Romanian economy is in an ongoing transformation process starting with 1990. These involve changes of legislation, institutions, human perceptions of economic activity and productivity in order to fulfill the new challenges. Transformation process have gaEuropean Union, economic integration, welfare

Campeanu Emilia

Mosteanu Tatiana

English

Research Papers in Economics

58 
 
CHALLENGES FOR ROMANIAN ECONOMY AS AN EUROPEAN UNION MEMBER 
STATES 
Mo teanu Tatiana  
Academy of Economic Studies Bucharest, Faculty of Finance, Insurance, Banking, and Stock 
Exchange, Mihail Moxa, no. 5-7, Sector 1, Bucharest, Zip Cod: 010961  
Email: tatiana_mosteanu@yahoo.com, Tel. 021.319.19.01/563  
Câmpeanu Emilia  
Academy of Economic Studies Bucharest, Faculty of Finance, Insurance, Banking, and Stock 
Exchange, Mihail Moxa, no. 5-7, Sector 1, Bucharest, Zip Cod: 010961  
Email: emilia.campeanu@fin.ase.ro, Tel. 021.319.19.01/264  
 
Romanian economy is in an ongoing transformation process starting with 1990. These involve changes of 
legislation, institutions, human perceptions of economic activity and productivity in order to fulfill the new 
challenges.  Transformation  process  have  gained  another  status  in  the  context  of  the  evolution  of 
relationships between Romania and European Union. Starting from this idea, the aim of the paper is to 
present these challenges. 
 
Keywords: European Union, economic integration, welfare 
 
JEL classification: E6, H0, O1 
 
1. Introduction 
Romanian economy is in an ongoing transformation process starting with 1990. These involve 
changes of legislation, institutions, human perceptions of economic activity and productivity in 
order  to  fulfill  the  challenges  of  the:  (i)  transition  period,  during  1990-2003;  (ii)  emerging 
market, during 2004-2006, and emerging country, since 2007. Also, transformation process have 
gained  another  status  in  the  context  of  the  evolution  of  relationships  between  Romania  and 
European Union (EU) from a candidate country, in 1997, to an acceding country, in December 
2004, and a EU member state, in January 2007. This new status in 2007 indicates that Romania 
fulfills  political,  economic  and  institutional  criteria  and  implements  the  acquis.  As  a  result, 
Romanian  has  an  administrative  capacity  to  transpose  European  Community  legislation  into 
national  legislation,  to  implement  it  and  to  effectively  enforce  it  through  appropriate 
administrative and judicial structures.  
Therefore,  Romanian  economy  must  face  new  challenges  imposed  by  the  EU  member  state 
status. Starting from this idea, the aim of the paper is to present these challenges. After a brief 
introduction, section 2 highlights the challenges for Romanian economy regarding investments, 
trade, welfare and macroeconomic indicators. Section 3 presents the main concluding remarks.    
 
2. Challenges for Romanian economy 
2.1. Investments 
European integration is a problem of investments and income. It consists in the achievement of 
personal relationships and sharing experiences. Standard of living increases only as a personal 
investment  in  the  material  base,  but  Romania  risks  becoming  only  a  consumer  market. 
Integration  costs  exist  because  the  benefits  are  great  according  to  economic  analysts.  The 
population must be informed of the projects and integration mechanisms, which could make a 
success through the implementation of European funds to the company. 
In long run, integration in the European Union will bring major benefits to Romanian economy. 
In the short term, it will conduct to the decline of the purchase. Romanian real income will 
reduce by nearly a tenth. This emerges from a study that investigates the correlation between the 
average forecast of Romanians salaries and the cost increasing.  59 
 
