Thursday, October 25, 2012

EU Commission to withhold development funds from Romania

BRUSSELS, Oct 25 (Reuters) - The European Commission said on Thursday it intended to withhold European Union development funds from Romania, saying it had identified serious problems in the country's anti-corruption procedures.

An EU source said the amount to be withheld was about 500 million euros ($648 million), funds originally meant to reimburse part of the costs of transport, regional, economic development and environmental projects undertaken in Romania.

The Commission, the EU's executive, said it had also decided to block the bulk of future EU structural funding under three of the four programmes because of "serious deficiencies" in Romania's management and control systems.

"The problems lie in the areas of public procurement, sound financial management and in the prevention and detection of fraud and conflicts of interest," the Commission said in a statement.

"The steps taken today are part of a regulated procedure to protect the financial interests of the EU and the way taxpayers' money is used."

Romania, a former Soviet state which joined the EU in 2007, has so far been allotted about 20 billion euros of EU funds to bring its economy and infrastructure up to date.

But the European Commission has grown increasingly concerned about how the funds have been administered and how successfully they are being deployed. It interrupted payments in mid-2011 and has now decided to take similar steps again.

No further payments will be made until Romania remedies the faults, said the Commission, which last audited the payments to Bucharest in June and July of this year.

On Wednesday, Romanian Prime Minister Victor Ponta, speaking ahead of the formal announcement, said the Commission was taking the decision because it judged the country's use of EU funds was too inefficient.

The withheld funds amount to between 10 and 25 percent of total payments to Romania under the four programmes, it said.

Five years after joining the EU, Romania has made little progress under a series of short-lived governments in reforming its state-dominated economy and fighting widespread corruption.

Brussels is monitoring its respect for the rule of law and its drive against corruption. Romania remains excluded from the passport-free Schengen area and some EU diplomats believe it and Bulgaria should never have been allowed to join the EU.

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