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Tuesday, November 16, 1999 Published at 10:13 GMT

Business: The Economy

EU fraud costs millions

EC President Romano Prodi promised reform when he took office

Fraud and bad management in the European Union cost millions of pounds in 1998, according to a report.

The report - by the Court of Auditors - did not give exact figures, but said the amount was not much different from that found in other recent years.

Previous audits found that fraud cost the EU about 5% of its 85bn euro (£56bn) budget.

Farmers claimed subsidies for olive trees that did not exist and companies claimed for food deliveries to the poor which never arrived.

On top of farm fraud, the report found badly managed regional aid and foreign policy programmes, as well as misuse of research project funds.

Blame split

While much of the blame lay at the door of national authorities, who controlled most of the money, the European Commission is also responsible, the report said.

The study follows the mass resignation of the EC Commissioners in March, amidst allegations of fraud.

Under the new President, Romano Prodi, the Commission promised reform.

"There are very useful lessons in this report for the Commission," an EC spokesman said. "Improving financial management is one of the main priorities for the Prodi Commission."

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