European Union Subsidies Luxury Bike Shacks and Other Follies

Each year, the European Union dishes out massive amounts of money. Often, funding goes to ill-conceived or unnecessary projects. But there may be a way out of the waste.


Holtland, a town in Germany's north-western Ostfriesland region, is four meters (13 feet) above sea level. It boasts a church, an elementary school, two grocery stories, 2,200 inhabitants -- and a generous benefactor in Brussels.

Uwe Themann, the 49-year-old head of the town council, is proud to show off his hometown, and for good reason. Thanks to generous payments from the EU's coffers, Holtland has been thoroughly prettified. Everything in this small town, from the village square to the town hall, the kindergarten and the building where the fire department stores its equipment, has been tweaked and smoothed over to look like something straight out of a picture book of what little German villages ought to look like.

A network of narrow, red-and-gray cobbled streets and bike paths weave in and out of this bucolic composition of red brick and steep rooflines. At first asphalt was good enough for Holtland, but when local politicians discovered that Brussels would assume half the cost of improvements, money was suddenly no object. The streets and bike paths, it should be mentioned, are largely empty.

The European pie and where the pieces go.
DER SPIEGEL

The European pie and where the pieces go.

Even the town's old mill is in full working order once again, thanks to EU subsidies. But because it doesn't fulfill the EU's strict hygiene requirements, it can no longer be used to mill grain. But the piece de resistance stands at the entrance to the town, on Highway 436. The structure consists of red brick walls, thick beams and a tiled roof covering benches, a telephone booth and a village map in a glass case. The stylish little building is a glorified bike rack.

From Sicily to the Arctic Circle

"We really wanted to build just a simple shelter with a few bike racks," says Themann, the town council head. But Brussels wasn't handing out subsidies for uncomplicated little buildings to house bikes. To qualify, local officials kept inflating the project until they arrived at the €150,000 ($199,500) cost of building the current brick lodge -- the threshold to qualify for a grant under the EU's Village Renewal Program.

Towns and villages like Holtland are everywhere -- at least wherever Brussels ends up sending its subsidies. From Sicily to the Arctic Circle, from Fuerteventura to Vilnius, EU subsidies are being used to give villages complete face-lifts, deposit landscaped traffic circles on green meadows, site concrete biotopes along river banks and slice multi-colored bike paths through forests and cities. There are literally thousands of projects, many tiny, a few gigantic. Their combined cost runs into the billions.

Whatever happened to empty government coffers? The lack of funding for daycare centers, management problems in schools, universities filled to capacity? And what about the European mountains of debt?

As far as the EU is concerned, such concerns may as well not exist. There is little evidence of the dire financial straits of most EU countries at the organization's headquarters in Brussels. The problem there is not any particular lack of anything -- rather it is a problem of excess. Ingeborg Grässle, a member of Germany's conservative Christian Democratic Union (CDU) and a budget expert in the European Parliament, is appalled to realize that Brussels is willing virtually "unlimited cash" onto just about anything.

No idea seems too off-the-wall, no project too remote to be considered by Brussels. The only real hurdle is that a proposed project must fit into one of the hundreds of EU support programs used to finance ventures as diverse as street theater in Northern Ireland, farms in Scandinavia, film festivals on the Mediterranean, red-and-gray sidewalks made of composite paving stones in the Polish hamlet of Niedzica-Zamek -- and that luxury bike shed in Holtland.

Self-sustaining money cycle

It's all being paid for under a budget item with the cryptic name "Cohesion for Growth and Employment." In the next seven years, Brussels plans to dole out the enormous sum of €347 billion allocated to the program. It's the EU's second-largest subsidy program after farm subsidies.

The funds are in fact intended to support underdeveloped regions and bring them up to European standards in the long term. To fund the program, all EU members pay contributions into a common fund based on their ability to pay; the resulting pot is then used to support the economically weaker members. The logic behind the idea is that the wealthy nations will also benefit in the long run through higher exports.

