1
Why EU Regional Policy Has Been
Inefficient in Romania
A Regional Comparative Study of the Counties of Cluj, Iaşi and
Dolj for the Budgetary Period 2007-2013
MA Thesis in European Studies
Graduate School for Humanities
Universiteit van Amsterdam
Author: Rick Lof
Student number: 6056040
Main Supervisor: Prof. Dr. László Marácz
Second Supervisor: Dr. M. Lok
2
Content
List of Abbreviations ... 3
List of Figures ... 4
Introduction ... 5
Chapter 1. EU Regional Policy in Romania in Practice... 10
EU Regional Policy: The Budgetary Period 2007-2013, Its Objectives and Instruments ... 10
Preparations and Implementation in Romania ... 15
Cluj, Iaşi and Dolj ... 20
Chapter 2. The Main Challenges of Dealing with EU Funds in Romania ... 25
The Low Absorption Rate ... 25
The Low Payment Ratio, Evidence for Mismanagement ... 29
Corruption, Fraud and Mismanagement as the Main Obstacles ... 32
Chapter 3. EU Regional Policy in the Counties of Cluj, Iaşi, and Dolj ... 39
Absorption and Management of EU Funds in Cluj, Iaşi, and Dolj ... 39
Socio-Economic Development in Cluj, Iaşi, and Dolj During the Budgetary Period 2007-2013 ... 45
Chapter 4. Regional Development Trends and the Presence of the Structural Problematizing Factors of EU Regional Policy Prior to EU-Membership ... 53
The Structural Challenging Factors in Post-Communist Romania ... 54
The EU and the Pre-Accession Funds for Romania... 59
Conclusion ... 65
3
List of Abbreviations
ANAF
Romanian Agency for Fiscal Administration
ANTICORPP
Anticorruption Policies Revisited: Global Trends and European Responses
to the Challenge of Corruption
CEE
Central and Eastern Europe
CPI
Corruption Perception Index
DNA
Direcția Națională Anticorupție (National Anticorruption Directorate)
EC
European Commission
ERDF
European Regional and Development Fund
ESF
European Social Fund
EU
European Union
GDP
Gross Domestic Product
INS
Institutul Național de Statistică (National Institute for Statistics)
IPP
Institutul pentru Politici Publice București (Institute for Public Politics
Bucharest)
NCRD
National Council for Regional Development
NRDF
National Regional Development Fund
NUTS
Nomenclature of Territorial Units for Statistics
OLAF
European Anti-Fraud Office
OP
Operational Programme for EU Regional Policy
PD
Partidul Democrat (The Democratic Party)
PDL
Partidul Democrat Liberal (The Democratic-Liberal Party)
PNL
Partidul Naţional Liberal (The National Liberal Party)
PSD
Partidul Social Democrat (The Social Democratic Party)
SAR
Societatea Academică din România (Romanian Academic Society)
SEAP
Electronic Public Procurement System
4
UDMR
Uniunea Democrată Maghiară din România (The Democratic Union of
Hungarians in Romania)
USL
Uniunea Social Liberală (The Social-Liberal Union)
List of Figures
Figure 1: Objectives and Financial Instruments for EU Regional Policy 2007-2013 ... 11
Figure 2: Financial Allocations for Romania for the 2007-2013 Period... 14
Figure 3: Romania - Development Regions (NUTS-2 level) ... 18
Figure 4: Romania - Counties (NUTS-3 level) ... 20
Figure 5: Main Causes of Romania`s Low Absorption Capacity ... 27
Figure 6: Difference between Contracting and Payment Ratios 2007-2013 ... 30
Figure 7: Corruption and Absorption Rates in CEE States ... 34
Figure 8: Methods of Fraudulent Mismanagement of EU Funds... 36
Figure 9: Absorption of EU Funds at County Level ... 40
Figure 10: Absorption of EU Funds of all Romanian Counties at County Level ... 41
Figure 11: Map of Corruption Rate per 10.000 Inhabitants ... 43
Figure 12: Convictions of Corruption, Data for Cluj, Iaşi, and Dolj ... 44
Figure 13: GDP Growth Rates 2007-2013 ... 46
Figure 14: GDP Growth Underdeveloped Regions 2007-2013 ... 47
Figure 15: Development of Total Length of Public Roads by Road Type 2007-2013 (in KM) ... 47
Figure 16: Development of Average Net Monthly Salary 2007-2013 ... 49
Figure 17: Development of Life Expectancy 2007-2013 ... 50
Figure 18: Development of Population Connected to Public Water Supply 2008-2013 ... 51
5
Introduction
Regional diversity is a well-known phenomenon in Romania. Contemporary Romania can be divided into multiple historical regions of which Transylvania, Moldova and Walachia are the largest. Although these regions are contiguous and part of the same state, their cultural-historical backgrounds differ significantly. It was only after the end of World War I that these regions finally came together under the Romanian flag. The varying cultural-historical backgrounds give Romania an interesting and unique character for many reasons. Besides this regional diversity in cultural-historical perspective, Romania is also characterized by a serious regional diversity in socio-economic disparities.1 The causes for these are of course widespread
and are to be found among all aspects at the local, regional and national level of Romania. However, despite several initiatives to make Romania overcome these regional disparities, the present tells us that regional socio-economic inequality in Romania has only increased in the last decades and that several particular factors seem to prevent Romania from becoming a more homogenous state.
During the period of communism, the Romanian state had sought to solve the regional disparities mainly through a wave of industrialization. Following the Stalinist recipe, Romania underwent a
transformation from a predominant agrarian state towards a more modern industrial one, with specific emphasis on heavy industry.2 This artificial industrialization process may indeed have realized more
homogeneity, but after the fall of communism, when Romania officially started its transition towards a democratic state and a market economy, the regional disparities soon started to increase.3 An important
cause for this is that a significant amount of activity at inefficient industrial plants came to an end in regions which had become completely dependent on these industries. As this is of course only one factor that can be held responsible for the rise of regional inequality in post-communist Romania, we must admit that although Romania ultimately started to make some economic progress after the fall of communism, the regional disparities within the country have only further increased.
In light of regional development and socio-economic equalization, Romania`s accession to the European Union (EU) in 2007 could have been seen as a great opportunity, since the EU has regional growth and development as one of its main priorities.4 Through its Regional Policy the EU aims to
1 David Turnock, ‘Regional Inequalities and Regional Development in Post-Communist Romania’, in: D. Light and
D. Phinnemore eds., Post-Communist Romania Coming to Terms with Transition, Basingstoke: Palgrave Publishers Ltd. 2001, p. 150.
2 Wally Bacon, ‘Economic Reform’, in: H. F. Carey ed., Romania Since 1989 Politics, Economics and Society, New
York: Lexington Books 2004, p. 374.
