Fazekas, M. – Chvalkovska, J. – Skuhrovec, J. – Tóth, I. J. – King, L. P.: Are EU Funds a Corruption Risk? The Impact of EU Funds on Grand Corruption in Central and Eastern Europe. In Alina Mungiu-Pippidi (ed.): The Anticorruption Frontline. The ANTICORRP Project Vol. 2., Barbara Budrich Publishers. Opladen – Berlin – Toronto. 2014. pp. 68-89.
There is an intensifying public debate about EU Structural and Cohesion Fund’s impact on government quality in recipient countries. We test the hypothesis that EU Funds increase high-level corruption in public procurement between 2009 and 2012 in Central and Eastern Europe (Czech Republic, Hungary, and Slovakia). We use a unique pooled database containing over 120,000 public procurement contracts and the characteristics of participating organisations. We develop a novel composite corruption risks index based on the incidence and causal structure of ‘red flags’ in public procurement transactions. We find that EU Funds increase corruption risks in the analysed countries on average by 4%. This is a large figure given the extensive monitoring mechanisms associated with EU funding and already high corruption risks in national spending. The negative effect of EU Funds on controlling corruption call for carefully balancing the economic benefits with substantial governance costs.