Romania warned over funding

Barroso calls for “immediate measures” to improve the civil service and public contracts.

The European Commission today urged Romania to step up reforms of its civil service and its administrative rules or risk losing EU funding.

The warning came in a meeting between the Commission’s president, José Manuel Barroso, and Romania’s Prime Minister Victor Ponta that also covered a political crisis in Romania that has forced the Commission to extend its special monitoring programme for the country.

The meeting had been instigated by Ponta, in response to a decision by his political rival, President Traian Băsescu, to ask for meetings with Barroso and Herman Van Rompuy, the European Council’s president.

Băsescu met the two EU leaders on Friday (14 September) for what one diplomat described as an opportunity to “re-acquaint” himself with them following his reinstatement as president in August.

Ponta successfully manage to persuade the Romanian parliament to suspend Băsescu in July, but his attempt to impeach Băsescu failed in August when the constitutional court concluded that less than 50% of the electorate had turned out to vote in a 29 July referendum to remove the president from office.

The war between Ponta and Băsescu in July prompted an unprecedented intervention by Barroso, who obliged the Romanian government to make 11 pledges of concrete action to reassure the EU that his government was committed to the rule of law, including independence of the judiciary. It also led the Commission to bring forward, to the end of the year, the next report on Romania’s progress since accession. The post-accession monitoring mechanism – the ‘co-operation and verification mechanism’ – was set up specifically for Romania and Bulgaria, which joined the EU in 2007.
 
After his talks with Ponta, Barroso issued a statement in which he called on Romania’s political elite “to set their focus very firmly on the urgent need to restore institutional and political stability” ahead of parliamentary elections scheduled for November. He indicated that the Commission is especially anxious about the possible politicisation of nominations to the country’s anti-corruption body.

However, Barroso also took the opportunity to talk about the state of Romania’s finances and reforms of its civil service. Romania is currently under an international programme that includes a stand-by agreement enabling it to draw on roughly €5 billion in financial support from the International Monetary Fund and the European Union. At the same time, however, the country is proving incapable of spending money already allocated to it by the EU from its normal budget.

According to the European Commission, Romania’s absorption capacity – its ability to spend money effectively – is just 7.4%, a figure that Barroso has previously described as “painfully low”. On this occasion, he identified the country’s public-procurement rules as a specific problem, in addition to its “administrative capacity”.

In all, Romania was allocated around €20 billion in the EU’s seven-year budget, which ends in 2013.

Ponta has previously said that Romania could forfeit €100 million this year, and more than €1bn next year.

Under EU rules, money can be released only to approved projects and only if a country is able to meet its obligation to contribute to EU-funded projects – the ‘co-financing’ requirement. The funds must then be spent within a specific time period. Auditors can also prevent the release of funds if they deem that a project fails to meet their criteria.

Romania has significant problems on all counts. In February, the Commission temporarily halted billions of euros of payments after Romania’s audit office found irregularities.

Barroso today said that the government should take “immediate measures”.

A Romanian diplomat today said that “the Commission and Romania are working on finding solutions” and that Romania is “confident” that it will avoid losing the money allocated to it.

One possibility mentioned in the past is that the Commission would reduce the co-financing requirement. The EU has already changed the co-financing requirement to Romania’s advantage as part of its effort to help EU countries whose economies are under international ‘adjustment programmes’.

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