3 David Turnock, ‘Regional Inequalities and Regional Development in Post-Communist Romania’, p. 170.
4 Ana-Paula Laissy ed., Working for the Regions, EU Regional Policy 2007-2013, Luxembourg: Publications Office
6 homogenize the socio-economic situation of all the member states regions. EU Regional Policy has over time developed into a complicated system of different funds which all have their own specific objectives in the general effort of resolving regional disparities. In the budgetary period of 2007-2013, EU Regional Policy accounted for more than €348 billion, which was more than one third of the complete EU budget. As an EU member state, the budgetary period of 2007-2013 was Romania`s first experience with EU Regional Policy. Now in the position to receive funds, Romania is supposed to realize regional development and cohesion. For this budgetary period, Romania was allocated a total amount of €19.7 billion of EU Regional Policy funds. As the poorest member of the EU, and one with severe need for cohesion and development, Romania was given high priority in the allocation of funds.
In the course of the budgetary period between 2007 and 2013, it became evident that Romania was experiencing serious problems in using these funds efficiently and that there were no clear signs of regional equalization.5 The causes for this are widespread and vary among the different cases and sources.
One objective challenge for Romania is the absorption of EU funds. Although €19.7 billion was allocated, this did not mean that the money was automatically available to spend. The EU has developed a
procedure for gaining access to the allocated funds, to make sure that the money is being spent responsibly. Development initiatives and programs need to convince the EU that they are worth the already allocated funds. Especially in the first five years of the budgetary period, Romania had a low fund absorption rate (compared to the other Central and Eastern European (CEE) member states). This means that most of the allocated funds were never used for their intended purpose. Besides the reality of a low absorption rate and the resulting loss of a significant amount of funds, there was also a widespread availability of sources concerning the efficiency of development programs and EU funds in Romania. Administrative incapacity, mismanagement and corruption are important factors that seem to have influenced the effectiveness of EU structural funds in Romania. From another perspective, numerous scholars have criticized the role of the EU and the way it facilitates its EU Regional Policy in the CEE member states.
At the end of Romania`s first budgetary period of EU Regional Policy, it became clear that regional disparities had further increased.6 There also seemed to be important differences in the
performances of the different development regions in Romania, regarding EU Regional Policy. The more developed regions became more developed and the poorest regions lagged further behind. Although Romania`s fund absorption rate has recently increased, there is still enough reason to seriously doubt the
5 Lavinia Stan and Rodica Zaharia, ‘Romania’, in: D. Ó Beacháin, V. Sheridan and S. Stan eds., Life in
Post-Communist Eastern Europe After EU Membership, Happy ever After?, London: Routledge 2012, p. 195-196.
6 Eurostat, ‘Regional Gross Domestic Product by NUTS 2 Region – million EUR’, accessed February 12, 2016,
7 effectiveness and efficiency of EU Regional Policy in Romania. On the other hand, there is plenty of evidence to argue that the success of EU structural funds is seriously problematized by Romanian key players, who have the power and interests to prevent a successful implementation of EU policy and funds.
This thesis will explore which factors have prevented an efficient EU Regional Policy in the developing regions of Romania. Are these challenging factors merely to be found in Romania or elsewhere in the EU? For the reason that regional diversity in Romania is both a socio-economic and a cultural-historical phenomenon, this research will be a regional comparative study aiming to discover distinctive differences between three socio-economic as well as cultural-historical divided Romanian counties. For this
comparative study I have selected one county from each of the three major historical regions: Cluj (Transylvania), Iaşi (Moldova), and Dolj (Walachia). The selection of these counties is further based on the following variables: population, size, territorial location, center-periphery divide, and economic factors, in which they are relatively comparable to each other. The counties will be further introduced and specified in chapter one.
The methodology of this research will be two-sided. The first is the above introduced regional comparative study of the counties Cluj, Iaşi, and Dolj regarding the efficiency of EU Regional Policy. The comparison will focus indeed on cultural-historical as well as the socio-economic features and variables of these counties but also on administrative features in relation to their performances with EU funds. In order to complement the regional comparative study and give evidence for the inefficiency of EU Regional Policy in Romania and these counties, the analysis of socio-economic data will be the second side of the methodology. Socio-economic data (including corruption, fraud and management data and variables) of Romania and the three mentioned counties, relevant to the efficiency and objectives of EU Regional Policy will be analyzed and compared to each other in order to develop an answer on the central question of this research. This will not be an economic statistical research focused merely on data, but rather a critical analysis of events, performances, and developments of Romania and three of its counties. The aim is to discover which factors have problematized the efficiency and effectiveness of EU Regional Policy in Romania, specifically in these three counties.
The research will focus on the budgetary period between 2007 and 2013. Because conclusions can be made from available statistical data and evaluations from this period, it also provides evidence of how a new EU member state copes with EU policy and regulations. As Romania is characterized by a significant cultural-historical as well as a socio-economic diversity, it is realistic to hypothesize that there might also be differences between their regional performances concerning EU Regional Policy. This
8 thesis will demonstrate that the problems and differences concerning the efficiency of EU Regional Policy that occurred in this period in Romania, are predominantly based on administrative and financial
capacities as well as on the phenomenon of corruption and fraudulent mismanagement. As these are features that have been noted even before Romania`s accession to the EU it will be argued that also the EU has been ineffective in preparing Romania sufficiently for EU Regional Policy.
The aim of the first chapter is to find out what EU Regional Policy means for Romania in practice. I will analyze the EU-strategy for realizing its objective for regional equalization and cohesion, through EU Regional Policy, in Romania. What are the main goals and priorities of this policy and how is it in practice constructed and facilitated in Cluj, Iaşi and Dolj? Important attention will be given to the implementation and accessibility of the structural funds. Several scholars blame the EU for its lack of transparency and complexity in respect to its policies and accessibility of funds. From the other perspective, this chapter will further introduce the relevant characteristics of Cluj, Iaşi and Dolj. Accordingly, attention will be paid to the actions the central government and the regional governments practically, institutionally, administratively, and legally have undertaken in service of EU Regional Policy. It is argued by several scholars that especially on the national level of politics, the determination for implementing desirable reforms and for encouraging decentralization of power did not seem to have been sufficient in Romania.
Chapter two will discover the main challenges of EU Regional Policy in Romania for the
budgetary period 2007-2013. In this chapter the foundation will be created for the comparative analysis of Cluj, Iaşi, and Dolj which will be conducted in chapter three. The focus will be both on the main
challenges of the absorption of EU funds and on the management of the funds and the development projects. Important attention will be given to Romania`s low absorption rate of EU funds. The root causes of this phenomenon will be examined in order to study the main challenges which Romania has
experienced with EU funds. Another point of attention will be analyzing several evidences of poor management of EU funds. There is numerous available information discussing the failures of
development programs and serious impediments of efficient spending of EU funds in order to realize the aims of EU Regional Policy. Corruption, fraud and serious deficits in national and regional administrative and financial capacities will be argued to be the main factors and causes that have problematized an efficient EU Regional Policy in Romania.