That's the theory. But in practice the European Commission, European Parliament, and member states have created an absurdly self-sustaining money cycle. Not just the needy but also the politically powerful -- those who apply the most pressure -- are cashing in on the program. Billions of euros are being frittered away "stupidly and pointlessly," says Helmut Seitz, a Dresden economics professor who complains that the program lacks a clear plan or even effective control over the use of its vast resources.

It would take radical financial reforms to put a stop to this squandering of EU funds. But few are interested, at least for now. Indeed, most politicians and EU administrators alike have had little difficulty coming to terms with the system. The member states have already negotiated the painstaking details of how the money is to be allocated between now and 2013. For example, Poland will receive about €10 billion a year from the EU pot until 2013, while the Germans are entitled to just under €4 billion.

But unlike the Poles, the Germans will be asked to pay substantial sums into the system first, creating an absurd give and take. Of the €18 billion Berlin sends to Brussels, about €12 billion comes back to Germany through various sources. Of course, that money is then earmarked for programs conceived in Brussels or investments approved by Brussels.

Where they are needed least

"The system is completely ridiculous," says CDU expert Grässle. "We send money to Brussels and receive a large share of it back, along with program rules and implementation requirements that end up directing the funds to places where they are needed least."

In recent years, for example, word got around in Germany's industrial Ruhr region that Brussels is most likely to approve projects that promise to create jobs in high-tech, software or the media. The grotesque result is that the Ruhr region is now filled with expensive but largely unused "foundation centers" and "media parks." Many are now empty.

Other projects are even the subject of investigations. That was the case with the HDO animated film center in the central German city of Oberhausen, built at a cost ranging into the double-digit millions. After a series of scandals -- and as many fruitless attempts to save it -- the center finally filed for bankruptcy in 1998.

One of the most bizarre monuments to the absurdity of the subsidies programs is located in Brand, a town in the Spreewald region near Berlin. On the site of a remote former Soviet military airfield, Tanjong, a Malaysian conglomerate, has built Tropical Islands, an indoor water park on an unprecedented scale. The huge building is about 360 meters (1,181 feet) long, 210 meters (689 feet) wide and 107 meters (351 feet) tall. It could easily hold eight soccer fields, the Eiffel tower on its side or New York's Statue of Liberty upright.

Is it time to make a cut in European Union subsidies?
REUTERS

Is it time to make a cut in European Union subsidies?

Instead it contains swimming pools with white sandy beaches, large water slides, saunas, playgrounds, restaurants and stages for entertainment. What's been missing so far in what the park's owners call an "authentic tropical paradise" is a sufficient number of guests. The park's operators had expected close to 2.5 million visitors in the first year, but no more than a million actually turned up. They now hope to turn the business around with new park attractions.

If the Tropical Islands park goes under, says Elisabeth Schroedter, a Green Party member of the European Parliament, at least €17 million in subsidies, mainly from the EU's coffers, will have been wasted on "an economically and environmentally questionable project." That would be in addition to the €42 million already sunk into the giant building. Before being turned into an indoor water park, the building was meant to house a factory for Cargolifter, a manufacturer of giant cargo blimps. But the company went bankrupt in 2002.

Germany's east isn't the only part of Europe where these types of bad investments have already cost EU taxpayers billions. In southern Italy, for example, Brussels invested roughly €800 million in a project to modernize and electrify the railway network. The results of a 2002 review of the project were astonishing: Before it began eight years ago, "just under half" of the route network was electrified. According to official EU figures, the electrified portion of the network upon project completion was "50 percent."

What is more, three-quarters of all railways in southern Italy are still single-track lines. What exactly happened to the EU's €800 million is a matter of conjecture, but apparently a significant portion of the money quickly ended up in disreputable hands. Italy's tax investigators, the Guardia di Finanza, write in their annual report that the EU was defrauded of €433 million in subsidy money in Italy in 2006. The unreported number is likely to be much higher, and not just in Italy.

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