During the 2007- 2013 programming period Romania has been granted 19.6 billion euro of the EU Structural and Cohesion Funds and 8,3 bn euro of EU Agricultural and Fisheries Funds. Unfortunately, the Romanian’s level of absorption of Romania is the lowest in the EU. The paper focuses on the poor Romanian’s absorption capacity, on main causes, consequences and on some of the proposed measures to increase the amount of paid EU funds.European Union, Structural Funds, Absorption, Administrative capacity.

Gabriela DRAGAN

English

Research Papers in Economics

ROMANIA - IN SEARCH OF THE EU LOST 
FUNDS 
 
ROMÂNIA – ÎN CAUTAREA 
FONDURILOR 
STRUCTURALE PIERDUTE 
 
Gabriela DRAGAN 
Professor Ph.D., Faculty of International Business and 
Economics, Bucharest Academy of Economic Studies  
E-mail:gabriela.dragan@rei.ase.ro  
 
Abstract 
During the 2007- 2013 programming period Romania has 
been  granted  19.6  billion  euro  of  the  EU  Structural  and 
Cohesion  Funds  and  8,3  bn  euro  of  EU  Agricultural  and 
Fisheries  Funds.  Unfortunately,  the  Romanian’s  level  of 
absorption of Romania is the lowest in the EU. The paper 
focuses on the poor Romanian’ s absorption capacity, on 
main causes, consequences and on some of the proposed 
measures to increase the amount of paid EU funds. 
 
Keywords: European Union, Structural Funds, Absoption, 
Administrative capacity 
 
JEL CODES: F15, R11, H83. 
 
 
 
Rezumat 
În perioada 2007-2013 României i-au fost alocate 19.6 miliarde 
euro prin intermediul Fondurilor Structurale şi de Coeziune şi 8.3 
miliarde  euro  prin  Fondurilor  pentru  Agricultura  şi  Pescuit.  Din 
păcate, ân acest moment, la patru ani după ânceperea acestui 
exerciţiu financiar, nivelul de absorbţie în România este cel mai 
redus din întreaga UE. Articolul se opreşte asupra factorilor care 
au  generat  o  astfel  de  capacitate  redusă  de  absorbţie,  asupra 
consecinţelor şi face unele propuneri privind creşterea nivelului de 
absorbţie. 
 
Cuvinte cheie: Uniune Europeană, fonduri structurale, absorbţie, 
capacitate administrativă 
 
 
 
 
Proceedings of the seventh Administration 
and Public Management International 
Conference   
 
 
 
 
 
DRAGAN Gabriela 
ROMANIA - IN SEARCH OF THE EU LOST FUNDS 
 
 
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1. INTRODUCTION 
During the 2007- 2013 programming period, Romania has been granted 19.6 billion euro of the EU 
Structural and Cohesion Funds (EUSCF) and 8,3 bn euro of EU Agricultural and Fisheries Funds 
(EUAFF)  in  order  to  support  the  convergence  with  other  EU  member  countries,  increase 
competitiveness  and  employment  and  sustain  farming  and  fishing  communities  to  become  more 
economically resilient. At the EU level, in the 2007-2013 financial period, the EUSCF represent about 
35% of the EU budget (346.1 bn euro structural funds from 975.8 total EU budget, namely 35.5% of the 
2010 GDP). Over half (51%) of funds are available for the ten new member states from Central and 
Eastern Europe under the three objectives (convergence, competitiveness and territorial cooperation) 
and three main instruments of the EU Cohesion policy (the European Regional Development Fund - 
ERDF, the European Social Fund - ESF, and the Cohesion Fund - CF). According to the EU rules, each 
country should identify and define its national priorities of development at the beginning of the budgetary 
period and formalize them in the so-called “Operational Programmes” (which may cover one or several 
activities). 
TABLE 1 - STRUCTURAL FUNDS AVAILABLE TO THE NEW MEMBER STATES 
New member states  2007-2013  2011 
  Bn euro  Bn euro  % of GDP 
Bulgaria  6.9  1.1  3.0 
Czech Republic  26.7  4.0  2.6 
Estonia  3.5  0.5  3.6 
Cyprus  0.6  0.0  0.3 
Latvia  4.6  0.7  4.2 
Lithuania  6.9  1.1  3.9 
Hungary  25.3  3.8  3.8 
Malta  0.9  0.1  2.0 
Poland  67.3  10.0  2.7 
Romania  19.7  3.3  2.5 
Slovenia  4.2  0.6  1.7 
Slovakia  11.6  1.8  2.5 
TOTAL  178.1  27.1  2.7 
Other funds       
Rural development  37.6  5.5  0.6 
Fisheries  1.4  0.2  0.0 
All funds  217.0  32.8  3.3 
Source: Adapted from the EBRD - the EBCI [ …], 2011, p.5  
 