The aim of chapter three is to answer the question whether the challenges for regional equalization through EU Regional Policy must be interpreted as a national or even a regional
phenomenon in Romania. In this chapter the comparative study will be mainly conducted. I will dive deeper into the results of the previous chapter, attempting to find out how Cluj, Iaşi, and Dolj performed
9 compared to each other. Did all these counties experience the same challenges or were there significant differences among them? I assume this chapter to be important, since there seems to be significant regional variation concerning compliance with and commitment to EU policies as well as the
administrative and financial capacities of the regions in Romania. For this comparative chapter I will analyze the achievements of Cluj, Iasi and Dolj in terms of developments of several relevant
socio-economic variables in the period between 2007 and 2013. This analysis will provide concrete evidence for the inefficiency of EU Regional Policy, meaning that indeed the most underdeveloped areas (mostly rural), have performed worse in managing EU funds and benefited less from their availability than the more developed and urbanized areas. It will become clear that this phenomenon is evident on the national as well as on the regional, county and local level of Romania.
Chapter four will focus on the question whether the inefficient results of EU Regional Policy 2007-2013 in Romania could have been prevented. This chapter will examine the presence and notoriety of the structural factors that have challenged EU Regional Policy, prior to Romania`s EU accession. It will be clarified that most of the problematizing factors that have prevented EU Regional Policy from being efficient in Romania were not completely new, but rather structural factors that have been dominant and determinant for Romania`s development long before it became member of the EU. These factors are somehow expected to be the same that have dominated Romania`s post-communist transition (i.e. lack of political determination and commitment, purposeful mismanagement (corruption, fraud), and
administrative/financial incapacity). This chapter will also focus on trends in regional development before 2007, in order to demonstrate that EU Regional Policy did not have the power to enforce a significant change in regional development trends in Romania through its funds. Accordingly, Romania`s period in dealing with EU pre-accession funds will be briefly analyzed, since it proves more concretely that the EU had sufficient knowledge to assume that Romania was not ready for managing EU funds efficiently. It will be argued in this final chapter that the inefficient results of EU Regional Policy during the 2007-2013 budgetary period were not unpreventable at all, but rather the result of a lack of powerful action and commitment devoted to structural internal factors in Romania, from both the EU and Romania itself during the pre-accession period.
Finally, the conclusion will provide a well-structured answer to my research question. All the findings of this research will be used in the formulation of this conclusion and the answer on the question why regional equalization through EU Regional Policy has been so challenging in Romania. I hypothesize that the answer will be educational for the EU as well as for all levels of government in Romania, since the answers of this research are expected to be found on the sides of all the key players of EU Regional Policy in Romania.
10
Chapter 1. EU Regional Policy in Romania in Practice
EU Regional Policy: The Budgetary Period 2007-2013, Its Objectives and Instruments
Romania`s official accession to the European Union on the first of January 2007 also meant the official beginning of the country`s participation in the EU`s Regional Development Policy, also called Cohesion Policy. From then on Romania became eligible for billions of EU funds, targeting socio-economic
convergence and cohesion of the country with the other 26 member states of the EU. The first years of the relationship between Romania and EU Regional Policy are generally described as not very successful. It appeared that a fundamental mismatching of the two parties was evident, especially at the beginning of this new relationship. This chapter will analyze the content and objectives of EU Regional Policy and how it was practically implemented in Romania and more precisely in the counties of Cluj, Iaşi and Dolj. Accordingly, it will be examined what measures Romania has undertaken to accommodate and manage EU Regional Policy. It will be argued that on both sides the features of the undertaken actions in service of EU Regional Policy have not been ideal.
The main objective of EU Regional Policy is briefly described on the front sheet of a policy paper of the European Commission (EC): The European Union explained: Regional Policy. EU Regional Policy`s objective is explained as a strategic investment policy targeting all EU regions and cities in order to boost economic growth and improve quality of life. It also suggests that this policy is an expression of solidarity, focusing support on the less developed regions.7 In short, EU Regional Policy aims to tackle
the socio-economic disparities within the European Union. With the enlargements of 2004 and 2007 this challenge of the EU has only further increased, since these new members, predominantly CEE countries, were in general much less developed than the already existing members leading to an increase of the disparities within the European Union. The enormous increase of the budget for EU Regional Policy shows that the EU acknowledged this and put high priority on the development of the new member states. Gabriele Tondl mentions in her contribution to The Economics of the European Union, that the creation of EU Regional Policy was primarily for a political reason to maintain peace within the EU. She refers to Article 2 of the EU Treaty which mentions one of the main objectives of the EU, namely: equal standards of living within the EU. The existence and increase of income disparities clearly conflicts with this
7 European Commission, The European Union Explained, Regional Policy, Luxembourg: Publications Office of the
11 objective and therefore was the assuring of equality one of the primary arguments for EU Regional Policy.8
EU Regional Policy`s power and instruments are largely divided over three funds which all contribute to the fulfillment of the policy`s objectives in their own way. The European Regional
Development Fund (ERDF) is responsible for regional development, economic change, enhanced
competitiveness and territorial cooperation within the EU. The Cohesion Fund focusses on transport and environment infrastructure, but also on energy efficiency and renewable energy. The European Social
Fund (ESF) provides support to anticipate and manage economic and social change.9 These three funds
all support programs and projects, developed in accordance with the objectives of EU Regional Policy in their own particular fields. The three funds and their corresponding objectives and priorities are clearly represented in Figure 1.
Figure 1: Objectives and Financial Instruments for EU Regional Policy 2007-2013
Source: Iulian Braşoveanu et al, ‘Structural and Cohesion Funds: Theoretical and Statistical Aspects in Romania and EU’,
Transylvanian Review of Administrative Sciences, no. 33 (2011), p. 34.
It is important to note that funding of development programs and projects are based on a co-finance principle, encouraging public and/or private investors to invest in these programs and projects. The level of support and the co-financing rate is adapted to the level of economic development of the particular regions.10 EU regions are hereby divided into three groups: ‘Less developed regions’ or
‘convergence regions’, this group includes regions with a GDP lower than 75 % of the EU-average.
8 Gabriele Tondl, ‘Regional Policy’, in: M. Artis and F. Nixson eds., The Economics of the European Union, New
York: Oxford University Press 2007, p. 173.
9 Ana-Paula Laissy ed., Working for the Regions, EU Regional Policy 2007-2013, p. 2. 10 European Commission, The European Union Explained, Regional Policy, p. 10.
12 ‘Transition regions’, including regions with a GDP between 75-90 % of the EU-average. And ‘more
developed regions’, regions with a GDP higher than 90 % of the EU-average. For the budgetary period of
2007-2013, Romania existed entirely of regions of the poorest classification. This means that they are given the highest level of support from EU Regional Policy and enjoy the lowest co-finance rate.
EU Regional Policy is carried out under the umbrella of budgetary periods. Each budgetary period covers seven years in which the total budget of the policy and the total amount of allocated fund for each of the member states are fixed. The EU argues that the reason for a budgetary period of 7 years, unlike annual national budgets, is for making it inherently reliable and a valuable resource for private investment to draw upon.11 Instead of the budgetary periods being developed only to calculate the
policy`s budget, each budgetary period also has its period-specific objectives, which are sought to be accomplished during the seven years of the concerning budgetary period.
