Leading Article: Openness and democracy are the way to fight fraud

CLEAR AWAY the froth over fraud in the European Union's budget and three facts stand out. One is that this is a relatively small problem, not a large one. The bureaucracy of the European Commission is famously smaller than that of the Scottish Office, and its budget is one-fifth that of the British government's. The fact that pounds 3bn out of a budget of pounds 60bn cannot be properly accounted for is a disgrace, but only a fraction has been lost to dishonesty.

The second is that most of the EU's budget is spent by national governments. One of the reasons why devolution or "subsidiarity", the mantra of the Major government, never really caught on was because four-fifths of EU spending is already handled by member states.

The third is that fraud and waste are, sadly, to be expected in a budget that mostly takes the form of subsidies. Half of the EU's spending is still accounted for by the absurd Common Agricultural Policy, that original and monumental obstacle to the creation of an efficient and free market in Europe.

It is not at all clear how much of the missing billions has been stolen, wasted or simply lost track of, but it is plain that the attitude of the European Commission to the discrepancies is lamentable. For four years now, the Court of Auditors - the EU's spending watchdog - has refused to certify the union's accounts, although it accepts that most of the discrepancies are "honest mistakes". But the commission's response has been defensive and complacent. When the Dutch official Paul van Buitenen passed information to Euro MPs, complaining that evidence of fraud was being covered up, the instinct was to suspend, discipline and close ranks rather than to investigate. In fact, although he has made some wild allegations about the pressure put on him to keep quiet, he has also said: "I am not saying that the irregularities are widespread."

Nor do the allegations bandied about in recent days about the financial interests of commissioners' wives survive a moment's scrutiny, but the frustration of Euro MPs is understandable. Instead of declaring a crusade against waste and fraud, commission president Jacques Santer goes into next week's vote of confidence in the European Parliament declaring: "I want to have a strong commission because we have a lot of work to be done in the future." Nicolae and Elena Ceausescu could have said the same.

However, the problem goes far beyond Mr Santer's unwise posture of aggrieved innocence. Europe needs to wean itself off the culture of subsidy, and quickly. More fundamentally, Europe needs a new constitution. Without clearer lines of accountability, Europe's institutions will never gain popular consent. The systems for electing Euro MPs are flawed (and not much improved in Britain by the arrival of proportional lists), but the parliament does a reasonable job of scrutinising the commission, a role that should be strengthened. At present it lacks effective sanctions - apart from the "nuclear option" of sacking the entire commission on a two-thirds vote.

But the peoples of Europe need more readily identifiable democratic champions in Brussels who will fight for their interests. Jacques Delors' idea that each country should elect its commissioners directly has been overtaken by Europe's expansion, which requires the commission to be recast in any case. Robin Cook's plan for a "senate" of a small number of directly elected representatives from each country should be worked up instead.

The duty lies with national governments to come up with such mechanisms. Until the transparency and accountability of European institutions are improved, stories of fraud in EU budgets will only give succour to Eurosceptics, and undermine the consent of Europe's peoples upon which the health and strength of the Union depends.