The European Union's financial watchdog accused the bloc's executive today of mismanaging a €3.5 billion farm subsidy scheme.
The European Court of Auditors said that market information, used by the European Commission to calculate export subsidies that help EU farmers sell produce on the world market, is often inaccurate and out of date.
"There are no guidelines on rate setting procedures," it said in a report on the system of export refunds, totalling about €3.5 billion a year, by which the EU subsidises the gap between inflated internal prices and lower global ones in the cereal, sugar, dairy and beef sectors.
The report criticised the lack of communication between sections within the European Union executive that are responsible for setting subsidies. "There is no co-ordination between the responsible market divisions," it said.
The Luxembourg-based watchdog also found that the subsidy scheme allowed EU dairy farmers to undercut world butter, cheese and skimmed milk powder prices.
"The Commission's estimates show that the minimum EU price net of refund is below the world price for certain milk products," it said.
The EU's lavish farm subsidy system swallows nearly half of the bloc's €100 billion annual budget.
Farm ministers last month agreed a radical revamp of the Common Agricultural Policy (CAP), hoping the reform would give the bloc leverage at the next meeting of world trade ministers in Cancun in September.
The EU has already promised to cut its export subsidies by 45 per cent within the Doha round of World Trade Organisation talks, which are supposed to focus on the needs of developing countries.
Poorer countries and development campaigners say EU farm subsidies hamper food production and impoverish farmers in the developing world as cheap EU food floods the market, causing world prices to collapse.