More growth and jobs for all regions and cities of the European Union was the main objective of budgetary period 2007-2013.12 The policy`s main objective was divided into three policy objectives
which were supported by the three funds: ERDF, Cohesion Fund and the ESF. The three policy objectives ‘convergence’, ‘regional competitiveness and employment’, and ‘European territorial cooperation’, were designed to achieve the policy`s main objective in their own particular field, supported by a certain proportion of the three funds (Fig. 1). As the distribution and management of the funds works in the same way, I will not elaborate further on the specific characteristics of the different funds. Besides the policy`s objectives, the EU also argues that EU Regional Policy safeguards compliance with other EU policies in the member states and that this policy might improve and modernize public administrations to enhance transparency and foster good governance.13 The EU seems to promote its Regional Policy as the solution
for all the inequalities and underdevelopment within its union. In practice we will see that EU Regional Policy`s effectiveness is much more doubted than becomes clear from the above discussed information. In the article Cohesion Policy and the Evolution of Regional Policy published in 2013, Martin Ferry and Irene McMaster examine important deficiencies of EU Regional Policy, especially for the CEE member states. A valid argument is the blaming of the EU, concerning the vagueness, ambiguity and diffuseness of the content and implementation of its Regional Policy in Romania and in the CEE member states in general.14 Ferry and McMaster further argue that Romania as well as the other former socialist
countries lacked a worth mentioning tradition of Regional Policy and the institutions and practices to
11 European Commission, The European Union Explained, Regional Policy, p. 10. 12 Ana-Paula Laissy ed., Working for the Regions, EU Regional Policy 2007-2013, p. 2. 13 Ibid., p. 1.
14 Martin Ferry and Irene McMaster, ‘Cohesion Policy and the Evolution of Regional Policy in Central and Eastern
13 manage it.15 For this reason it is remarkable that Romania, particularly because it was already infamous
for its problematic reforming attitude during its post-communist transition16, was not provided with an
adjusted Regional Policy, but it was apparently expected to implement faultlessly the policy that was common for the entire EU. The EU seems to ignore the pluralism of its union here. Another deficiency that seriously may have prevented the policy`s effectiveness is that EU Regional Policy is non-regulatory. EU Regional Policy does not have legal authority to demand harmonization of regional policy systems of its member states, but rather to supplement and support them.17 This leaves space for unwilling
governments to ignore EU`s objectives and limit the impact of the EU structural funds. Below it will be argued that these have been serious deficiencies in Romania`s performance on EU Regional Policy.
The factual accessibility of structural funds provides more evidence of EU Regional Policy`s diffuseness. The key players involved and the legal framework of procedures that are required prior to receiving allocated funds does not seem to be the most efficient combination. Andrej Horvat and Gunther Maier discuss the EU`s “golden rule” for the sake of fund absorption, which has become obvious in accordance with the EC`s recommendations and best practices of EU countries. This golden rule is as follows: the smaller the number of institutions involved at different levels of management and programs in new member states, the greater the possibility of higher rates of structural fund absorption is.18 The
golden rule was certainly not met in the case of EU Regional Policy in Romania.
After the budget and the total amount of allocated funds for each of the member states for the budgetary period are jointly set by the European Parliament (EP) and the EU Council of Ministers, based on a proposal from the European Commission, EU Regional Policy is carried out in a decentralized way called “shared management”.19 Figure 2 shows the distribution of the EU funds among the different OP`s.
It becomes clear that almost 98% of the total amount was reserved for the overarching convergence objective, where transportation and environment were given the highest priority. Investments in these two sectors were seen as the most important for Romania in order to realize the goals of this budgetary period. The instruments and programs of EU Regional Policy are managed by the EC and the national and regional governments of the member states. The member states and the regions needed to prepare a
15 Martin Ferry and Irene McMaster, ‘Cohesion Policy and the Evolution of Regional Policy in Central and Eastern
Europe’, p. 1506.
16 Per Ronnås, ‘Romania: Transition to Underdevelopment?’, in: I. Jeffries, Problems of Economic and Political
Transformation in the Balkans, New York: Pinter 1996, p. 29.
17 Martin Ferry and Irene McMaster, ‘Cohesion Policy and the Evolution of Regional Policy in Central and Eastern
Europe’, p. 1505.
18 Andrej Horvat and Gunther Maier, ‘Regional Development, Absorption Problems and the EU Structural Funds’,
44th Congress of the European Regional Science Association: "Regions and Fiscal Federalism", 25th - 29th August 2004, Porto, Portugal, (2004), p. 15.
14 ‘national strategic reference framework’ and national and regional ‘operational programmes’ (OP`s) within the framework of the overarching priorities of the EU Regional Policy`s objectives.
The EU ensures that each development program is developed in a collective process involving authorities at the EU, national, regional and local level, social partners as well as organizations from the civil society.20 The management of programs is largely done by administrations at the regional and local
level. The Commission does not have a role in the selection or management of individual projects but only needs to approve the overall programs covering a range of potential projects. Supervision of projects is the responsibility of audit authorities which are designed for each OP. Finally, it is worth noting that although the EC makes the funds available, the individual payments to beneficiaries is done by EU-accredited national and regional paying agencies.
Figure 2: Financial Allocations for Romania for the 2007-2013 Period
Gábor Hunya argues in his article Problems of Romanian SME`s with tapping EU structural
funds, how especially small- and medium-sized enterprises (SME`s) struggle with the diffusive and
complex design of EU Regional Policy. A lack of experience and dedicated staff is cited as one of the main reasons why SME`s applications for structural funds are generally rejected.21 This argument is valid
as well for Romanian local and regional authorities eligible for structural funds, since they also lack the experience with EU policies, legislation, procedures and responsibility in general. Since EU Regional Policy is presented as contributing to the regional development of Romania, we might expect that these funds would be legally and easily accessible, especially for the less developed and experienced eligible
20 Ana-Paula Laissy ed., Working for the Regions, EU Regional Policy 2007-2013, p. 6.
21 Gábor Hunya et al., ‘An Assessment of the Access by Romanian SMEs to Structural Funds’, The Vienna Institute
15 groups of a new member state. Later in this research it will be further examined how local and regional authorities in Romania have struggled with the system of shared management and EU Regional Policy.
A final point worth mentioning is the balance, or amount of accordance, between the development priorities of EU Regional Policy as set by the EU and those of the Romanian regions. There is sufficient evidence that strengthens the assumption that the development priorities of the EU Regional Policy do not seem to completely correlate with the demands of the regions in Romania. Tom Gallagher discusses this critique convincingly in his monograph Romania and the European Union, How the Weak Vanquished
the Strong of 2009. Although his arguments are mostly based on Romania`s pre-accession experiences
with EU funds, they have significant value for taking into account for Romania`s first experience with EU Regional Policy. Gallagher blames the EU for treating Romania as a peripheral exotic country and argues that EU decision-makers failed to devote major attention to Romania from the very early stage.22 This
standpoint is supported by Lavinia Stan and Rodica Zaharia in their contribution to Life in
Post-Communist Eastern Europe after EU Membership in which they argue that the EU treats Romania as a
second-class member.23 These arguments shine a light on a possible factor that might have problematized
the efficiency of EU Regional Policy in Romania. Indeed, it will become clear in a later stage of this thesis that EU`s devotion to the Romanian case prior to it became eligible for EU Regional Policy funds has not been optimal. But this has definitely not been the only factor for the policy`s inefficiency in Romania.