 
 
 
 
 
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2. THE LOWEST LEVEL OF ABSORPTION AMONG THE ALL NEW MEMBER STATES 
Even though considerable funds are available for the new member states (51% of the EUSCF), the level 
of  absorption  is  rather  disappointing  in  most  country  and  particularly  in  Romania  and  Bulgaria. 
According to the Romanian authorities (Romanian Fiscal Council, 2011) the absorption rate is only 8.6% 
of the total allocation1 (the highest rate of 15% registering for Regional Development OP and lowest of 
1% for the Transport OP2). The amount of EU funds absorbed of Romania divided by the population is 
also the lowest in the EU, 79 euro per capita against 700 euro in Estonia or 93 euro in Bulgaria 
(Romanian Fiscal Council, 2011, p.22). The Romanian’s low absorption rate is even more obvious when 
is benchmarked against other new member states (8.6% compared with 17% the average rate of 
absorption after four years of membership). At the end of 2010, Latvia paid over 1.3 billion euro in EU 
grants, meaning 29% of the available budget for 2007-2013, Estonia 26% (about 900 million euro), 
Poland  20.4%  (about  13  billion  euro)  and  Czech  Republic  12.44%  (about  3.3  billion  euro)  of  the 
allocated funds (Romanian Fiscal Council report, 2011, p.22). 
Undeniably, the crisis makes more difficult the absorption process for all EU member states. On the one 
hand, domestic financial institutions become more reluctant in lending, making the access to credit more 
difficult. On the other hand, as public finance came under growing tension “many cohesion projects had 
to be cancelled before the contracting phase got under way or during implementation, as beneficiaries 
found it impossible to secure their own contribution” (EC, Commission Staff Working Paper, 2010, p.3). 
Consequently, aware of the supplementary difficulties the crisis may in increasing disparities among EU 
regions  and  member  states,  the  Commission  proposed  a  set  of  legislative  changes  and  targeted 
recommendations in order to accelerate financing for programmes already approved for 2007-2013, 
increasing the EU pre-financing and introducing a series of simplification measures. The Commission 
legislative package3 was adopted in December 2008 and entered into force in the second quarter of 
2009. 
                                                           
1 According to the EBCI report (March 2011, p.7), Romania is again on the last position among the other new 
member states in absorption of EU funds available under the ERDF, ESF and CF, but with an absorption rate of 
13% (Bulgaria of 15% and the average rate of the NMS of 21%). Finally, the real absorption rate (once the 
payments of cash advances are subtracted) is the same, 3%. 
2 Transport OP is the least efficient operational program, with only 47 million euro paid until end 2010 (about 1% of 
the available budget for 2007-2013). In contrast, Bulgaria absorbed 5.81% of its total available budget for transport 
infrastructure (about 94 million euro) and has a contract ratio of 30%. 
3 The legislative package comprised three regulatory amendments:  
 -Council Regulation (EC) No 284/2009 amending Regulation (EC) No 1083/2006 laying down general provisions 
on the European Regional Development Fund, the European Social Fund and the Cohesion  Fund concerning  
 
 
 
 
 
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However, the efficiency of the Commission legislative package ultimately depends on each member 
state efforts to make optimum use of the adopted measures. According to Romanian Convergence 
Programme 2011-2014 (Government of Romania, Convergence Program 2011-2014, p.36), in 2009-
2010, a number of specific measures were taken to simplify the implementation mechanism and remove 
delays in Community instruments absorption, respectively:  
(i)  facilitation of beneficiary’s access to funds; 
(ii)  simplification of project financing mechanisms and facilitation of access to financing sources 
for both private and public beneficiaries; 
(iii)  amending public procurement legislation to speed up tender procedures by reducing tender 
times. 
Nevertheless, Romania remains on the last position in absorption EU funds despite of the measures 
taken in 2009 and 2009 to simplify the implementation mechanism and a slightly improving in the 
process of contracting structural and cohesion funds (a contracted ratio of 42% in 2010 compared to 
16% in 2009).  
TABLE .2 - STRUCTURAL FUNDS ABSORPTION BY OPERATIONAL PROGRAMS 
 
Total 
allocation 
2007-2013 
Payments at December 2010  Absorption 
Rate 
Absorption 
excl. pre-
financiang 
    Total  Pre-
financing 
EU 
Refunds 
   
