EC Delegation highlights Romania's successes and shortcomings

In three weeks’ time, Romania will learn whether the European Commission decides to grant it functional market economy status. Romania is likely to be acknowledged as a functioning market economy, but this does not necessarily mean that it meets the economic criteria needed to join the European Union. These criteria refer to the ability of a candidate county to withstand the competitive pressures coming from the community market.

“Never before has a candidate country received the two qualifications in one year,” Onno Simmons, deputy head of the EC Delegation to Bucharest said yesterday, while on a visit to the capital.

The Commission’s country report will be released later this year, at the beginning of October, before the institution’s term ends.

Simons assessed Romania’s current situation, reviewing the main requirements entailed by functional market economy status and whether they have been fulfilled or not.

The definition used by the Commission is not very precise: “The existence of a functioning market economy requires that prices, as well as trade, are liberalised and that an enforceable legal system, including property rights, is in place. Macro-economic stability and consensus about economic policy enhance the performance of a market economy. A well-developed financial sector and the absence of any significant barriers to market entry and exit improve the efficiency of the economy.”

The simple enumeration of these requirements suggests that, despite clear progress made in the economic field since the previous Country Report was released, Romania still has many weak points.

“It is undeniable that, since 2000, Romania has embarked on a steady path of disinflation. Moreover, the recent amendments to the statutes of the National Bank, which explicitly mention price stability as the NBR’s ‘fundamental goal’ and which prevent central bank officials from seeking or receiving instructions from ‘public authorities or any other institution or authority’, bode well for the sustainability of the commitment to bring inflation down and keep it at low levels. Another unmistakable sign of progress is the prudent execution of the public budget,” Simons said yesterday.

However, he was quick to mention the not so positive aspects as well. “Romania still has the highest inflation level among all the candidate countries and, moreover, this relatively high inflation also takes its toll on the country’s ability to fully assume the obligations stemming from the acquis. In particular, further opening of the capital account is being delayed because of too high interest differentials between the domestic and the international markets, which cannot be divorced from the high underlying inflation differentials. Also, the assessment of how satisfactory the achieved degree of macroeconomic stability is, cannot not disregard the risk factors entailed by the acceleration of private consumption, further rises in energy prices and a deteriorating current account deficit”, the European Commission official said.

According to Simons, there is also a need to better take into account the medium-term sustainability of public finances, and the extent of price liberalisation (which appears satisfactory). He moreover mentioned the “much talked about issue of privatisation and financial discipline (payment arrears)”.
razvan.voican@zf.ro