European Commission freezes 100 billion in funds for Czech Republic

The European Commission has put on hold 100 billion crowns earmarked for two Czech operational programmes because of fears they were subject to corruption and insufficient supervision, according to the daily Mladá fronta Dnes. The Commission will not resume payments into the programmes until the Czech authorities revolve the issues.

Photo: European Commission

The Czech Republic faces the gravest problems with EU funds since 2012 when the European Commission halted payments into all Czech operational programmes. The daily Mladá fronta Dnes reported on Monday that reported the Commission put on hold 100 billion crowns for the Operational Programme Business and Innovation, run by the Czech Ministry of Industry and Trade, and the Regional Operational Programme Central Bohemia designed for the development of the region.

The Czech authorities learned about the freezing of the funds last August, according to the newspaper, which is when they received a report by the European Anti-Fraud Agency, or OLAF, listing the problems in the administration and supervision of the programmes.

The paper says that in 2009, the industry and trade ministry delegated its supervision of the innovation programme to the Czech Chamber of Commerce. However, among its members are dozens of companies benefiting from the same EU funds, which are now at risk from the freeze.

David Rath, photo: Filip Jandourek

The Central Bohemia programme, meanwhile, was put on hold soon after the region’s then governor, Social Democrat David Rath, was arrested in June 2012 on charges of corruption. The ongoing trial against Mr Rath and his associates uncovered systemic corruption in public procurement projects handed out by the regional administration and paid for with European money.

Last November, the Czech government asked for the funding of the regional programme to be resumed. But the European Commission declined, and said it would not cover 300 million crowns worth projects for hospital equipment that will have to be covered from the regional or state budget. The daily also reports the programme faces a fine of another 300 million crowns over past contracts handed out in violation of Czech public procurement rules.

It’s not clear when EU funding for the two operational programmes in question could resume. Deputy regional development minister Daniel Braun told Czech Radio on Monday the freezing of the funds does not automatically mean the money is lost.

Daniel Braun, photo: archive of Ministry for Regional Development

“The Czech authorities sent in their reactions to the audits of the two programmes and we are now waiting for an update from the European Commission. But funding for the projects continues, and will be reimbursed by the Commission after the situation is resolved.

"The solution could mean that some of the projects will not be reimbursed but it’s not like that the programmes would lose the money; this could be used to cover other expenses.”

The Czech Republic has chronic issues with drawing on EU funding. Between 2007 and 2013, the Czech Republic received 260 billion crowns from the EU’s structural funds, which was only a third of the funds earmarked for the country.