Regional 
Development 
3.726  554,9  381,4  173,5  14,9  4,7 
Environment  4.512  318,5  266,2  52,3  7,1  1,2 
Transport  5.565  47,2  0,0  47,2  1,0  1,0 
Competitiveness  2.554  251,2  106,3  144,8  9,8  5,7 
Human 
Resources 
3.476  464,2  416,6  47,6  13,4  1,4 
Adms.Capacity 
Dev. 
208  10,2  4,1  6,1  4,9  2,9 
Technical 
Assistance 
170  9,0  1,2  7,8  5,5  4,6 
TOTAL  19.211  1.655,3  1.175,8  479,5  8,6%  2,5% 
Source: Romanian Fiscal Council – Annual Report, 2011, p.21 
                                                                                                                                                                      
certain provisions relating to financial management (OJ L 94, 8.4.2009, p. 10); Regulation (EC) No 284/2009 
entered into force on 9 April 2009;  
 - Regulation (EC) No 396/2009 amending Regulation (EC) No 1081/2006 on the European Social Fund to extend 
the  types  of  costs  eligible  for  a  contribution  from  the  ESF  (OJ  L  126,  21.5.2009,  p.1);  Regulation  (EC)  No 
396/2009 entered into force on 22 May 2009;  
 -  Regulation  (EC)  No  397/2009  amending  Regulation  (EC)  No  1080/2006  on  the  European  Regional 
Development Fund as regards the eligibility of energy efficiency and renewable energy investments in housing (OJ 
L 126, 21.5.2009, p. 3); Regulation (EC) No 1080/2006 entered into force on 10 June 2009.  
 
 
 
 
 
 
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Problems may be identified at all levels of programme implementation, starting with the evaluation and 
selection of projects but finally, the lack of administrative capacity represents the main reason for the 
poor absorption of EU funds. One more time, Romania entered the vicious circle of underdevelopment, 
the low absorption rate, especially in the transport area, negatively influencing the overall level of 
absorption and reducing the investment propensity of foreign investors and the country opportunity to 
reduce development gaps. “Numerous investors and the business community, such as the Council of 
Foreign Investors and the American Chamber of Commerce in Romania, repeatedly underlined that the 
poor  state  of  infrastructure  in  Romania  is  a  serious  hindrance  to  investment.  Therefore,  transport 
throughout  the  country  is  inefficient  and  dangerous,  especially  in  the  North  and  East”,  Daniela 
Nemoianu, Head of Advisory at KPMG Romania, said (Nine O’clock.ro, 2010). 
The 23 June 2009 Memorandum of Understanding with the EC (EC, Memorandum of Understanding, 
23 june 2009), laying down the economic policy criteria linked to each disbursement, stated as a main 
measure to increase the level of absorption the restructuring of the Ministry of Transport. The reform of 
this Ministry means a “separation of task between Ministry and the implementing agencies, clarification 
of responsibilities and clear accountability, availability of qualified staff and capacity in the departments 
linked to project preparation for SF support”. Neither last but nor least, the MoU include the obligation to 
adopt a multi-annual performance agreement between the Ministry and agencies which “should define a 
clear accountability framework” and “reduce political interference and frequent change in priorities”. The 
latest addendum (the fourth) from April 2011, has mentioned as a main measure of the “structural 
reforms” chapter, the submission of a multi-annual performance agreement between the Ministry and 
implementing agencies, which must take into account and be in line with the Government’s medium-
term fiscal strategy (EC, Supplemental Memorandum of Understanding, April 2011). 
3. CONCLUSION 
Since 2008, the year when global crisis hit Europe, Romania has moved from one of the fastest-growing 
economy in the EU to the last one to recover. The rapid increase in borrowing (capital inflows mainly 
facilitated by the foreign banks with subsidiaries here) in previous years transformed Romania, as well 
as  Hungary  and  Latvia,  in  highly  exposed  countries,  with  serious  problems  in  attracting  (or  even 
maintaining) foreign capitals. Under these circumstances,  it is essential  “to accelerate the pace of 
structural  reforms  with  the  aim  of  supporting  potential  growth,  which  should  also  help  restore  the 
sustainability of public finances” and particularly to accelerate the absorption of EU Structural Funds, 
because  “this  would  allow  increasing  investment  in  long-term  growth  without  endangering  the 
achievement of the agreed budget deficit targets” (Council Opinion, 2010, pp.14). 
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REFERENCES 
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Journal  of  the  European  Union,  No  2010/C  144/03.  Retrieved  from:  http://eur-
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Council Opinion on the updated convergence programme of Romania

ROMANIA - IN SEARCH OF THE EU LOST FUNDS

http://www.confcamp.ase.ro/2011/pdf/Sectiunea2/25.pdf

ROMANIA - IN SEARCH OF THE EU LOST FUNDS

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