Friday

19th Jan 2018

Political battles 'taking a toll' on Romanian economy

  • Graffiti in Bucharest: Politicians are portrayed as corrupt, greedy and incompetent. (Photo: Valentina Pop)

Political infighting risks wrecking urgently needed reform of the Romanian economy, according to a progress report released on Tuesday (14 August) by the European Commission, the International Monetary Fund (IMF) and the World Bank.

While maintaining that the country's economic reforms were "broadly on track," the trio expressed concerns about the impact of the drawn-out political crisis on the Romanian economy.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

"The recent political turmoil is taking a toll on the economy and has dented confidence," it said.

It added that "a prolonged political crisis could hamper effective economic policy making, increase risk premiums and financing costs, further depreciate the exchange rate, and depress investment."

The document is the latest report warning the Romanian government about the wider impact of battles between the governing Social-Liberal union and the opposition Democratic Liberal party, which culminated in a July referendum on whether to impeach the country’s President Traian Basescu.

Last Friday (10 August), commission President Jose Manuel Barroso called on Prime Minister Victor Ponta to respect the independence of Romania's Constitutional court, which is expected to rule on the validity of the referendum on 21 August.

In mid-July, the commission publicly questioned whether the Romanian government has the "understanding of the meaning of the rule of law in a pluralist democratic system."

Romania is three years into a reform program, including sizeable spending cuts, required under the terms of a €20 billion rescue package agreed with the IMF, the EU and the World Bank in May 2009.

In 2011 the support package was expanded to include a Stand-By Arrangement from the IMF of an additional €3.5 billion, alongside Balance of Payment Support from the EU of €1.4 billion and loans from the World Bank.

The Balkan country, which joined the EU in 2007 but is not part of the eurozone, emerged from two years of recession in 2011, posting annual growth of 2.5 percent.

However, in the past few months the IMF revised its growth estimate for 2012 down to 0.9 percent from 1.5 percent. The country also saw its budget deficit rise to 5.2 percent in 2011 and is expected to make further spending cuts to bring its budget in line with the 3 percent deficit limit.

The report emphasised the need for Romania to improve its absorption of EU structural funds, saying "a much higher use of these free resources is critical to boost infrastructure investment and economic growth, and would also help to strengthen international reserves."

Romania currently has - at just 7.4 percent - the lowest rate of absorption of EU funds in the 27-nation bloc.

The commission withheld payments to the country in February after a series of irregularities regarding funds worth €3.5 billion were uncovered in the management of its human resources programme.

The country has been wrecked by partisan battles throughout 2012, with the ruling Social-Liberal union attempting to force President Basescu out of office over allegations of abuse of power.

The referendum saw a large majority voting to impeach Basescu but only on a 46 percent turn-out, below the required 50 percent threshold.

Fresh parliamentary elections are expected to take place in November.

Analysis

Something is rotten in the state of Romania

The view of ruling politicians that public institutions - be they cultural institutes, media, or, more worryingly, the judiciary - need to obey the ruling party has never been completely eradicated since Communism fell.

EU commission still 'very worried' about Romanian democracy

EU justice commissioner Viviane Reding on Wednesday said she remains "very much worried" about the state of democracy in Romania. Meanwhile, there is intense political infighting in Romania ahead of Sunday's impeachment referendum.

German coalition deal aims for 'Macron-lite' EU renewal

Merkel and Schulz clear the first hurdle of coalition talks, but the SPD's full membership backing is still needed. The likely coalition parties express support for Macron's eurozone reform ideas, but remain cautious.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  2. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  3. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  4. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  5. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  6. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  7. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  8. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  9. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  10. ACCAWelcomes the Start of the New Bulgarian Presidency
  11. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  12. EU2017EEVAT on Electronic Commerce: New Rules Adopted

Latest News

  1. EU wants 'entrepreneurship' in education systems
  2. UK loses EU satellite centre to Spain
  3. Pay into EU budget for market access, Macron tells May
  4. Ethiopian regime to get EU migrants' names
  5. EU to lend Greece up to €7bn more next week
  6. Nato prepares to take in Macedonia
  7. Taking full benefit of supercomputers in Europe
  8. Spitzenkandidat system 'difficult to get rid of', hopes lead MEP