Assessment  of  trade  at  international  level  is  a  very  important  element  for  the  balance  of 
payments, gross domestic product and economic studies at international and national on short 
run. The statistical data on trade are useful for the government to establishing trade policies and 
are used by some organizations that identify the possibilities for extension.  
One of the major challenges is when the Romanian economy will be ready to absorb all the 
European  funds.  This  means  that  Romanian  policies  must  be  oriented  to  build  efficient 
institutions  capable to  absorb  community  funds.  But,  administrative  capacity  to  absorb  post-
accession funds proved to be insufficient because of the many institutional weaknesses. As a 
result, will be necessary important human investment in order to have professional civil servants 
capable to develop major projects financed by European funds. Totally, 40% of the staff has 
experience in working with European funds12. European funds are still difficult to access, due to 
lack of responsibility of state bodies. Partnerships between government, unions and employers 
are missing. Each has a different perception on things and accepts different points of view. There 
is  also  an  acute  lack  of  dialogue  between  specialists  of  ministries,  and  in  this  case  is 
recommended  for  a  debate  between  civil  society,  trade  unions,  academics,  business  and 
government. 
 
2.2. Trade 
After joining the European Union, Romania is part of the Single European Market and should 
take all changes that come with that status. As a result, we will withdraw from the Central 
European Free Trade (CEFTA), the European Free Trade Association (EFTA) and the treaties 
signed with Moldova, Turkey, Israel, Serbia, Montenegro, Albania and Bosnia will no longer be 
valid. Most of the Romanian trade was held under the Free Trade Agreement (approximately 
83.92% of exports and 70.56% of imports) and the European Union was the main trade partner 
(average 70% of the country's imports and exports were in EU). 
Since 2007, Romania applied common European policy that includes: imports in EU without 
taxes,  tariffs  common  border,  the  generalized  system  of  preferences  (GSP)  of  EU  trade 
agreements  with  World  Trade  Organization  and  other  treaties  where  the  EU  is  a  member. 
Community signed a set of free trade agreements with Mediterranean countries, Mexico, Chile 
and South Africa. On the other hand, Romania has adopted new rates for larger countries and 
some other anti-dumping measures for goods from non-EU countries. 
Another positive consequence of integration in the European Union is the increase of foreign 
direct investments which focus on the industrial sector. This has led to increasing imports in the 
first  period,  but  also  led  to  improvement  of  business  environment.  In  contrast,  demand  for 
domestic investment fell and focused on equipment import. Foreign direct investment must be 
addressed in close connection with economic growth, development, because regardless of the 
political system, it constitutes an important factor of economic and social development through 
its volume, structure and quality. 
Common customs tariff shall apply uniformly throughout the EU and aims at a fair trade by 
avoiding concentrations in countries with lower rates. This will apply without any right at the 
national level. As an immediate impact on Romania, the tariffs were reduced and local businesses 
can access more easily the European goods. There was an exports increase to EU countries that 
have also contributed to exports in non-EU countries, unlike in Slovakia, for example, which had 
a different trend in the first year after accession. 
Generalized system of preferences (GSP) of the European Union is a system of preferential tariffs 
for certain goods of emerging and developing countries. Among these countries are: China, India 
and the countries belonging to the former Community of Independent States (CIS). Starting in 
                                                       
12 Oprescu,Gh.; Constantin, D.L.; Pislaru, D. (2005/2006), Analysis of the absorption capacity of European 
funds in Romania, European Institute of Romania. 60 
 
January 2006 and until December 2008, the EU has applied the so-called a GSP Plus (appointed 
to support sustainable development) that expanded the number of products from 6900 to 7200. 
Romania as a member of GSP Plus, applies preferential treatment to certain countries which will 
conduct to positive results for businesses.
 13 
Romania's Integration in the European Union had a minor impact on exports to Iraq since the 
latter has the same customs tariff for both countries members of the Union and for non-member 
states. Considering the small volume of products imported from Iraq, the EU integration will not 
influence significantly the commercial balance.
 14 
Trade with Jordan has brought economic benefits just because the EU and Romanian Jordan 
signed  a  deal  designed  to  create  a  free  trade  zone  by  2010.  Romanian  export  to  Jordan  is 
concentrated mainly on industrial products and chemicals, and supplies of wood and metal. Also, 
import of products from Jordan will benefit of the concessions granted by the European Union. 
Romania import primarily agricultural products and medicines, but their value is not significant
15. 
 
