BLACK SEA BLOG: Romania still goofing off 10 months after joining EU

By bne IntelliNews October 24, 2007

Bogdan Preda in Bucharest -

A few months before January 1 when Romania joined the EU, the bloc's officials warned they would trigger safeguard clauses resulting in loss of financial support and partial membership rights if the country doesn't meet the European Commission's requirements over agricultural policies and the justice system. Now, a year later, the problems remain almost the same, and the fragile government of Premier Calin Popescu-Tariceanu can no longer keep sweeping the trash under the bulging carpet, as the EU has given it a month to tackle these issues.

In money terms, Romania faces losing as much as €110m, or about a quarter of the planned direct payments for farming from the EU for 2008, if it doesn't prove beyond any doubts by November 9 that it has put in place a computer system that will enable its Farming Payment Agency to properly disburse EU money to the country's farmers.

Additionally, the government must show progress with implementing a so-called Land Parcel Identification System, which would allow for the exact measurement of agricultural land. If it decides to disburse financial aid to farmers before the two conditions are met, the Romanian government will lose a quarter of EU funds for 2008, Commissioner of Agriculture and Rural Development Mariann Fischer Boel said October 10.

"We have a duty to ensure that the farm budget is properly spent and that irregularities don't occur," Fischer Boel said, adding that neighboring Bulgaria, which joined the EU at the same time as Romania, has made "good progress" on the same matter.

Put more bluntly, the EU is telling Romania that it will no longer tolerate a culture of preferential funding, which too often has led to corruption and bribery, and is keeping a close eye on how money is being spent in a country that the anti-graft agency Transparency International ranks as the most corrupt in the EU.

A force for change

For many Romanians, this is the kind of help they were counting on from the EU. Shameful as it may sound, the EU, through its European Commission executive arm, is improving governance to the country, something the government has too often failed to do. In fact, it's probably about the biggest advantage Romania has so far gained from its accession in the EU.

As if the problem over the safeguard clause wasn't bad enough, the issue coincided with more political shame as public television station aired secret footage filmed by anti-corruption prosecutors, featuring Agriculture Minister Decebal Traian Remes allegedly accepting a €15,000 bribe from a businessman seeking to win two tenders worth tens of millions of euros payable from public money. The footage also allegedly revealed Ioan Muresan, another former agriculture minister, as the middleman between the businessman and Remes. Both Remes and Muresan are being investigated by prosecutors but deny any wrongdoing.

Remes has since resigned following the scandal and was replaced by 37-year-old Dacian Ciolos. Prime Minister Tariceanu's National Liberal Party has expelled Remes as a member for a year. "You are not going to be able to make up for a year of lost work in just 30 days," President Traian Basescu told Ciolos as the latter was sworn in as minister. "Having the safeguard clause enforced would be shameful and Romania must avoid this."

Basescu also warned Tariceanu that the EU is considering triggering its safeguard clause system for the justice system if the government doesn't get its act together. "In other words, decisions by the Romanian justice system would no longer be valid on EU territory, which would gravely hit on the rights of Romanian citizens, foreign citizens and companies that operate on Romanian territory,'' Basescu said.

Basescu's warning is the latest criticism against Tariceanu, his political foe, who in 2005, even at a time when the two were on friendly terms, refused to step down to allow for early elections that the president insisted would have given the coalition a more comfortable majority in parliament.

Faltering economy

Meanwhile, Tariceanu's minority government, which on October 3 survived another no-confidence vote due to the opposition's reluctance to force early elections, is becoming ever-more fragile and it's hard to say if it can survive another year when the next legislative elections are due at end-2008.

Despite the introduction in 2005 of one of the region's lowest flat taxes on corporate profits and personal income at 16%, which generated massive foreign direct investment along with accession in the EU, the government is now seeing economic improvement falter partly because it didn't coordinate spending priorities.

Among the economic problems is the likelihood Romania will miss its inflation target for the end of this year; a severe drought coupled with rising consumption could result in unstable prices for most of next year too. Another problem, emphasized recently by National Bank of Romania Governor Mugur Isarescu, is the current account deficit, which will widen to a record this year in the absence of enough domestic productivity that might otherwise boost exports. FDI and remittances from Romanians working abroad can no longer finance this gap alone, prompting Isarescu to worry about ways to achieve a "soft landing" through a revised economic scenario in the long term, though he didn't elaborate on what that might involve.

One way of narrowing the gap would be to weaken the currency and cut economic growth. Romania's economy, which the International Monetary Fund claimed on October 2 was overheating, expanded 7.7% in 2006, its eighth consecutive year of economic growth.

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BLACK SEA BLOG: Romania still goofing off 10 months after joining EU

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