Court of Auditors: ‘Due to inflation, EU risks losing up to 13 percent of its budget by 2025’

Brussels – European Union, numbers add up: the way the funds of the common budget (MFF 2021-2027) are spent and the revenues for the EU are “free of material errors.” Overall, the opinion on the reliability of 2023 accounts is “positive.” The EU Court of Auditors, in its report devoted to the 12-star budget, does not identify any particular critical issues. However, inflation is likely to gnaw away significant funds for the functioning of the 27 member states and their policies. Specifically, the Luxembourg auditors estimate that the EU budget could lose nearly 13 percent of its purchasing power by the end of 2025.

Since prices soared in the wake of the Russian-Ukrainian war, rudimentary calculations show the cost of rising inflation. The 2022 EU budget, the year the conflict erupted, totaled 170.6 billion euros, 186.6 billion in 2023, and 189.3 billion in 2024, for an overall 546.5 billion euros. With inflation taking away as much as 13 percent of purchasing power, the EU risks losing 71 billion euros from high living costs alone, more than 10 billion euros per year.

“We estimate a loss of between 13 and 17 billion euros a year,” confirms Carlo Alberto Manfredi Selvaggi, an Italian member of the EU Court of Auditors. The situation is not expected to worsen since, “foreseeably,” the 13 percent rate of loss of purchasing power due to inflation “is not expected to increase. In the background are the decisions that the European Central Bank will have to make moving forward in the direction that goes “toward a reduction in interest rates,” Manfredi Selvaggi acknowledges.

In any case, the EU Court of Auditors does not doubt that “the high inflation rate continues to affect the EU budget adversely.” Ultimately, Manfredi Selvaggi does not hide that it is likely that “some spending will not match what is declared” because of inflation, which has nibbled away at significant slices of the pie to finance European programs.

In general, the EU budget is not of particular concern. Qualitative and quantitative errors — i.e., bureaucratic-procedural irregularities and miscalculated sums — persist, but there are no significant cases of fraud. There is certainly a phenomenon of “increased irregular spending: data show that about 10.7 billion was incorrectly spent in 2023, up from previous budget years (8 billion in 2022 and 5.7 billion in 2021). Problems that, in particular, lurk in the spending of cohesion funds. It is a problem that Raffaele Fitto will have to solve if confirmed for the role of next commissioner for Cohesion. 

Finally, an item that has forcefully entered the European common budget following recent events is financial support for Kyiv. The Court notes that (33 billion euros) loans to Ukraine will be funded through borrowing on the financial markets. Political choices are not in question. However, there are many accounting concerns.However, there are many accounting concerns. In its opinion on the Ukraine Facility, the Court emphasized that this approach carries considerable risks for the EU budget, reiterating it in its report today.