Preparations and Implementation in Romania
In addition to being a challenge for Romania in regards to its relation with EU Regional Policy, the period 2007-2013 was also a stormy period for its politics and economy. Political instability remained evident in Romania, as it has been since the revolution of December 1989.24 At the time of Romania`s accession to
the EU, Traian Băsescu was the president of Romania. His position was not undisputed referring to his suspension by the parliament on April 19, 2007. Băsescu was accused for unconstitutional conduct, but the Romanian national impeachment referendum of May 19, 2007 resulted in a majority against a forced resignation of the president. Băsescu returned in his position but in 2012 followed another attempt for impeachment, this time due to a conflict between the president and Prime Minister Victor Ponta. Once the political crisis of 2012 was resolved, political stability seemed to have been achieved. Unfortunately, the
22 Tom Gallagher, Romania and the European Union, How the Weak Vanquished the Strong, Manchester:
Manchester University Press 2009, p. 5.
23Lavinia Stan and Rodica Zaharia, ‘Romania’, p. 200.
16 structural problems of Romanian politics, of which corruption remained the worst, resurfaced again.25
Traian Băsescu would remain in place until December 2014.
Along with Băsescu`s unstable presidency, Romanian governments were also characterized by their instability, in the years of the first budgetary period of EU Regional Policy. Instable multi-party coalitions were predominant in Romanian politics. Until the parliamentary elections of November 2008, Romania was governed by a coalition of the liberal PNL (Partidul National Liberal), Băsescu`s PD (Partidul Democrat), the party of the Hungarian minority UDMR (Uniunea Democrată Maghiară din
Romania) and the Conservative Party, led by Prime Minister Călin Tăriceanu. These parties only had a
small majority in the parliament. This government`s main accomplishment was Romania`s accession to the EU. From 2008 until 2012, the Romanian government consisted of a coalition of the liberal democrat PDL (successor of the PD) and the social democrat PSD, led by Prime Minister Emil Boc (PDL). In 2012, four prime ministers and two parliamentary majorities changed in Romania.26 In May 2012, Victor Ponta
(PSD) became prime minister of Romania but unfortunately did not bring stability to Romanian politics. Ponta, as well as numerous other Romanian politicians, got involved with multiple scandals, mostly for corruption and other forms of abuse of power. The lack of political stability and the fact that we may seriously doubt the functioning of Romanian politics in the period 2007-2013 is certainly a factor that may have problematized Romania`s performance concerning EU Regional Policy. The central authorities play an important role in the functioning of EU Regional Policy. Any form of corruption, fraud or
mismanagement impedes the success of the implementation and management of EU funds. This feature of Romanian politics and management will be further clarified in the next chapter.
Another factor that may have indirectly influenced the effectiveness of EU Regional Policy is the global financial crisis that also had its impact on Romania`s economy. The crisis reached its peak in 2009 when the GDP growth rate was -5.6 %, while GDP in the previous three years consistently increased by 6.8% (2006), 7.1% (2007) and 6.8% (2008).27 The Romanian government`s budget realized a deficit of
9% of the GDP in 2009. This was a record since the end of communism in Romania.28 The crisis indeed
affected all aspects of the Romanian economy and its society. Due to the financial crisis, a possible abrupt adjustment of exchange rates and upholding of a high inflation rate during from 2009 to 2012 were expected to create pressure on the enforcement of contracts and the cost of construction works and thus
25Raluca Pop et al., ‘Risks of Corruption and the Management of EU Funds in Romania’, Romanian Journal of Political Sciences, no. 1 (2013), p. 104.
26 Ibid., p. 106.
27Eurostat, ‘Real GDP Growth Rate – Volume, Percentage Change on Previous Year’, accessed February 22, 2016,
http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00115.
28 Trading Economics, ‘Romania Government Budget 1993-2016’, accessed February 22, 2016,
17 on the performance of EU Regional Policy in Romania.29 The crisis not only affected the authorities`
financial capacity for co-financing projects, but also those of the private sector. Gábor Hunya argues how especially the SME`s were particularly victimized by the crisis. As a result of the crisis, profitability had seriously declined and the number of SME`s going out of business increased, while most of the rest fought for survival.30 The financial crisis had its impacts on EU Regional Policy in Romania, though the
economy started already to show growing rates in 2011 and could not be seen as the main factor for the challenging implementation of EU Regional Policy in this particular budgetary period.
Before Romania became officially ready for receiving EU funds, it had to implement several institutional reforms to convince the EC that it had undertaken sufficient action to become able for dealing efficiently with the billions of funds that were being allocated. According to EU Regional Policy, Romania needed to create and install several managing and supervising authorities which all had to safeguard the efficiency and legal implementation of EU Regional Policy in their specific field of responsibilities.31 Among these: Management Authority, Audit Authority, Authority for Coordination of
Structural Instruments, Certification and Payment Authority and the National Authority for the
Regulation and Monitoring of Public Procurement and Unit for Coordination and Verification of Public Procurement. In hindsight, we may seriously doubt the effectiveness of these authorities, since
mismanagement and corruption became prominent influencers of the budgetary period 2007-2013 in Romania.
Although Romania became officially involved with EU Regional Policy in 2007, important efforts for becoming eligible for EU funds had started already in late 1990s. An important stage of this was the restructuring of Romania`s regional division into eight regions at the NUTS-2 level in 1998. NUTS (nomenclature of territorial units for statistics) is a hierarchical system for dividing up the
economic territory of the EU for several governing purposes, among them are the framing of EU regional policies and socio-economic analyses of regions.32 NUTS regions are divided into three levels, ranging
from NUTS-1 as major socio-economic regions to NUTS-3 as small regions for specific diagnoses. EU Regional Policy is managed on the NUTS-2 level. With the purpose of becoming eligible for EU funds, Romania had to harmonize its regional administration with EU structures to face the challenge of regional
29 Gheorghe Zaman and George Georgescu, ‘Structural Fund Absorption: A New Challenge for Romania?’,
Romanian Journal of Economic Forecasting’, no. 1 (2009), p. 146.
30 Gábor Hunya et al., ‘An Assessment of the Access by Romanian SMEs to Structural Funds’, p. 4. 31 Camelia Popa, ‘Implementation of Cohesion and Structural Funds in Romania’, Journal of Knowledge
Management, Economics and Information Technology, issue 7 (2011), p. 5-7.
32 Eurostat, ‘NUTS – Nomenclature of Territorial Units for Statistics, Overview’, accessed February 19, 2016,
18 development.33 From having its regional policy based on a county-level division of 41 counties plus the
capital of Bucharest, Romania shifted to a regional-level of 8 development regions at NUTS-2 level. This regional reform was inevitable for Romania to gain accession to EU funds and for this reason it could have been seen as a big achievement in Romania`s reforming approach towards EU-membership.
Figure 3: Romania - Development Regions (NUTS-2 level)
Unfortunately, the reorganization of Romania`s regional divisions also provides important evidence for the lack of determination of Romanian ruling powers towards EU policy and legislation. This argument is convincingly made by Dragoş Dragoman in his article Regional Inequalities,
Decentralisation and the Performance of Local Governments in Post-Communist Romania from 2011.
