatic reduction in corruption costs, potentially saving €70 billion (£55.27 billion) per year. This mechanism focuses on strengthening judicial systems and tackling organized crime, crucial steps in curbing corruption.

• Establishing a European Public Prosecutors’ Office (EPPO): The creation of an EPPO to work alongside OLAF (the European Commission Anti-Fraud Office) would significantly bolster the EU’s capacity to investigate and prosecute corruption across member states. This collaborative approach could cut corruption costs by an estimated €0.2 billion (£0.16 billion) annually.

• Implementing a Unified EU-wide Procurement System: Moving towards a standardized, EU-wide public procurement system would enhance transparency and reduce opportunities for corruption in awarding public contracts. This systemic change is projected to save €920 million (£726.37 million) each year.

Marco Hafner, the lead researcher at RAND Europe and the study’s primary author, emphasizes the far-reaching consequences of corruption: “Corruption imposes significant social, political and economic costs. Not only does it result in huge amounts of money being lost annually, but corruption leads to more unequal societies, higher levels of organised crime, weaker rule of law and lower trust in public institutions.”

Hafner concludes, “Measuring corruption is challenging, but our study provides one of the most realistic and current estimations of its true cost to Europe as a whole. Our recommendations highlight achievable targets for the EU and member states to help stop corruption from taking place and limit the amount of money lost each year.”

The full, detailed report, “The Cost of Non-Europe in the Area of Corruption,” is available for review at http://www.europarl.europa.eu/RegData/etudes/STUD/2016/579319/EPRS_STU%282016%29579319_EN.pdf. This comprehensive analysis serves as a critical resource for policymakers and citizens alike, urging decisive action to combat corruption and reclaim billions for the European economy.

Notes to Editors: EU Corruption Levels by Member State

* Countries with corruption levels higher than the EU average.

About RAND Europe

RAND Europe is a non-profit research organization dedicated to informing policy and decision-making. They provide impartial analysis across diverse policy areas, offering evidence-based solutions to complex challenges. Learn more at www.randeurope.org.