The Cost of Corruption in Europe — Up to €990 Billion (£781.64 Billion) Lost Annually
March 22, 2016
- RAND Europe's study shows the true extent of the cost of corruption in the EU, with new figures far higher than the previous estimate of €120 billion (£94.74 billion).
- Study estimates that an initial €71.12 billion (£56.16 billion) could be saved through the EU adopting three policy measures regarding corruption.
- Corruption risks during public procurement could cost Europe around €5 billion (£3.95 billion) a year.
A new study has highlighted the true extent of the cost of corruption in Europe, with new estimates showing that up to €990 billion (£781.64 billion) in GDP terms is lost annually.
The Cost of Non-Europe in the Area of Corruption Study by RAND Europe, commissioned by the European Parliament, investigated the many forms of corruption, which includes paying bribes or exercising power to give privileged access to public services, goods or contracts.
The new figures from the study are far higher than the initial estimate provided by the European Commission of €120 billion (£94.74 billion), after RAND Europe used an innovative methodology to measure the cost of corruption to the EU as a whole. This takes into account the indirect effects of corruption, such as disincentives of companies to invest, and direct effects, such as money lost on tax revenues and public procurement.
Corruption involving EU public procurement was estimated to cost Europe around €5 billion (£3.95 billion) a year. This form of corruption could be involving only one organisation in a procurement process, or giving organisations just a couple of days to respond to a tender for a new contract.
Based on the study, RAND Europe has recommended three policy measures to address corruption in Europe and retrieve an initial €71.12 billion (£56.16 billion) from the money lost each year. These are:
- Applying the updated Cooperation and Verification Mechanism (CVM), which was used in Bulgaria and Romania before each joined the EU, to other member states could reduce corruption costs by €70 billion (£55.27 billion) annually.
- Establishing a European Public Prosecutors' Office (EPPO), which would assist OLAF (the European Commission Anti-Fraud Office) in investigating corruption across the EU, could reduce corruption costs by €0.2 billion (£0.16 billion) annually.
- Implementing a full EU-wide procurement system could reduce corruption costs by €920 million (£726.37 million) annually.
Marco Hafner, a research leader at RAND Europe and the report's main author, says: “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.”
He continues: “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 report for the Cost of non-Europe Corruption can be viewed at: http://www.europarl.europa.eu/RegData/etudes/STUD/2016/579319/EPRS_STU%282016%29579319_EN.pdf.
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Notes to Editors:
The league table of EU corruption — lowest to highest levels in individual member states based on an average of three corruption indices
|9||Republic of Ireland|
The * indicates countries that have higher corruption levels than the EU average for the 28 member states.
About RAND Europe
RAND Europe is a not-for-profit organisation whose mission is to help improve policy and decisionmaking through research and analysis. Our clients include European institutions, governments, charities, foundations, universities and private sector firms with a need for impartial research. We combine deep subject knowledge across diverse policy areas including health, science and innovation; defence, security and infrastructure; and home affairs and social policy. Combined with proven methodological expertise in evaluation, impact measurement and choice modelling, we are able to offer quality-assured research and analysis, unbiased insights and actionable solutions that make a difference to people's lives. www.randeurope.org