April 10, 2008
Cash or crash time in Romania
As a trained economist and former prime minister of Romania, Nicolae Vacaroiu is understandably concerned about his country’s inflation rate, budget deficit and vast current account deficit, all of which are getting Romania into hot water with its new masters at the European Commission. But what really bugs him is Romania’s inability to make effective use of all the economic aid that is on tap from the European Union.
On the 27th floor of a Brussels hotel the other night, Vacaroiu told me that Romania had made such “poor progress” in absorbing EU funds last year that it had ended up a net contributor to the EU budget. “Maybe, unfortunately, the same will be true in 2008,” he said.
The EU does in fact have compensation schemes for new member-states such as Romania and Bulgaria, so that they won’t find themselves in the strange position of subsidising their richer western European friends. But as Vacaroiu points out, the real problem lies at home, and above all in the agricultural sector, which employs about 40 per cent of Romania’s population.
“Our payment agencies aren’t working, especially in agriculture and rural development… There’s a certain degree of red tape involved - it’s rather high in Romania, though you find bureaucracy in the EU institutions, too… Another element is that we’re unable to make a so-called ‘leap’ in decentralised decision-making from the centre to local levels.”
All new member-states find it hard to absorb EU funds in their first years after accession, so one shouldn’t necessarily make a big deal about Romania’s problems. But Romania qualifies for about €30bn in EU aid between now and 2013. That is serious money - more, I would imagine, than Romania can ever have been offered in its entire history.
It would be unforgivable if the chance was wasted.
The funds may be available, but the red tape and poor information regarding these funds is scandalous.
While at least 80% of the responsibility lies with the Romanian authorities, EU holds a solid 20% of the ‘guilt’.
Compared to the Romanian counterparts it was expected that EU responsible / officials would advise the managemant of the funds and facilitate directing them in an efficient manner (one may claim incompetence or even worse, indiference, for both parties involved). The lack of action and coordination fuels conpiracy theories: EU is relieved that so little of the planned expenditure is actually finding its way to the target…There is a void of management and EU officials should take the lead.
Posted by: Paul | April 11th, 2008 at 11:20 am | Report this commentWhy should be somebody else responsible for the public administration’s inefficiencies? It is advisable to check the presentation posted on the Romanian Central Bank on EU absorbtion levels posted on March 21st.
Absorbtion rate was 21.7% vs. above 41% for Czech republic, Poland, Slovakia and Hungary - all in the same range. It is true to have a poor absorbtion rate in the first year, but Romania is definetly at the lower end. Romania paid EUR 2.0bn in 2007 and drew only 0.44bn. This is terribly low and I wonder how the Government can pretend things are just fine. Oh, let’s not forget that if the EU funds reqiurements are low then the Romanian Government contribution to eligible projects is low as well…
I also want to add the title is bit too metaphoric.
Posted by: bogdan | April 11th, 2008 at 5:40 pm | Report this commentSecond para is typo, obviously CZ, HU, PL and SK absorbtion rates are better.
Posted by: bogdan | April 11th, 2008 at 5:42 pm | Report this commentRomania?
Posted by: andrea | April 12th, 2008 at 6:27 am | Report this commentThe problem are romanian people. I saw Romania in 1989, 20 years after 2008 the only new buildings were made by foreigners. 20 years of doing nothing, they are like italians!
all economical analysis lack the sociocultural analysis of population
ANTHROPOECONOMY
if you bring 20 millions Swedish or Jalanise to Romania you will change it
Posted by: andrea | April 12th, 2008 at 6:31 am | Report this commentFor Andrea:
Posted by: sandra | April 21st, 2008 at 6:53 pm | Report this commentRomanian “bussines men” don’t stolen all EU funds for 2007 and this is their realy problem. Until 2007 they stolen a lot of many from others funds: PHARE, SAPARD,
Now….
It is only corruptions in Romania, starting with gouvernment, police, secret service, DNA etc