ECONOMY

Commission seeks to keep OSE investment costs from derailing

The European Commission has cast a shadow over a 4.5-billion-euro investment program designed to modernize Hellenic Railways (OSE), seeking to establish strict assessment procedures on how the money is spent. «The European Union intends to stop all payments for railway projects, both from the Third Community Support Framework (CSFIII) and the Cohesion Fund until a proper management framework is formulated and until the Greek authorities deal with all irregularities,» Regional Policy Commissioner Michel Barnier is quoted as saying in a recent report to the Greek government, revealed by Kathimerini on Sunday. The Commission also emphasizes in the report that it possesses no guarantees about proper management by OSE’s construction arm, ERGOSE, and that findings of irregularities force it to consider demanding a return of funds disbursed in the past. The funds affected come under CSFIII’s program for «Railways, Airports and Urban Transport, (RAUT) 2000-2006.» In the report, which sources say was sent to Transport Commissioner Christos Verelis on January 8, Barnier puts ERGOSE in the spotlight, calling on it to prove that it can triple its work performance, that it can deliver the program in time and that its planning is based on a well-founded simulation of the service levels desired. «Our departments will have to examine in detail the possibilities for funding, the realism and adequacy of the program and timetable in question, taking into account ERGOSE’s productive capabilities, with a view to achieving CSFIII targets and avoiding as much as possible extensions of the contracts, delays and complications,» Barnier said. Sources said the Commission is planning to send inspectors to check the quality of projects carried out and any complementary contracts signed after approved funds were exhausted without the completion of projects. The RAUT program Management Authority found cost overruns in its account audit of ERGOSE as early as 1998 (concerning CSFII funds), but did not insist on economic sanctions. However, the then Ministry of National Economy took the initiative and imposed cuts of 8.65 million euros from the program, after inspections in 1999, considering that related contracts were in violation of national legislation. In a statement on Monday, ERGOSE said the Commission’s assessment and warnings were based on inadequate information and interpretation of the legal framework regarding public works in Greece, leading to «arbitrary conclusions.» It noted that contrary to Commission claims, recommendations by PriceWaterhouseCoopers (PWC), who acted as technical advisers in ERGOSE’s reorganization between 1999 and 2001, were at best inadequately implemented. PWC said that the reorganization was actually implemented on the basis of its directives. It further said that in 50 inspections carried out by Greece’s independent Public Project Quality Control Agency (ESPEL), all ERGOSE projects were rated of top quality. It claimed that cost overruns averaged only 3.4 percent.