2.3. Welfare 
This study intends to demonstrate the effects of European integration of the last two waves of 
accession in 2004 and the effects on new members starting with 2007. But the results of such a 
process can be observed on long term; therefore this analysis intends to use the forecasts for the 
coming years so that the two waves to be somewhat comparative. Figure 1 presents the evolution 
of economic growth for ten EU member states accepted in 2004 and for the last EU members. It 
can be seen that in nine cases out of ten (except for Lithuania), the accession (2004) has brought 
different intensity for economic growth of these countries. Moreover, the trend of the next year 
shows  an  increasing  which  supports  the  assumption  that  European  integration  brings  many 
benefits for member states. In Romania case the next years will demonstrate if this evolution will 
be also achieved.   
 
Figure 1 Evolution of economic growth (%) 
 
Source: data are from EUROSTAT 
                                                       
13 National Commission of Prognosis (2006). The impact of accession on foreign trade experience of the 
new member states; Cosmin Zaharia (2006). Romania's commercial policy dictated by EU rules 
14http://www.dce.gov.ro/Materiale%20site/Indrumar_afaceri/impact_aderare_afaceri/Fisa_impact_Irak.htm 
15http://www.dce.gov.ro/Materiale%20site/Indrumar_afaceri/impact_aderare_afaceri/impact_aderare_aface
ri_iordania.pdf 
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
EU-27 EU-25 Czech Republic Estonia Cyprus
Latvia Lithuania Hungary Malta Poland
Slovenia Slovakia Bulgaria Romania61 
 
Based on EUROSTAT forecasts for economic growth of EU member states, we may identify the 
trend during 2001-2010 and group the countries in the following categories: (i) countries with an 
increasing GDP (Malta, Poland, Slovakia, Slovenia, Czech Republic, Bulgaria); (ii) countries 
with  a  decreasing  GDP  but  with  an  economic  growth  over  EU  average  (Romania,  Cyprus, 
Hungary, Estonia, Latvia); (iii) countries with a decreasing GDP but with a real GDP growth 
bellow EU average (Lithuania). Important changes had been made in Malta, where economic 
growth will increase with 3.8 percentage points (pp), and Lithuania, where real GDP will reduce 
with 7.8 pp. 
  
Figure 2 Evolution of economic growth (%) 
   Source: data are from EUROSTAT 
 
When it comes to the new EU members countries and the impact of this status it can be seen also 
that the situation is favorable, although the case of Romania is a little different from that of 
Bulgaria.  Adhesion  and  expectations  have  already  been  felt  since  2006,  prior  to  integration, 
which led to a significant economic growth. Although many countries are deeply affected by the 
current financial situation, Romania has great expectations based on an economic increasing of 
more than 2 percentage points in 2008, in contrast with other countries examined. Serious decline 
is expected to produce in Estonia (from 6.3 in 2007 to -1.3 in 2008), Latvia (from 10.2 in 2007 to 
-0.8 in 2008) and Lithuania (from 8.9 in 2007 to 3.8 in 2008). 
Evolution of the Romanian society in all plans confirms that there are not areas known not to be 
fundamental changes. Uninterrupted economic growth, Romania is the country with the largest 
growth of GDP in EU, the measures taken in the social field (increasing wage income, pensions, 
the  minimum  gross  salary),  enhance  the  investment  process  reflect  a  healthy  trend  for  the 
restoration of balance macroeconomic, progress achieved in the sustainability of public policies, 
increasing  the  country's  international  credibility  and  attractiveness  to  stimulate  domestic 
economic environment for international business community. 
All these impressive results in Romania occurred in the context of accession to the European 
Union due to the long process of integration to fulfill the requirements of being a member of the 
community. 
Integration  in  the  EU  has  stimulated  and  stimulates  further  economic  growth  and  foreign 
investment,  but  puts  pressure  on  inflation  and  to  exchange  rate  volatility  according  to  the 
specialized economic studies. The immediate effect of the integration will not be distinguishable; 
EU-27 EU-25
CZ
EE
CY
LV
LT
HU
MT
PL
SI
SK
BG RO
-0,9 -1 1,4 -5,7 -0,8 -7 -7,8 -2,3 3,8 3 0,9 2,1 0,6 -0,7
-2
-1
0
1
2
3
4
5
6
-10 -8 -6 -4 -2 0 2 4 6
%
 
