The Impact of EU Funds on Romanian Finances

– by Laurian Lungu, November 2012

The primary aim of this paper is to look at the potential consequences an increase in the EU budget would have onto the size of the domestic budget deficits. As the simulations in this paper show, if the EU budget for the 2014-2020 period was adopted in the current form put forward by the European Commission, the resulting increase in Romania’s annual budget deficits would average somewhere between 0.1-0.2% of GDP during the next fiscal exercise.

Another issue addressed is the impact of the EU funds on Romanian GDP and employment. After more than five years this impact appears to be modest and below initial expectations. Part of the reason the full potential of EU funds has remained unfulfilled for so long relates to issues of domestic governance. Sorting out this problem should constitute a priority for the Romanian authorities. Thus, maximising the impact of the EU funds by markedly improving the administrative capacity to control projects and ensuring efficient project allocation and implementation should get pre-eminence. It makes little sense to advocate an increase in the size of the EU budget if there was a high probability that domestic constraints to funds
absorption would lead, anyway, to a disengagement of future EU funds.
.