The 1998 division of Romania into eight NUTS-2 development regions was in fact nothing more than a development tool for gaining access to EU funds. Dragoman criticizes the Romanian government for the fact that the newly created regions did not become territorial administrative units, replacing the counties in order to realize more administrative efficiency in Romania.34 The eight development regions became
no legal entities, but only formal associations between counties. They were in fact powerless, while the EU based its EU Regional Policy on these regions.
33 Dragoş Dragoman, ‘Regional Inequalities, Decentralisation and the Performance of Local Governments in
Post-Communist Romania’, Local Government Studies, vol. 37, no. 6 (2011), p. 649.
19 Each of the eight development regions were provided with a regional agency with an executive function and a ministry for regional development. Law 315/2014 further provided the regions with a regional development council, provided with a deliberative function, only for coordinating the
development programs of the regional agencies. Although the regions indeed gained some functioning authority, they still lacked any significance. Still the counties and certainly not the regions were having the administrative power as fixed by the Romanian constitution.35 According to the constitution, the
counties are run by County Councils which are the legislative power at the county level. The county council is headed by a president who bears the responsibility for the functioning of the county
administration. These facts clarify largely my choice for focusing on three counties instead of the regions at NUTS-2 level. Since these regions only function as development tools for receiving EU funds and do not form any territorial legal administrative entity, I do not expect them to be interesting for the purpose of my research. Instead, the counties do have a legal administrative power and even have a certain political identity.
A final point of critique made by Dragoman is the lack of a decentralization of power in Romania. Dragoman remarks that although the development regions had been created and the counties had their local administrative power, the general policy of regional development and its financing continued to be run in a centralized manner by the national government, seated in Bucharest.36 Regional development in
Romania was coordinated through the National Council for Regional Development (NCRD) and through the National Regional Development Fund (NRDF). A decentralization of administrative and fiscal power would provide the regions a necessary tool for effectively coordinating regional development.
Nevertheless, the centralized character of politics and ruling power in Romania is a generally known problematic issue that seems to be a negative inheritance from its communist past.37 The lack of ruling
and administrative efficiency and therefore the lack of experience and capacity on the lower levels of governance will form an important issue in the remainder of this research.
35 Dragoş Dragoman, ‘Regional Inequalities, Decentralisation and the Performance of Local Governments in
Post-Communist Romania’, p. 654.
36 Ibid., p. 653. 37 Ibid., p. 667.
20
Cluj, Iaşi and Dolj
This final paragraph of chapter one will focus on the three counties of Cluj, Iaşi and Dolj. First, I will introduce the counties and clarify why specifically these counties will be researched. Accordingly, I will examine essential points concerning the counties` political and economic situations, as well as several important geographical and cultural-historical characteristics from each of them.
Figure 4: Romania - Counties (NUTS-3 level)
In addition to the argument mentioned in the introduction that the selection of these three counties is based on their geographical location in each of the three described historical provinces of present Romania this choice is in fact motivated on more specific characteristics of these particular counties. First, the counties of Cluj, Iaşi and Dolj are more or less comparable in terms of their population. In 2011, the three counties` population counted 691.106 (Cluj), 772.348 (Iaşi) and 660.544 (Dolj).38 The counties`
population density is not completely corresponding (103.639, 141.140, 89.141), due to the fact that Iaşi
38 Institutul National de Statistică, ‘Populația Stabilă după Etnie – Județe, Municipii, Orașe, Comune’, Rezultate
Definitive RPL 2011, vol. I Populația Stabilă (Rezidență) – Structură Demografică, accessed February 24, 2016,
http://www.recensamantromania.ro/noutati/volumul/.
39 Direcția Județeană de Statistică Cluj, ‘Populația și Densitatea Populației la Recensăminte’, accessed February 24,
2016, http://www.cluj.insse.ro/cmscluj/files/judet2013/pop_refacut_Mela/13_pop_si_densit_recensam.htm.
40 Direcția Județeană de Statistică Iaşi, ‘Populația și Densitatea Populației la Recensăminte’, accessed February 24,
2016, http://www.iasi.insse.ro/main.php?lang=fr&pageid=477.
41 Direcția Județeană de Statistică Dolj, ‘Populația și Densitatea Populației la Recensăminte’, accessed February 24,
21 county has the smallest territory while its capital is corresponding in size and population with its
counterparts. The role and importance of the county`s capital city for the entire county`s economic and political sectors is another comparable feature that forms an important motivation for this selection of counties. The geographical locations of the counties in terms of their cross-border relations are also comparable and should not be ignored. Each county has close connections with a different neighboring country of Romania (Fig. 4). While Cluj is not a frontier county, its cultural, economic, historical and political relations are the strongest with neighboring Hungary. Iaşi shares a border with the Republic of Moldova, while Dolj has Bulgaria and Serbia as its close neighbors. Next to comparable factors, several crucial differences between these counties have also motivated my selection for making this research significant. One of these differences is the division in economic development of the counties in terms of GDP. Finally, the diversity of the political identity of the County Councils is an important factor for this comparable study and has been an important criterion in the selection of these three counties.
Cluj county belongs to the EU development region (NUTS-2 level) Nord-Vest (north-west). This development region had a GDP per capita of 40% of the EU-average in 2007 and was ranked as among the more developed regions of Romania.42 Its capital, Cluj-Napoca, is the main administrative and
economic center of the county and with 324.576 citizens in 2011 it is ranked the second largest city of Romania in population. The counties ethnographic makeup represents the general characteristic of Transylvania`s ethnographic composition. In addition to ethnic Romanians (75.4% of the population), Cluj`s population consists of a significant minority of ethnic Hungarians (15%) and Romas (3.2%).43 The
county`s economy is specifically based on services and industry.44 The county`s high economy
performance relies, according to the county council mainly on the well-developed tertiary sector. While the main economic sectors are predominantly based in and around Cluj-Napoca, agriculture remains an important sector for the rural areas of Cluj. Cluj-Napoca has proven to be an attractive county for local and foreign investors, referring to the fact that it has after Bucharest the highest number of companies in Romania. The county council attributes Cluj`s attractiveness to its multi-cultural character, its favorable geographical location in terms of infrastructure and western alignment, dynamic economy, and impressive supply of human resources.45
42 Eurostat, ‘Regional Statistics Illustrated’, accessed February 29, 2016,
http://ec.europa.eu/eurostat/cache/RSI/#?vis=nuts2.economy&lang=en.
43 Institutul Național de Statistică, ‘Populația Stabilă după Etnie – Județe, Municipii, Orașe, Comune’, Rezultate
Definitive RPL 2011, vol. I Populația Stabilă (Rezidență) – Structură Demografică, accessed February 24, 2016,
http://www.recensamantromania.ro/noutati/volumul/.
44 Consiliul Județean Cluj, ‘Economia Județului Cluj’, accessed February 24, 2016, http://www.cjcluj.ro/economie/. 45 Ibid.
