Euromoney’s survey indicates that graft is steadily worsening and is seemingly rife in many parts of Europe, despite concerted attempts to address it.
Whether it be bribe-taking at the border, back-handers in return for lucrative contracts or the plundering of loans and aid, corruption is a widespread problem that deprives countries worldwide of much-needed resources.
It also creates an unfair playing field and can dangerously lure investors into a trap they are well advised to avoid.
The problems afflicting smaller resource-rich nations saddled with debts and despotic dictatorships are legendary. So, too, are the underhand practices in countries as diverse as China, Nigeria, Russia and, yes, even Ukraine.
But for advanced industrialized nations, it is also proving a problem to eradicate, contributing to the declining average global score for the corruption indicator in Euromoney’s country risk survey – as the recent crisis in Austria testifies.
ECR survey contributor Constantin Gurdgiev, an associate professor of finance at the Monfort College of Business, says Austria ranks relatively well in terms of corruption globally and the rankings have been improving in recent years.
One of the reasons for this is the robustness of Austrian media in uncovering and publicizing cases of high-level corruption, which is a key factor in deterring individuals from undertaking such practices.
That said, he adds, the case concerning the twice-serving former chancellor, Sebastian Kurz, of the Austrian People’s Party (ÖVP), is a pivotal one.
“The scale and scope of alleged corrupt behaviour are both worrying, and the latest amplification in the scandal comes on the heels of the acquittal of another senior Austrian politician, Heinz-Christian Strache [the former vice-chancellor and chair of the far-right Freedom Party, FPÖ], on his second corruption trial in July this year.”
Overall, the ongoing corruption crisis is clearly acting as a channel for political risk amplification- Constantin Gurdgiev
Strache’s case led to his resignation as vice-chancellor in 2019, which brought down the coalition government led by Kurz, triggering a fresh election.
“Overall, the ongoing corruption crisis is clearly acting as a channel for political risk amplification,” says Gurdgiev.
His views are underlined by Austria’s falling score for corruption – one of two political risk factors, the other being government stability – contributing massively to its downgraded total risk score and gentle slide in Euromoney’s global risk rankings.
Karl Nehammer, the chancellor since December and a member of the ÖVP, is facing declining party popularity at the polls, due to economic pressures – the slowing economy, high inflation and rising cost of debt – an acute energy crisis unfolding into this winter and the internal political discontent over the cost of Austrian aid to Ukraine.
With the opposition sensing potential for a victory in an election, Nehammer is unlikely to survive a robust challenge in parliament, says Gurdgiev. However, it is unclear to what extent Austrian opposition parties are capable of uniting around a coherent economic platform that can convince voters of their ability to lead the country in the current global macroeconomic environment.
Another ECR contributor, Nicolas Firzli, director of the EU Asean Centre (EAC), a think-tank affiliated with the Singapore Economic Forum, believes the ÖVP-led government’s days are numbered and the contempt of Parliament by Thomas Schmid – who has now stepped down as head of Austrian state holdings group OBAG – is problematic on multiple planes.
Schmid, an official at the centre of a multi-year investigation and a close ally of Kurz, refused to answer MPs’ questions at a parliamentary committee.
“Everyone knows that Schmid, like chancellor Nehammer and most ÖVP-appointed former (or active) civil servants, answer essentially to their political mentor, former chancellor Kurz,” says Firzli.
“In many ways, Kurz is still the power behind the throne when it comes to the Austrian government and, perhaps more importantly, its ideological line: a classic neoliberal combination of laissez-faire economics and Nato-oriented hawkishness.”
Firzli says Austrian voters, in their majority, are fed up with that policy mix. Be they working-class Social Democrats suffering from economic decline and rampant inflation, or “petit-bourgeois” Austria first nationalists (the FPÖ) indifferent to Ukraine’s plight and hostile to the European Commission, they all want change.
Schmidt’s reckless behaviour and the progress made by central prosecutorial agency for corruption (WKStA) investigators have given them the political momentum they need to call for new parliamentary elections.
“In the coming weeks, the Nehammer government will fall, paving the way for new parliamentary elections,” he says.
As Firzli and Gurdgiev go on to point out, the Austrian corruption scandal is not unique in Europe.
In recent years, increased political polarization across many European countries has led to intensified efforts to uncover and publicize cases of political corruption, says Gurdgiev.
In many countries, such as Italy and Spain, as well as Germany and Malta, and even in Ireland and France, accusations of political corruption are often used by opposition parties to challenge the dominant parties’ grip on power.
“As a result of this, we are witnessing a pushback from the current political elites against anti-corruption civil-society movements and whistleblowers, with accusations that anti-corruption activists serve the interests of foreign political influencers (commonly, Russia) and/or promote domestic extremism,” says Gurdgiev.
Put simply, he says, political polarization is informing a notable drift towards the establishment perception of anti-corruption campaigners as sinister forces of political extremism.
Anti-corruption civil-society organizations, the whistleblowers and the media are now being accused of serving the interests of extremist politicians and/or foreign powers by the incumbent political elites.
This trend undermines more than European anti-corruption policies and efforts. It undermines public trust in the establishment and public support for the democratic institutions. It debases one of the key pillars of Western European systems of checks and balances, where civil society and media are allowed to impose some controls on political leadership.
However, the extent of corruption – private and public – across the European continent differs substantially in keeping with the economic and political maturity of individual states.
For many cynical policymakers, ‘whatever it takes’ has morphed into ‘anything goes’- Nicolas Firzli
In basic terms, core Northern and Western European states have well-established and enforced legal frameworks for fighting corruption, as well as relatively robust – in most cases – whistleblower protection legislation, enabling civil-society organizations in charge of uncovering corruption to function relatively well.
On the other hand, southern EU accession states and non-EU states in the Balkans tend to have much-less-evolved corruption controls and are even less active in enforcing their existent laws.
The further one travels from the core Western European democracies, the more prevalent and more endemic the problem of political corruption becomes, says Gurdgiev.
There are exceptions to this rule. Czechia, Estonia, Lithuania and Slovenia represent Central and Eastern Europe democracies with robust anti-corruption laws and, crucially, functional law-enforcement mechanisms.
On the other hand, Poland, Latvia, Hungary, Croatia and Slovakia represent countries with much weaker corruption controls enforcement, even though their legislative frameworks are, pro-forma, closely aligned with European best practices.
Albania, Serbia, Bosnia, Bulgaria and Romania, meanwhile, all lack robust legislative frameworks, as well as robust civil-society culture capable of monitoring and uncovering corrupt practices.
Firzli adds that beyond the recent scandals that have tarnished the reputations of Malta and Spain’s centre-left governments or – earlier this week in Frankfurt, Europe’s financial capital – the abrupt removal by popular referendum of mayor Peter Feldmann, there seems to be a deeper corruption current at play here.
Echoing Gurdgiev, Firzli says this is affecting both social democrat and centre-right conservatives in power across the European Union (at national or municipal level) and in Brussels (the EU Commission and EU Parliament).
“For many cynical policymakers, ‘whatever it takes’ has morphed into ‘anything goes’: the president of the European Commission Ursula von der Leyen herself has hinted that a certain degree of ‘opacity’ was acceptable in case of ‘vital emergency’.
“This cavalier attitude has justified all kinds of grafts and abuses, from Covid vaccine procurement (the Pfizer scandal) to the deliberately blind transfer of billions to corrupt Ukrainian politicians without any financial control mechanism.”
Not long ago, he says, Germany’s SPD and CDU grandees, in the mould of Helmut Schmidt and Helmut Kohl, would have been horrified.