Political corruption in Europe: A threat to more than public funds

During Viktor Orbán's tenure as Hungary's leader, two close associates have experienced a significant surge in their wealth. Lőrinc Mészáros, once a gas fitter, saw a remarkable change in his fortunes following Orbán’s re-election in 2010. His astounding success at securing government contracts has made him Hungary’s richest person. Similarly, Mészáros’s long-term business partner, László Szíjj, has also dominated competition for these contracts. Between 2018 and 2020, Szíjj won 10 per cent of Hungary’s public procurements, while Mészáros won 7 per cent, underscoring their substantial power over the country's economic landscape. Perhaps the biggest winner, however, is Prime Minister Orbán whose control of who gets rich ensures that highly influential businesspeople help reinforce his own power.

This is just one of many instances throughout Europe of businesspeople with close ties to power seemingly getting advantages – even in countries with less public sector corruption, like Estonia, major political donors are winning a significant share of public tenders.

Public officials having serious conflicts of interest between their duties to the public and their own priorities is also too common. And this happens at various levels. Take for example, member of the European Parliament Axel Voss, who earns up to €6000 a month as a lawyer for companies working on data protection and artificial intelligence – topics he actively addresses in parliament. Can citizens be sure that he is acting in their interests, or is there a risk of policy decisions being swayed to benefit these companies instead?

For society to work for everyone, politicians need to act with integrity. That means consistently exercising power for the common good – instead of rewarding themselves and their associates.

When political corruption happens, it makes governments ineffective, deepens inequality and deprives people of their human rights. Corrupt politicians weaken checks and balances to further their own power and wealth while advancing the interests of the few at the expense of the many. Corruption at the top also weakens control of many other kinds of corruption, from embezzlement to bribery of low-level officials.

And when citizens see these abuses of power, they lose trust in political systems and stop voting, or perhaps worse, vote for dishonest politicians who co-opt anti-corruption language to tap into public discontent. Many of these politicians then undermine the ability of citizens, civil society and media to hold the powerful to account.

Political corruption can turn countries in dangerous directions and can even do the same for entire regions – with European Union (EU) elections coming in June 2024, voters are wondering if they can trust EU politicians. Questions linger about why they allegedly allowed Qatar to pay bribes for political advantages and whether they missed an opportunity to reform their system sufficiently to prevent similar undue influence in the future. These elections also risk being undermined by weak national laws around political finance and lobbying that allow business figures to buy the loyalty of candidates from EU member states and secretly influence them. The consequence could be giving seats in parliament to people who prioritise dangerous private interests over the common good.

A key step toward protecting Europe from political corruption is to bring openness to politicians’ activities. That is why Transparency International’s Integrity Watch 3.0 project gathers and analyses data on politics to uncover weak spots and suspicious activity. In 16 member states and the EU parliament, it is shining a bright light on issues like politicians’ side activities that conflict with their duties to the people, undeclared lobbying activities and secretive, unlimited political donations.

Integrity Watch reveals many concerning facts about political finance throughout the region. In Italy, only a small number of political associations, foundations and committees – which are believed to provide considerable funding to the political parties – declare who their donors are. Only nine did so in 2021, and eight in the election year of 2022. In Malta, the sources of almost 99 per cent of all donations to political parties between 2016 and 2019 remain undisclosed to the public. Over 13 million euros were donated anonymously.

Opacity around donations is still common across the EU: less than half of countries in the Union publish key details, such as timing and amounts of donations, or names of donors. This opacity heightens the risks of hidden influence over politicians. And these hidden donors could even be organisations and individuals with a history of unethical actions or even criminal connections.

Another way that much of Europe is failing with political finance is the absence of limits to the amount of money that each donor can give to politicians. This lack of restriction raises concerns over decision-making being swayed by the highest bidder. At least twelve EU countries do not have any cap on the amount of money that can be donated during an election campaign.

Loopholes render existing caps ineffective in various countries. In Latvia, for example, some donors sidestep limits by using intermediaries, like family members, to make further donations. This shows how little fear these donors have of getting caught, which makes sense as weak enforcement often renders these capping rules ineffective.

We’ve also spotted worrying signs of companies controlled or owned by big donors getting contracts from governments. This can be seen in Estonia, where in the lead up to the 2023 election, a crucial time for attracting donations, 8.2 per cent of the public procurement contracts were awarded to people who made substantial contributions to political parties. In certain industries, like pharmaceuticals, major donors have won more than a quarter of the public contracts. Among these highly successful individuals is Margus Linnamäe, a leading businessman and a top 15 donor in the country. He has secured over 360 million euros of government contracts.

Similar scenarios involving business figures can be seen in Estonia and many other European countries. A lot of individuals in the business community simply want to support democracy and endorse parties they believe in. Unfortunately, others gain unfair advantages over competing bidders through destructive trade-offs with politicians that can damage society when, for instance, stifled competition results in sub-standard work.

With European elections slated for this year, urgent attention must be paid to the ongoing weaknesses in national campaign finance regulations. Even though the European elections determine the composition of one single parliament, they are often referred to as 27 national elections with 27 different rulesets on how political finance is regulated.

This means that risks in one Member State could impact others, jeopardising the integrity of the elections as a whole. A particularly serious issue is covert foreign funding of electoral campaigns, a tool that authoritarians use to secure the election of sympathetic politicians with the aim of undermining the EU and its states from within. Seven out of 27 Member States still allow foreign donations to political parties while nine allow foreign funding of candidates. To safeguard electoral processes throughout the block, a total ban on non-EU funding is urgently needed.

Even when foreign funding bans are in place, the widespread shortage of regulations on spending by third-parties that can influence elections, such as PR firms, or on disclosing who is behind corporate donations means that the origin of a considerable share of money that flows into elections remains opaque. Strong legislation is urgently needed, as are sufficient resources and mandates for oversight and enforcement agencies. The difference among public institutions responsible for political finance across Member States is striking, with notable differences in reporting requirements, investigative powers and sanctions. Harmonising these aspects is crucial to ensure a standardised and transparent electoral financing landscape.

Conflicts arising between politicians’ official duties and their personal interests can also skew the flow of public contracts into the hands of a few. The most extreme example is the lack of respect for integrity rules displayed by officials in the Hungarian regime, which the European Parliament has described as an electoral autocracy. Integrity Watch found that 118 public contract winning business owners hold at least one public office, with many of them serving or having served in the contracting authorities that hire their companies.

In 2021, several MPs in Germany’s then ruling party were paid hundreds of thousands of euros in commissions for helping protective mask suppliers win lucrative government contracts. While two MPs resigned, others kept their roles, even after being excluded by their parliamentary group.

Whether it’s business, deal brokerage or working for politically active law firms, many politicians across the region are involved in side activities that face either inadequate regulation, like in Italy, or insufficient scrutiny, as in Portugal. In Portugal, nearly one fifth of MPs declare paid outside activities that seem incompatible with their legislative duties. This creates the risk of politicians prioritising their employers’ interests over the common good.

EU politicians wield considerable power, and any undue influence in their decisions could have far-reaching consequences, given that the directives and regulations they vote on affect the lives of over 400 million citizens. It is particularly concerning, then, that Members of the European Parliament (MEPs) are allowed to omit crucial details on their side activities. As of September 2022, 30 per cent of all declarations of interest published on the parliament website lack the necessary information to identify conflicts of interest. Furthermore, 12 per cent of all side activities are for organisations registered as lobbying EU decision-makers. This means that almost one in eight side jobs are with organisations that have an active interest in influencing EU policy. This substantial number raises concerns about the potential for European Parliament “insiders” to help these organisations secure policies to achieve their goals, whether ethical or not.

Lobbying is not necessarily problematic and can help give voice to the underrepresented. However, all people affected by laws and policies should have equal opportunities to influence those who decide them. Unregulated lobbying that gives the wealthy or politically connected unequal and secret access to politicians leads to decisions that benefit private interests at the expense of the public good.

In Europe, lobbying legislation tends to be ineffective and is rarely enforced. Take Slovenia, for instance: the quite strong lobbying law has not been properly implemented, due to factors like under-resourcing of the anti-corruption commission. Public officials and bodies are also not reporting enough information on their lobbying activities to enable the commission to hold politicians to account.

Some countries do not even have lobbying laws, like Italy, Portugal, Slovakia and Malta. This can cost lives: in Malta, the public inquiry into the assassination of investigative journalist Daphne Caruana Galizia denounced the secretive connections between politicians, business people and criminals – undisclosed discussions enabled this deadly collusion between these groups.

It’s shocking that Maltese politicians have not rushed to create robust lobbying laws in the aftermath of this assassination, but they are not alone in the region. For example, Portuguese MPs have repeatedly rejected proposed lobbying laws for around five years, leading some to ask: who is lobbying against the lobbying regulation?