22 The county of Iaşi is part of the EU development region Nord-Est (North-East) and is located on the border with the Republic of Moldova. This development region was the most underdeveloped of the eight with a GDP per capita of only 26% of the EU-average in 2007.46 The homonymous capital had a
population of 290.422, ranked as the fourth biggest city of Romania in 2011.47 In line with Cluj-Napoca,
the city of Iaşi functions, to a comparable extent, as the main administrative and economic center of its county. The ethnographic composition of Iaşi county represents the general common in the historical region of Moldova. 91% of the population is ethnic Romanian while the most significant minority is Roma (1.5%). Iasi is more homogeneous than Cluj, but the ethnic Romanians differ among the historical regions in their cultural-historical characteristics. The main concerns and characteristics of the county`s economy are discussed in a report of the county council. According to this, the county can be divided into two parts: the first accounts for the capital and its direct suburban region, where almost half of the
county`s population lives and works and who generate approximatively 90% of the county`s total economic output, while the other part exists of the rural area of the county characterized by its poverty, lack of jobs and opportunities in general.48 While the capital has a growing service and industrial sector,
in the rural areas agriculture dominates the economy. The points of attractiveness of Cluj are not valid for Iaşi, while the main problematizing factor for development is generally called the lack of sufficient infrastructural system especially towards the west and thus the EU.49
The County of Dolj is part of the EU development region Sud-Vest (South-West) and is located on the border with Bulgaria. This development region had a GDP per capita of 32% of the EU-average ranked among the middle developed Romanian regions.50 The capital Craiova had a population of
269.506 and was ranked the sixth largest city of Romania in 2011.51 The county`s ethnographic
composition is relatively homogenous, namely 90% of its population is ethnic Romanian and 4.5% Roma as the most significant minority. Again, this county is predominantly agrarian but its capital has an
46 Eurostat, ‘Regional Statistics Illustrated’, accessed February 29, 2016,
http://ec.europa.eu/eurostat/cache/RSI/#?vis=nuts2.economy&lang=en.
47 Institutul Național de Statistică, ‘Populația Stabilă după Etnie – Județe, Municipii, Orașe, Comune’, Rezultate
Definitive RPL 2011, vol. I Populația Stabilă (Rezidență) – Structură Demografică, accessed February 24, 2016,
http://www.recensamantromania.ro/noutati/volumul/.
48 GEA Strategy & Consulting, Identitatea Economică, Socială, Culturală a Județului Iaşi, 2014, p. 25. 49 Adelina Mihai, ‘Cum arată economia județului Iaşi, capitala „bogată“ a celei mai sărace regiuni din țară, unde
antreprenorii își promovează singuri orașul în fața investitorilor străini’, Ziarul Financiar, May 22, 2014, accessed February 25, 2016, http://www.zf.ro/zf-24/cum-arata-economia-judetului-iasi-capitala-bogata-a-celei-mai-sarace-regiuni-din-tara-unde-antreprenorii-isi-promoveaza-singuri-orasul-in-fata-investitorilor-straini-12642935.
50 Eurostat, ‘Regional Statistics Illustrated’, accessed February 29, 2016,
http://ec.europa.eu/eurostat/cache/RSI/#?vis=nuts2.economy&lang=en.
51 Institutul Național de Statistică, ‘Populația Stabilă după Etnie – Județe, Municipii, Orașe, Comune’, Rezultate
Definitive RPL 2011, vol. I Populația Stabilă (Rezidență) – Structură Demografică, accessed February 24, 2016,
23 important economic and administrative function. Craiova also has an important industrial and service sector. Compared with the western and north-western regions of Romania, the south-western regions` economies are characterized by their heterogeneity.52 The industrial sector of Dolj is focused on: food,
textile, and automobile parts. The industry of Craiova was given a big boost in 2007, when Ford opened a factory in the city.
In terms of socio-economic standards on county-level, the Romanian newspaper Gândul published a useful research in 2013. All counties were ranked on their level of living standards based on seven important socio-economic indicators (resp. unemployment rate, net average salary, amount of green areas, crime rate, accessibility of running water, GDP per capita, and life expectancy). The counties of Cluj, Iaşi and Dolj were ranked respectively as: 5th, 10th, and 17th. Cluj thanks his high ranking mainly for
its relatively high salary level and its high life expectancy (74.8 years). Cluj`s negative points were its high rate of criminality and the GDP per capita which was below Romania`s average. The ranking of Iaşi was mainly a result of its relative high life expectation (73.6) and the relative high monthly net salaries together with a low rate of criminality. The seventeenth position of Dolj was predominantly a result of its fourth highest unemployment rate of 9,69% and the low net salary which is around 10% lower than the national average.53 Although this research provides insight in the balances of socio-economic standards
among the Romanian counties and shows interesting differences between Cluj, Iaşi and Dolj, it is important to note that the statistics are average data of the counties. The importance of the capitals in these three counties surely fade the realities of rural, non-urban circumstances.
Concerning the political identity and voting behavior, there were worth mentioning differences between the three counties during the budgetary period 2007-2013. Dragoman`s explanation that
‘transition losers’, especially post-communists, vote more frequently with communist successor parties as a result of their structural dependency seems to be legitimate in these cases.54 When we look to electoral
behavior in the three counties during the local elections of 200855 and 201256, the majority of the votes in
Cluj go to liberal parties, while in Dolj and especially in Iaşi a majority of the votes go to the PSD
52 GEA Strategy & Consulting, Studiu de Fundamentare pentru P.A.T.Z – Zona Metropolitană Craiova – Studiu de
Economie Urbană, 2015, p. 54.
53 Corina Vârlan and Alexandra Pele, ‘HARTA INTERACTIVĂ a nivelului de trai din România. Cât de bine se
trăiește în județul tău’, Gândul, April 8, 2013, accessed on February 25, 2016,
http://www.gandul.info/financiar/harta-interactiva-a-nivelului-de-trai-din-romania-cat-de-bine-se-traieste-in-judetul-tau-exclusiv-10675712.
54 Dragoş Dragoman, ‘Regional Inequalities, Decentralisation and the Performance of Local Governments in
Post-Communist Romania’, p. 665.
55 Autoritatea Electorală Permanentă, ‘Alegeri Locale 2008’, accessed February 25, 2016,
http://alegeri.roaep.ro/?alegeri=locale-2008.
56 Autoritatea Electorală Permanentă, ‘Alegeri Locale 2012’, accessed February 25, 2016,
24 (communist successor party) and later USL (coalition of center-left and center-right parties including PSD).57 This is not surprising when we look to the regional development of these counties. Cluj is the
most developed of the three, while Iaşi and Dolj are among the bigger losers of the transition in terms in socio-economic development. I assume the analysis of the political identity of the county councils
important for this research, since it is argued by scholars that clientelism, as a part of the regional trend of corruption, among political authorities has been an important deficit of Romania`s political
performances.58 The general unwritten rule is that most of the money goes to the ruling party or the
parties within the ruling coalition.59 It is in this light argued that all parties in government tended to favor
their own council presidents and mayors.60 The following chapters will examine in how far clientelism
indeed has been an influencing factor regarding to EU Regional Policy.
