Friday, March 13, 2009

Huge bureaucracy' prevents Romania from using EU funds

Published: Wednesday 11 March 2009

Romania's "huge bureaucracy" means EU funds allocated to Romania are not being used, the country's President Traian Basescu told parliament in Bucharest on Monday (9 March). EurActiv Romania looked into the situation.

Background:

Romania asked the EU executive for aid yesterday (10 March) to save it from a possible financing crisis, becoming the latest member of the 27-member bloc to cry for outside help in fighting the global economic storm.

Brussels was quick to respond, saying it is ready to offer aid.

Romania's finance ministry and the national central bank have started talks with the Commission, the IMF and other institutions to seek a financial bailout, described by officials as "medium-term foreign financial assistance."

Economists estimate that the amount needed could be around 20 billion euro, a figure close to the $25 billion that the IMF, EU and World Bank agreed to offer Hungary in a bailout last October, Reuters reported.

Romania's centre-left government, however, may struggle to meet the IMF's belt-tightening requirements, which are bound to include tough spending cuts.

More on this topic:

Other related news:

President Basescu strongly criticised the Romanian authorities for their inability to absorb funding under EU programmes. On Monday, the country asked the EU and the International Monetary Fund (IMF) for a bailout to save it from a possible financial crisis.

Basescu said that from a total of nine billion euros put at the disposal of Romania by the Union, a total of 5.5 billion has not been used, covering the years 2007, 2008 and 2009.

"We have a huge bureaucracy, the performance of which amounts to what I just said: nine billion euro put at the disposal of Romania, unused. This is inadmissible and this shows the deep inefficiency of this apparatus, established probably under the clientele's criteria, and not on the basis of competence," the Romanian president stated.

Basescu also said that although there is no imminent threat of a financial and banking crisis in Romania, there is nevertheless "contraction of crediting and an apparent deficit of liquidity".

EurActiv Romania interviewed various economic stakeholders, who concluded that an administrative and partially political blockage indeed affects the potential beneficiaries of EU-funded projects.

While economic actors have been waiting for almost a year to start EU-sponsored projects, much has changed since, including the market, prices, the value of money and business plans. As Basescu himself recognised in his speech, the Romanian currency lost 40% of its value over the last eighteen months, and 500,000 households with a lot of foreign currency credit suffered substantial losses.

EurActiv Romania identified three examples, from three different programmes:

  • The regional operational programme 'Financing scheme 4.3: Micro-enterprises'. The projects were drafted by the candidates in February-March 2008 and were submitted before the 16 June deadline. The 500 projects selected for financing were announced in November 2008. Since then, the beneficiaries have been waiting to sign their contracts.
  • The sectorial operational programme 'Increasing the Economic Competitiveness'. The first twenty contracts were only signed in February 2009, despite the fact that a year ago, the ex-minister for SMEs, Ovidiu Silaghi, announced that the 'Solicitants' Guides' for these schemes would be launched on 15 February 2008.
  • The sectorial operational programme 'Human resources development': The first 100 projects were selected in April 2008, but as of yet many applicants still have not been informed of the selection decision. Project evaluation should have taken 2-4 months, the consultant Marian Stoian insisted.

Positions:

Aurel Nicoara, who manages a company applying for EU funding, explained that he submitted a project almost a year ago. "The exchange rate will kill us! I don't know exactly how much have I lost, but you can imagine the difference between 3,6 lei/euro to 4,2 lei/euro," he said. He called his situation a "long decease and a certain death".

The problem of accessing the structural funds has been raised for many times by the National Bank Governor Mugur Isarescu. Almost a year ago, Isarescu said: "Accessing European funds is the main problem of Romania. Our country pays to the EU more money than it receives, which reflects major macroeconomic imbalances."

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