o
f
 
G
D
P
 
i
n
 
2
0
1
0
change in pp between 2001 and 201062 
 
either for economy or for the capital market and the benefits of the accession should be expected 
on a longer term. 
The  empirical  studies  point  out  the  existence  of  a  positive  correlation  between  economic 
integration and growth rates of GDP per capita, but there is not a causal relationship between 
these two variables. The integration helps to stimulate convergence only if it has an influence on 
long-term growth potential of the economy. Economic integration may induce permanent effects 
on economic growth as a result of the development of research-development and realization of 
innovations.  European  data  suggests  the  positive  impact  of  integration  on  macroeconomic 
stability,  but  the  growth  potential  of  the  economy  on  long  run  it  is  ambiguous.  However, 
economic integration contributes to a better allocation of resources by reforming factor markets. 
This is an operation especially at micro level, with the goal of improving the business climate 
through regulation and liberalization. 
 
3. Conclusions 
Analyzed the impact of direct foreign investments on the Romanian economy, we find that the 
role is double: (i) as a financial flow it plays a complementary role, quantitatively, the transition 
process, by supplementing insufficient resources of the country in the process of adapting to free 
market  mechanisms,  creating  jobs,  developing  activity  by  stimulating  domestic  production, 
through contracts of unproductive or coproduction, increasing exports; (ii) as an investment flow, 
it plays a structural and qualitative role, because it generates flow of advanced technologies, 
increases the walk of the job and contributes to the expanding of the private sector. 
Regarding the commercial trade, Romania is seen more as a nation that offers great development 
opportunities where we can work and where to carry out successfully activities. Romania is not 
considered a market in which you can only transfer activity for low cost of labor. These changes 
are primarily due to changes in socio-economic conditions in Romania in recent years. 
The macroeconomic situation is obviously influenced by the current international situation. The 
effects of global financial crisis are felt indirectly and in Romania through five channels: the 
commercial, financial, of trust, exchange rate and the effects of wealth and balance. Regarding 
the effects of the international crisis on trust it can be seen less willingness from investors to 
Romania, but also for neighboring states. 
The next step after integration will likely be the Economic and Monetary Union. Romania plans 
to adopt the single currency in 2014-2015, but there are certain issues which must take into 
account the criteria to be fulfilled. According to the forecast in Romania, estimates for 2008 were 
an increase in GDP of 9.1%, with more than 6% in 2007. Future actions must be the result of 
political cooperation. 
 
Bibliography 
1.Ionescu Cornel (2007). Convergence real - essence of Romania's EU integration, Spiru Haret 
University, Economics Series 7 (7), publisher of Maine Foundation Romania, Bucharest 
2.Müller, Annett; Cutler, Melanie (2007). Romania: a wealth of poverty 
3.National Commission of Prognosis (2006). The impact of accession on foreign trade experience 
New Member States 
4.Oprescu, Gheorghe; Constantin, Daniela Luminita; Pislaru, Dragos (2005/2006). Analysis of 
the absorption capacity of European funds in Romania, European Institute of Romania 
5.Richardson Ben (2007). Made in Romania for the style elite 
6.http://www.dce.gov.ro/Materiale%20site/Indrumar_afaceri/impact_aderare_afaceri/Fisa_impact
_Irak.htm 
7.http://www.dce.gov.ro/Materiale%20site/Indrumar_afaceri/impact_aderare_afaceri/impact_ade
rare_afaceri_iordania.pdf  
   

Convergence real - essence of Romania's EU integration,

Daniela Luminita; Pislaru, Dragos (2005/2006). Analysis of the absorption capacity of European funds in Romania,

Romania: a wealth of poverty

The impact of accession on foreign trade experience New Member States

CHALLENGES FOR ROMANIAN ECONOMY AS AN EUROPEAN UNION MEMBER STATES

http://steconomice.uoradea.ro/anale/volume/2009/v1-international-relations-and-european-integration/06.pdf

CHALLENGES FOR ROMANIAN ECONOMY AS AN EUROPEAN UNION MEMBER STATES

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics