Brussels - Most of the money given by the European Union to member states is well spent, though problems remain when it comes to payments designed to boost employment, EU officials said Monday.

Officials in Brussels said the bloc's annual audit debunked the "myth" that EU spending is either mismanaged or riddled with fraud.

It found that more than 98 per cent of direct payments made in 2007 to farmers or on administrative expenditure was error free.

Other budget areas such as research grants and humanitarian aid also registered errors of less than 5 per cent.

However, spending in so-called structural funds - money designed to boost employment in the EU's poorest regions - remains a problem.

Auditors found that 11 per cent of the 42 billion euros (54 billion dollars) spent by the commission in this area in 2007 registered irregularities and will now have to be reclaimed from member states.

The share of irregular structural spending was 12 per cent in 2006, suggesting the commission was "on the right track", officials said.

The commission has reclaimed 843 million euros in irregular structural funds this year and aims to recover a further 1.5 billion euro by March 2009.

"The commission shall not hesitate to take a tough stance and suspend payments until all member states implement adequate corrective measures," said Siim Kallas, the EU commissioner in charge of administration, audit and anti-fraud.

The EU executive often laments that it receives a bad press when it comes to spending. Common criticisms suggest billions of euros in European taxpayers' money are "lost", or that the money would be better managed by member states.

Officials in Brussels retort that auditors merely point to "errors", for instance when forms are not filled in properly. They also note that 80 per cent of the EU's budget is spent by national or local governments, which are in turn responsible for ensuring that the money is spent properly.

One widely-reported recent example of alleged EU mismanagement involved the southern Italian region of Calabria spending 6 million euros in EU money to sponsor the Italian national football team.

It later emerged that the sponsorship deal only totalled 1.8 million euros. And of this, only 200,000 euros were taken from EU structural funds, officials said. (dpa)