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Christopher Booker's notebook
(Filed: 24/04/2005)

Anything to declare, Mr Barroso?

When it emerged last week that two EU commissioners, Peter Mandelson and José Manuel Barroso, the Commission's Portuguese president, hadn't declared hospitality received on the yachts of two billionaires, it was inevitable that British media attention would centre on Mr Mandelson. But far more serious are the issues raised by President Barroso's admission that last year, just before he took office, he spent six days on the yacht of Spiros Latsis, one of the richest and most powerful businessmen in Greece.

The previous week, all 25 commissioners had agreed that Mr Barroso's holiday posed no conflict of interest. Yet what they may not have known was the substantial involvement of Mr Latsis's group of banking, petroleum, engineering and construction companies in the new Athens International Airport, at £1.6 billion the most expensive airport project in Europe. This was constructed by a German company Hochtief, with the aid of nearly £900 million-worth of funding from EU taxpayers and the EU's European Investment Bank (EIB).

Although Hochtief and the Latsis group are partners in a series of part-EU-funded construction projects in Greece, the European Commission's chief spokesman said last week that she was "not aware that the group had benefited from EU funding". Even more relevant is the ongoing controversy over EU funding of the airport at Spata, near Athens, on which I reported here as long ago as March 2004, and in which it now emerges that the Latsis group has significant interests.

For three years, up to the highest level, the EC has been refusing to answer a stream of questions from MEPs and journalists on how the contract to build and run the Spata airport was given to Hochtief. Although the German company contributed only €133 million (£90.8 million) to the €2.28 billion project, it now has the right to manage the airport for 30 years, through a company of which, although it holds only a 45 per cent stake (the remaining 55 per cent held by the Greek government), Hochtief can nominate a majority of the board and appoint the chief executive.

Exhaustive investigation by Basil Coronakis, the editor and owner of the Athens and Brussels-based journal New Europe, showed that the sub-contractors who carried out the actual construction work on the airport did not receive more than €320 million. This is way below the €2.28 billion (£1.6 billion) total cost stated by Hochtief in April 2003. Among the questions raised by Coronakis since then, and which the Commission has persistently failed to answer, are:

1) How, in order to qualify to administer a contract representing more than €2 billion of public money, did a private, profit-making company set up by Hochtief come to be designated by the Commission as an "authority" in 1996, when EU rules make clear that an "authority", responsible for monitoring that the money has been spent correctly, must be state-owned or at least non-profit making? How could a recipient private company itself be that "authority"?

2) How did the EIB come to lend €997 million (£700 million) to the project, at a time when its total cost was still being shown as only €950 million, and when EIB rules allow loans of only 50 per cent of a project's infrastructure cost?

3) Why in costings accepted by the Commission was a sum of €416 million (£290 million), shown as interest, added into the total twice?

4) What happened to the nearly €2 billion discrepancy between the estimated actual construction cost and the final costs claimed?

In March 2003, three MEPs, a German, a Dane and a British Conservative, Bashir Kanbhai, asked Romano Prodi, the Commission President, for an itemised cost analysis and sight of the invoices. In April, Mr Prodi replied that the European Court of Auditors was investigating the project.

In July 2003, a senior Commission official of the directorate-general in charge of the Cohesion Fund (DG-Regio) assured the MEPs that the project was now under investigation. Nothing has subsequently been heard of any outcome to these investigations.

At the end of July 2004, according to a Greek version of the airport authority's annual report, Mr Prodi attempted to close the "Spata dossier", before handing over to the new Commission under Mr Barroso, by calling a top-level meeting of three directors-general. They proposed that the Greek government should pay a penalty of €12.7 million, under two technical headings, although Cohesion Fund rules say that such a penalty must be paid by the "authority", not by a government. No more has been heard of this proposal. But when, last autumn, a new Greek government was set to investigate the Spata contract, the Commission sent a list of every EU-funded Greek project other than Spata, with a hint that, if all these were investigated, the government might have to return to Brussels billions of euros. Nevertheless the contract is now under investigation by Greece's public prosecutor.

A further twist to the tale has been provided by Yannis Terezakis, a Commission official working in DG-Tren, the directorate-general dealing with energy and transport.

As someone who must travel between Athens and Brussels up to 45 times a year, often with his family, Mr Terezakis became angered by Spata's exorbitant airport charges, which cost him nearly £7,000 a year. In November 2003, emphasising that he was writing as a private citizen, not as an official, Mr Terezakis lodged a dossier on the airport saga with Olaf, the Commission's anti-fraud unit.

In April 2004, Mr Terezakis was summoned to Olaf's offices in his official capacity to answer questions. He refused, on the grounds that his was a private complaint and that, as an official, Olaf could order him to keep quiet. After further exchanges, Mr Terezakis applied to the European Court of Justice for his right under EU law to see key documents on the airport project which the Commission was withholding. This month he was summoned by the Commission's administration (DG-Admin) to attend a disciplinary tribunal. Again he refused to attend, on the grounds that he is not conducting his case as a Commission employee who can be silenced for a breach of disciplinary rules.

All this shows how, under the Barroso Commission, Spata is still a highly sensitive issue - which makes it relevant to question the wisdom or otherwise of Mr Barroso's original refusal to declare as an interest his holiday last August with Spiros Latsis, whom Mr Barroso explains has been a friend since they met 30 years ago as students in Geneva.

The Latsis commercial empire has been closely involved with Hochtief in both constructing and managing Spata airport. Through Hellenic Petroleum, Greece's largest oil company, it holds the contract for all fuel supplies to the airport, through an EU-funded pipeline built by a Latsis engineering company. Latsis has a 50 per cent stake in the contract for running most of the airport's "ground-handling" - almost everything except control of the aircraft themselves.

Latsis's construction arm, Lamda, is a partner with Hochtief in a series of vast, part-EU funded motorway projects across Greece, as part of the "Trans European Network". And between 1999 and 2004, during the time when Spata airport was completed, the Commission last week revealed that the giant EFG Eurobank Ergasias banking group, controlled by Latsis family interests, held an exclusive contract to handle all EU structural funds coming to Greece, totalling €28 billion.

All this evidence might have given Mr Barroso pause to reflect when he was first asked last February by Nigel Farage, the leader of the UK Independence Party's MEPs in Brussels, whether he had taken any holidays that might raise a possible conflict of interest.

We may also question whether his fellow-commissioners were fully briefed when this month they endorsed his decision that he had nothing to declare, on the grounds, as Mr Barroso's spokesman put it, that, as far as she knew, his host had no "business ties with the EU".

Last Wednesday, in a speech in Geneva, President Barroso reaffirmed his belief that the European Union should be more "transparent" in its dealings with the public. He was giving the speech as a guest of the Latsis Foundation