Despite this, there have been some positive developments. In 2021, a Lithuanian law was amended to bring more transparency into decision-making processes, including with a requirement for those on both sides of the lobbying table to report lobbying activities. Since then, lobbyists have increased the declarations of activities fourfold compared to the total made in the 20 years following the law’s implementation in 2001.

However, the law needs to be enforced better. Integrity Watch has found that lobbyists declare their activities 2.5 times more often than the powerholders they talk to – only about half of Lithuanian MPs report their meetings with interest groups and registered lobbyists. This suggests that MPs may still be concealing who is influencing them and might also be making decisions without consulting relevant stakeholders, like civil society organisations and trade unions.

Politicians should publicly disclose their lobbying activities in registers that contain key information about those involved and specify which laws or policies are being targeted. This transparency would show the full “footprint” that a lobbyist has on decision-making processes.

With over 12,000 organisations listed in it, the EU’s lobbying register is one of the largest in the world and asks lobbyists for all the right information. However, the register is only mandatory for the European Commission, which applies the simple rule of no meeting without prior registration.

Lobbyists seeking to hide their true backers or that prefer to stay in the shadows may instead concentrate on members of the European Parliament or national officials in the Council of Europe. That’s because they can meet them without disclosing key information in the lobbying register. This poses several integrity risks – MEPs that hold such meetings enable lobbyists to circumvent the Code of Conduct that is tied to the register, which sets rules forbidding behaviour than can skew law-making.

The Council is particularly vulnerable, as EU Member States take the “no meeting without registration” approach on a voluntary basis and typically only during their EU presidencies. This means that some countries’ representatives in Brussels are only transparent about who they meet every 14 years. They can also choose not to publish their meetings with lobbyists, which increases the chances of conflicts of interest and undue influence staying hidden from key corruption watchdogs, like journalists and civil society organisations.

What is more, MEPs only recently made it mandatory to publish their interactions with lobbyists. Up until then, 27 per cent of MEPs had not published a single meeting since taking office in June 2019.

Increasing people’s trust in decision-makers and minimising political corruption risks can only be achieved with transparency and effective prevention of conflicts of interests and undue influence.

Many of the important statistics in this article were made possible by Integrity Watch harnessing political data, highlighting the need for more open data at EU and national levels to adequately counter corruption threats. And while strong political integrity laws are necessary, it’s also clear that well coordinated, effective enforcement is equally crucial throughout the region.

To empower citizens, journalists, civil society and competent authorities in identifying trading in influence and illicit enrichment, we recommend that the Directive on Combating Corruption, currently under discussion by Council of the EU and the European Parliament, should:

• Ensure open political integrity data. All EU member states must publish, in accessible machine-readable and interoperable formats, datasets with political finance information, assets and interests disclosures of high-level officials, gifts and travel registers, lobbying registers, and lists of politically exposed persons.
• Close regulatory and implementation gaps in lobbying and political financing. EU member states must improve lobbying rules and practice to ensure the proactive publication of influencing activities in centralised registers. Legislative footprints must document what steps are taken during legislating processes to ensure the inclusiveness of stakeholders in the development of regulations. Likewise, EU members states must revamp their political finance frameworks to introduce effective private donations caps, beneficial ownership disclosure for legal entities making contributions, compulsory use of dedicated bank accounts for making and receiving monetary contributions, as well as the timely publication of detailed income of and expenses incurred by candidates, political parties and third parties who participate in campaigns.
• Strengthen the prevention of conflicts of interest. All EU member states must step up their rules for the disclosure and management of conflicts of interests in the public sector and among elected officials, including cooling-off periods and incompatibilities on revolving doors. All EU members must ensure the ad-hoc and periodic disclosure of assets and financial and non-financial interests, as well as any outside income, employment, memberships or beneficial ownership in any type of legal entity.
  
• Increase deterrence through robust oversight and sanctions. Competent national and international authorities across the EU should be given the mandate and resources to audit, verify and publish all relevant political integrity data and should be empowered to monitor compliance and sanction breaches of regulations. Their oversight role must be supported by clear rules and protocols that facilitate swiftly and where possible automatically sharing data in their jurisdictions and across the EU with other anti-corruption agencies, ethics bodies, ombudspersons, tax authorities, financial intelligence units and other relevant law enforcement agencies. Signing and ratifying the International Treaty on Exchange of Data for the Verification of Asset Declarations must be part of such efforts.