This first chapter has researched what the implementation of EU Regional Policy in Romania has meant and under which circumstances and characteristics the counties of Cluj, Iaşi and Dolj experienced the accessibility of EU funds. The first part of the chapter discussed several important aspects of the policy and its objectives as constructed by the EU. The main conclusion from this part is that EU Regional Policy has become a complex policy, with a wide range of legislation to be implemented by Romania. The policy surely shows certain deficiencies in its design and construction that likely may have influenced the inefficiency of itself.
Accordingly, in the second part I have discussed the Romanian political environment and economics in the period 2007-2013. It became clear that during these years Romania faced important crises and instability that definitely may have influenced the performance of the country concerning EU Regional Policy. On the contrary, several actions undertaken by the government strengthen the idea that the determination among the ruling elite has not been sufficient in Romania in the vital first years of the policy. Among these are the lack of decentralization and multiple political scandals. Finally, the three counties were introduced and discussed in terms of their cultural, political and economic characteristics. Important differences as well as similarities have been examined in service of the research and their identification.
57 Autoritatea Electorală Permanentă, ‘Alegeri Locale 2012’, accessed February 25, 2016,
http://alegeri.roaep.ro/?alegeri=alegeri-locale-2012.
58 Raluca Pop et al., ‘Risks of Corruption and the Management of EU Funds in Romania’, p. 106. 59 Ibid., p. 106.
25
Chapter 2. The Main Challenges of Dealing with EU Funds in Romania
In the first years of the budgetary period 2007-2013 statistics already showed Romania`s
underperformance in dealing with the billions of allocated EU funds. Among the CEE member states of the EU, Romania faced the most difficulties in gaining access to the already allocated funds. This phenomenon is called ‘absorption of funds’ and is demonstrated by the absorption rate. This rate shows the amount of accessed funds as a percentage of the total allocated funds of a specific country. It was indeed not merely the absorption of funds that seriously impeded regional development and cohesion in the development regions of Romania.
This chapter will analyze the most dramatic challenges and deficiencies of the management and implication of EU funds in Romania in the period 2007-2013. This chapter will be divided into three stages of fund management that are assumed to have been critical in the case of Romania. The foundation will be created for the comparative analysis of the counties of Cluj, Iaşi and Dolj, which will be
conducted in the next chapter. The analysis of fund management in Romania will be done in the following order. First, the main causes for the deficient absorption of funds will be examined. Second, this chapter will focus on the payment ratio of funds in Romania, which can be seen as a next challenge since it will be demonstrated that Romania had a very low payment ratio of funds what provides evidence of a malfunctioning management of funds. Finally, the factual spending of funds will be reviewed according to the results of projects and the numerous cases of corruption, fraud and mismanagement that have dominated the field.
The Low Absorption Rate
When speaking of EU Regional Policy, developed to realize regional development and convergence of the least developed regions, it can be said that the absorption capacity of eligible states in order to gain access to the allocated funds is one of the determining factors of the policy`s success. The absorption capacity represents the extent to which a country is able to effectively spend the allocated EU funds and is expressed in percentage of the total allocated funds. The fund absorption capacity can be related to three main features:
- Macroeconomic capacity: the rate of a country`s GDP to which EU funds are limited to amount. - Financial capacity: the ability to co-finance the programs and projects supported by the EU.
26 - Administrative capacity: the ability of central and local authorities to manage the Operational
Programmes (OPs) and projects.61
The absorption capacity is mainly expected to be influenced by the administrative and the financial capacities of a state.62 Zaman and Georgescu even argue that there is a consensus around the fact that
absorption depends heavily on institutional factors, both of EU and national structures.63 At the EU level
these factors are mainly related to the transparency of the fund allocation process, the consistency of using various funds and the bureaucratic administration. At the national level, institutional factors are related to the real structure of the economy, the administrative capacity, the political system and the economic policies.64 This argument claims that the absorption capacity, an important factor of the
efficiency of EU Regional Policy, depends indeed on both EU and national factors, suggesting that the main factors for the inefficiency of EU Regional Policy are indeed to be found on the side of the EU as well as on Romania`s territory.
It is proven that the link between the economic situation and the absorption capacity is a paradoxical one, since the most economically disadvantaged regions also experience the greatest difficulties in the absorption of EU funds.65 The problematic feature of this paradox is that the most disadvantaged regions
need the largest financial support in order to restructure their economies and overcome regional disparities. This paradox can be interpreted as evidence for the inefficient functioning of EU Regional Policy, since it should be no surprise that the lowest developed regions experience the biggest difficulties in managing development. According to Zaman and Georgescu, the explanation for this paradox lies in the administrative and financial capacities of the various regions as well as within the regions and counties of Romania. Statistics show that regional disparities have increased in the period 2007-2013. Also within counties have the centers proven to have better capacities in dealing with EU funds than the peripheries and mostly rural areas of Romania. This phenomenon is on a regular base emphasized and reflected in Romanian news articles. For instance, these mention the fact that the more developed regions and cities have managed to realize development with the support of EU funds, but at the same time in the villages a serious amount of people still live without electricity or running water.66 Living standards in the
61 Ivana Katsarova, ‘The (low) Absorption of EU Structural Funds’, Library of the European Parliament, 1/10/2013,
p. 2.
62 Gheorghe Zaman and George Georgescu, ‘Structural Fund Absorption: A New Challenge for Romania?’, p. 142. 63 Ibid., p. 143.
64 Ibid., p. 143. 65 Ibid., p. 142.
66 L.C., ’EU funds absorption in Romania A funding obsession’, The Economist, June 5, 2012, accessed March 23,
27 peripheries are indeed lagging more and more behind the developments of these in the centers, mostly direct surrounding areas of the bigger cities. This problematic paradoxical issue of EU funds will be analyzed in detail in the next chapter.
Evaluations and studies of Romania`s absorption performance in the period 2007-2013 have demonstrated that the main causes of Romania`s absorption problem are to be attributed to the
administrative and financing capacities. Lavinia Stan argues that the low absorption rate can be explained by the inefficiency of the Romanian bureaucracy, the high levels of corruption and the inability of applicants to come with matching funds.67 Iulian Braşoveanu examines in the article Structural and
Cohesion Funds: Theoretical and Statistical Aspects in Romania and EU, that the absorption of EU funds
has been a problem due to a high rejection rate of submitted projects and the problems for beneficiaries in procuring their own part of funding for covering costs related to own contribution, starting the project and covering non-eligible expenditure.68 These findings are convincingly represented in a 2008 survey of
www.fonduri-structurale.ro, Romania`s main information source for European financing opportunities.
The aim of this survey was to collect information from Romanian insiders, regarding the main causes of Romania`s low absorption capacity. The results are represented in Figure 5 and show that the main causes of the poor performances regarding the management of EU funds are indeed related to Romania`s
administrative and financial capacities.
Figure 5: Main Causes of Romania`s Low Absorption Capacity
Source: Dragoş Jaliu and Crina Rădulescu, ‘Six years in managing structural funds in Romania. Lessons learned’, Transylvanian
Review of Administrative Sciences, no. 38 (2013), p. 87.
67 Lavinia Stan and Rodica Zaharia, ‘Romania’, p. 194.
68 Iulian Brașoveanu et al, ‘Structural and Cohesion Funds: Theoretical and Statistical Aspects in Romania and EU’,
