Wednesday, June 6, 2012

The Economist: EU funds absorption in Romania

EU funds absorption in Romania
A funding obsession
Jun 5th 2012, 19:01 by L.C.| BUCHAREST

"God gives you but he is never stuffing it into your bag," is an old Romanian saying suggesting that everything one achieves in life should come with an effort. Most Romanians seem to have forgotten the proverb under the Communist regime which gave citizens a house and a job regardless of their efforts. They are now finding it difficult to get their funds from the European Union (EU), which involves making an effort.

The second poorest country in the EU, Romania continues to fail with the absorption of EU funds. At around 7.4% it is the state with the lowest absorption rate in the European Union. Absorption capacity is the extent to which a state is able to spend financial help from the EU in an effective and efficient way.

After joining the EU in 2007, Romania was told it could access up to €20 billion in aid until 2013 in order to catch up with more advanced EU members. It did not make good use of EU largesse. Victor Ponta, the prime minister, recently said the country is in danger of losing €100m from the European Commission by the end of the year. Next year Romania stands to lose more than €1 billion in the human-resources sector amid concerns over corruption and other irregularities.
That’s not all. In April, Leonard Orban, boss of the newly created ministry of European Affairs, said the EU might freeze five development programmes if the country fails to respect European recommendations by the end of June. It wouldn’t be the first time the European Commission decides to block payments to Romania. In February, Brussels withheld funding for Romania after it revealed a series of irregularities estimated at around €3.5 billion in the management of the human-resources development sector.

Romania’s very low degree of EU funds absorption has become an obsessive problem for the government in Bucharest. The government has repeatedly said the European funds represent the main priority for the country this year.

What are the main reasons for the failure to absorb the EU’s so-called structural funds? Analysts point to corruption, a lack of motivation and information, inadequate administrative capacity and major gaps in understanding how EU institutions work.

To tackle the problem the government set up the ministry run by Mr Orban in September. Romanians are in urgent need of the structural funds that are being withheld. Five years after Romania joined the EU, there are still villages around the country where people live without electricity or running water. Romania’s infrastructure is far from European standards, with just 300 kilometers of highway and dozens of damaged roads built during Ceausescu’s regime.

The European Commission is expected to publish a new report on Romania in the following weeks. The political turmoil Romania has experienced recently and the fact that the country has re-entered recession last month is adding pressure on the government.

The clock is ticking as the country is heading for the 2013 deadline for absorbing the European money. The Management Authority, the institution in charge of funds absorption for the human-resources programme, must make a radical change by the end of this year, said Mr Ponta. Otherwise he will restructure the authority completely next year. He is even prepared to risk the loss of the entire EU budget for 2013. This could be an opportunity for Romania to start all over again; this time maybe in the right direction.

No comments: