The European Union and Romania: consolidating backwardness?

Tom Gallagher
26 September 2006

Silviu Brucan, Romania's best-known social scientist, died aged 90 on 13 September 2006. His books, exploring how underdeveloped countries could grapple with the challenge of modernisation and build durable political systems, were better known in Latin America than in western Europe. Here his fame rested on the pivotal role he played in spearheading a revolt which brought down the tyrannical Nicolae Ceausescu regime in 1989.

He quit politics within weeks of the demise of communism to become an influential political commentator, later to host his own much-viewed TV show. He had caused anger by a series of injudicious remarks, such as his claim that it would take at least twenty years before democracy had a chance to take root in Romania. Nowadays, this appears to be a riotously optimistic claim. A recent poll showed that most Romanians thought that corruption would remain out of control for years to come, despite the country being on the verge of joining the EU.

The claim made in May 2006 by Jonathan Scheele, the British economist, and since 2002 the head of the EU's delegation in Romania, that, within the next decade, Romania had the chance to become the seventh economic power in Europe (thereby matching its population's size) was treated with incredulity. It showed how out-of-touch the 100-strong delegation appeared to be with the true conditions of the country.

Tom Gallagher holds the chair of East European Studies in the department of peace studies, Bradford University, England. His book Theft of a Nation: Romania since Communism (Hurst & Co, 2005) is published in the United States as Modern Romania (New York University Press, 2005).

Also by Tom Gallagher in openDemocracy: "Understanding Slobodan Milosevic: between the cold war and Iraq"
(13 March 2006)

A crisis of representation

Romania instead appears poised to become the Philippines of Europe: a country where the key sectors of the economy are controlled by foreign (west European) capital, much of the middle-class emigrates, and many poor people are dependent on foreign remittances from the even larger numbers of ordinary citizens who have already fled abroad.

There is an acute crisis of representation. The Partidul Social Democrat (Social Democratic Party / PSD), the heirs of the communists, is a network of businessmen who mouth leftwing platitudes while systematically grabbing the most desirable economic plums for themselves in a chaotic lurch towards the free market. Millions of economic casualties gravitate towards nationalist parties or movements run by soccer tycoons. The mainstream centre-right parties currently in office are in many ways pale versions of the PSD.

All these parties represent only narrow interests. They are usually driven by the will to acquire power, and to benefit from access to state wealth and the patronage possibilities that power provides. Parties absorbed with the spoils system usually have little in the way of a programmatic agenda.

A disastrously low-grade EU accession process has accentuated this political backwardness. Eight years ago Brussels had no plans to offer full membership to Romania. Eurocrats viewed a country which had been hollowed out economically by Ceausescu's crazy policies, then left to stagnate under more astute but mercenary figures led by Ion Iliescu, as a lost cause. But within months, Romania had been invited to open talks for full membership.

The catalyst was the worst security crisis in Nato's history, the 1999 confrontation with Slobodan Milosevic over Kosovo. It was one in which the west only narrowly prevailed and where the assistance of neighbouring states such as Romania was much needed. Tony Blair, on his way to Sofia and Bucharest in May 1999 to address the respective national parliaments, astonished his advisers by deciding to promise Romania and Bulgaria early membership in return for their support in this high-risk conflict. Germany and France were won round.

Romania struggled to complete the demanding EU roadmap. Its chances of joining were again aided by security concerns in 2001, when 9/11 convinced the EU that it must project its influence right up to the borders of the middle east and cease to treat the Balkans as peripheral and expendable territory.

The PSD returned to power in the first year of entry negotiations. Soon the heirs of Ceausescu's communists revealed that they still had a monopolistic approach to power and wealth. Much of the EU's pre-entry financial help was channelled through regional agencies which were captured by PSD chieftains, who proceeded to diverted a high proportion of these funds to shadow companies controlled by close relatives.

The EU should have realised that, without its adoption of a bold approach to the country's problems, merely imposing a new regionalist tier of decision-making on Romania in order to bypass inefficient central ministries was likely to increase the level of national corruption. But the EU, and indeed numerous academics, insisted that there was nothing special about Romania. Its problems were identical to those of the post-communist entrants of 2004, the argument went, and it is simply lagging behind them in particular respects.

Europe's failure

The approach was misconceived. The communist system in Romania had been broken up far less completely than anywhere else in the former Soviet bloc (of which it had been the most dissentient member). State capture by kleptocratic interests became far more advanced. Romania witnessed more years of continuous economic decline after 1989 than any comparable country. The fully totalitarian nature of the political system bequeathed an administrative structure where deficiencies in capacity and an ability to perform routine functions dwarf those seen in Poland, Czechoslovakia, Hungary and even Bulgaria.

The social structure of Romania in the aftermath of communism in many ways resembled that of a backward global-south country. 40% or more of the labour force was engaged in agriculture. It had the smallest service sector in the former communist bloc, and the smallest middle class. The political transition towards a chaotic form of democracy with many chronic problems has been more dependent on foreign backing and oversight than in any of the other states mentioned.

If Romania was at the bottom of the table on some of these important indicators but doing better in others, then it would be harder to argue that it was indeed a special case. But it remained at the bottom in all of them and that is where it was also to be found in terms of the level of corruption (Transparency International findings) and the inability to absorb EU funding.

What could the European Union have done? At least seven things:

  • it could easily have asked the Romanian government for more powers of oversight and intervention in order to try to overcome the key blockages preventing Romania becoming a law-based state, one where citizenship mattered and the state facilitated economic development
  • it could have created task-forces to improve the capacity of key parts of ministries and regulatory agencies which needed to function in a competent way if the country were to have a chance of holding its own against competitors
  • it could have created a different form of regional system in order to allow for the successful distribution of pre-accession funds
  • it should have given education a prominent place in the accession strategy, in light of evidence that poor countries can recover quickly from underdevelopment when this is done
  • it should have emphasised conditionality as much in political areas as economic ones. A longer period should have been allowed before particular areas of the national economy were opened to foreign competition
  • it should have customised rules for the right to use pre-accession funds in a way that suited Romanian conditions (rules that were made far simpler, and funding access more resistant to interception by corrupt power-brokers).

Instead of doing any of these things, it was only in the economic realm that the European Union insisted that Bucharest conform strictly to its blueprint for entry: in a country where average wages are 15% of the EU norm, it insisted on removing price subsidies, with the result that today, Romanian prices approach the EU average.

Tariff barriers were lowered far more quickly than was the case with Spain and Portugal when they joined in the 1980s. This meant that just as small and medium-sized businesses were struggling to get on their feet, they have been overwhelmed with a flood of imports from EU states. It is hard to envisage how Romania will become economically competitive if one of the main results of EU entry is a flood of cheaper and better-produced goods which Romanian producers will be powerless to match for years to come.

While Brussels insisted on the speedy introduction of legal arrangements to facilitate free-market economics, it was sluggish about observing that the political conditions of entry were met. This was an extremely foolish oversight, given the active legacy of dictatorship and the fact that the heirs of communism have enjoyed much success in the process of state capture so that it would serve the interests of a greedy oligarchy.

The EU has repeated this blunder in different parts of the post-communist world. Its eagle-eyed insistence that International Monetary Fund-licensed medicine be swallowed in large doses while true democracy can wait has led to the emergence of a string of leaders (most notably in Russia) who are no friends of perceived western values because they can see the double-standards attached to them.

The road to Brussels

Jonathan Scheele and his team of more than a hundred EU officials negotiated for four years with Adrian Nastase, an intelligent, cynical and superficially westernised ex-member of the ruling class. This ex-prime minister and his formidable wife Dana are now facing trial on corruption charges arising from alleged misdeeds committed when the EU was supposedly placing the country under maximum surveillance.

But Brussels failed to react when things started to go badly wrong. Crude political interference with the justice system and a string of physical attacks on journalists who reported PSD misdeeds were reported to Brussels by Scheele and his team, but the response was low-key.

Nastase and the PSD set out to lower expectations in Brussels and in important ways succeeded. They needed to convince their EU interlocutors that their own unimpressive standards of behaviour and values fully reflected those of the Romanian people as a whole. This was not hard to do since the Eurocrats had few contacts with Romanian society beyond a string of westernised NGOs. Accordingly, the post-communists managed to convince top EU officials that they were fully representative of the country and that real reforms could wait until after full membership.

The Bucharest oligarchy, composed of ruthless political survivors, knew how to play the EU game better than the rather effete and complacent Eurocrats whom they interacted with. Nastase could see that that the EU's rules were there to be broken. There were no transparent criteria for entry. The negotiating chapters were flexible targets and it was the core member-states who decided whether they had been met or not. He obtained valuable lessons from the way that Germany and France violated rules for keeping budget deficits in check, or how Greek evasion about that country's ability to join the eurozone, had gone unpunished.

Nastase's masterstroke was to build up an influential lobby in Brussels which would advocate membership even if many key reforms existed only on paper. This was done by throwing open the economy to multinationals, which become advocates of early EU membership on informal terms. Lucrative contracts were offered to top firms which (in the era of declining party memberships) are a vital source of funding for parties like the German social democrats and the French Gaullists and socialists.

The role of lobbies in preparing accession-states for entry has been much neglected in the study of European expansion. The changing attitude towards Romania of Günter Verheugen, EU commissioner for enlargement from 1999 to 2004, and his patron, the then German chancellor Gerhard Schröder, perhaps sheds some light on the process.

In 2001 Schröder was openly sceptical about Romania joining the EU at an early stage. But in August 2004 when he turned up in person in Romania, he declared that the prospects of closing negotiations by the year's end were very good. This was despite the fact that the EU still could not find enough evidence that Romania had acquired a functioning market economy.

Schröder was there to sign a €1 billion contract with the German-led EADS group to secure the country's borders. No public tender was organised and the European commission was obliged to investigate whether EU regulations had been violated. One well-known Romanian commentator observed that here was a classic example of western companies arriving in Romania and immediately adopting local customs.

The EU followed its failure to do elementary homework on Romania by sending a vast army of well-paid consultants to write fatuous reports which barely scratched the surface of the country's problems. Now it has wound up accepting the country on the crooked agenda of pseudo-reform outlined by the PSD.

There had been a blip in early 2004, when Emma Nicholson, the British Liberal Democrat politician and the European parliament's rapporteur for Romania, recommended halting talks because of the PSD's serial bad behaviour. But Verheugen swept aside her warnings. The incident showed how little control the European parliament exercised over the EU's executive arms and also the degree of distrust the commission often had for the parliament.

Difficult negotiating chapters - agriculture, competition, the environment, justice and home affairs - were hastily closed in the second half of 2004 as Verheugen pressurised his subordinates to declare that the reform targets had been met. To the undisguised frustration of several commission officials in Bucharest, he saw the post-communist PSD as being in the same political camp that he belonged to, that of the moderate left. He seemed oblivious to the role of the communist past in shaping the rules of political power in contemporary Romania.

Most incredibly of all, Verheugen stated on 3 November 2004 that he hoped to complete negotiations with Romania by 24 November, four days prior to voting in national elections. His patron Schröder then echoed him. The comments brought sharp criticism from many in the European parliament, who accused Verheugen of interfering in the Romanian electoral process.

The Romanian press asked why this date was being brought forward to the eve of elections in which the PSD was using strong-arm methods to clinch victory. Despite serious irregularities in the first round of voting, power swung away from the PSD to the centre-right. The EU sat on its hands as NGOs reported electoral fraud and it was the intervention of the United States embassy that ensured a clean second round of presidential elections. Nastase narrowly lost and Traian Basescu, a former oil-tanker captain angry about the way Brussels had cavorted with corrupt and authoritarian figures, unexpectedly became president.

On 17 December 2004, the EU's then council of ministers agreed to sign the accession treaty with Romania in April 2005, apparently paving the way for membership by 2007. But there was a snag. Finland had grown alarmed at the state of the Romanian justice system and was not prepared to ratify Romania on the terms that had just been hastily agreed.

An end and a beginning

Verheugen's successor, was a Finn, Olli Rehn. He insisted that a number of additional reforms be carried out, particularly in the areas of competition policy and justice during 2005. If, by the spring of 2006, there wasn't significant progress, he warned that "a safeguard clause" would be invoked, delaying Romania's entry until 2008.

According to his Helsingin Sanomat interviewer in December 2004, Rehn "complained that EU members states offered Romania and Bulgaria dates for entry into the EU while membership talks were still going on, and before the countries were even close to being ready to meet the requirements of membership". This was a damning indictment of his predecessor; in any well-run democratic system it would have led to Verheugen being sent to run the equivalent of a Siberian power-station, rather than (as happened) being promoted to the job of EU industry commissioner until 2009.

Monica Macovei, a bold justice minister drawn from the ranks of civil society, has carried out enough reforms in the justice system to allay the fears of some in Brussels that a state would join the EU where criminals had influence in this key area. The defeats inflicted by Dutch and French voters in 2005 on the EU's constitution produced a crisis of nerves inside the EU but not enough to shipwreck Romania's entry chances.

Almost all the strategic sectors of the economy - banking, the remaining major industries, the energy sector (except for oil and gas ) - are now owned by EU banks and multinationals. Arguably, this explains why Romania has made such progress in the eyes of Brussels since the referendum upset. The vested interests of west European economic groups in seeing their investments protected by Romania's accession by 2007 explains why Romania is being admitted now, even while several candid EU spokesmen are expressing unhappiness about the country's ability to cope with the stiff membership challenges and conditions.

Even in opposition, the PSD remains the largest party. Foolishly, Brussels imposed a veto on early elections which could have enabled Traian Basescu - an erratic figure but generally reformist in his instincts - to promote a cleaner parliament. The present one continues to throw out laws, such as full disclosure of the income of elite figures, which Brussels insists on.

And here the wrecking role of west European interests is evident, led (perhaps astonishingly) by the European socialist parties in the European parliament. The latter continue to back the PSD despite its lead role in sabotaging reforms designed to bring a corrupt oligarchy to account. Poul Nyrup Rasmussen, the former Danish prime minister who heads the group, has been extravagant in his praise of Adrian Nastase (whom he described on the eve of the 2004 elections as "our friend and colleague ... who has done so much for Romania, in particular guiding the country towards EU membership"). Rasmussen has also, more recently complained that Macovei, the reforming justice minister, is behind "a government attempt to control the judicial system".

On his visits to Bucharest Rasmussen has mixed with a whole set of Latin American godfathers in the PSD, ex-ministers whose personal wealth runs into many millions of dollars. At least Anthony Giddens, the well-known sociologist, and architect of the ideas behind New Labour's "Third Way" has now severed his ties with the PSD after agreeing to help draft the party's new programme.

Another figure who spoke to PSD members in July 2006 was Roger Liddle, an eminence grise of Tony Blair. He has been an advocate of the managerialism and corporatist policies which have disfigured Labour's record in the United Kingdom and been adopted in Hungary by the young wolves from the former communist nomenklatura who have gathered around its beleaguered millionaire prime minister Ferenc Gyurcsány.

The story of Romania and the European Union is an unedifying one of top figures in the European left allying with big business to take Romania in on a prospectus that benefits only a tiny handful of local elite figures and foreign investors while worsening local social conditions. The one undeniable gain for ordinary people will be that they can emigrate - which millions are sure to do. If indeed the outcome of accession is to confirm the EU as the accomplice of rapacious local oligarchies, it will be a crushing indictment of the union and its claim to be projecting eastwards a programme based on authentic reform and social justice.

Romania today is a low-wage, high-tax economy in which purchasing power had fallen by nearly 50% since 1990. In 1989 Romanians had been weighed down by shortages, but household costs such as rent and heating usually did not exceed 10% of an average income. Fifteen years later, these costs exceeded the average salary or pension on which most citizens tried to subsist. In 2004, 58% of average household income still went on food alone and conditions will grow harsher in key respects once inside the EU.

There are some bright spots (such as improvements in the treatment of abandoned children) but the story of the EU and Romania could be summed up as the consolidation of backwardness. The main responsibility for this dèbâcle lies not with Romanian public officials unwilling, or unable, to adopt EU standards but with the EU itself. It never produced a coherent set of plans based on clear familiarity with Romania's immense problems designed to enable it to successfully overcome them. It was often sluggish in its response when there were clear signs that its strategy of using the same instruments as in earlier expansion rounds was not working.

By 2004 there was unmistakable evidence that it was prepared to weaken its own entry requirements, thus allowing the country to enter the union on the terms of its own much-criticised political elite. At key moments, political conditionality proved to be totally superficial while economic liberalisation was ruthlessly pursued. The danger is that the limited nature of the EU's reforms will lead to rampant economic inequality which an unreformed political system, far from checking, will simply reinforce.

A day after the European Union's decision on 26 September 2006 to give Romania (along with Bulgaria) the go-ahead to join in January 2007, there is no shortage of evidence of the union's complete inability to export sustainable economical and social reforms, improved governance, and ultimately stability to that country. Any entity with the reach and ambition of the EU would carry out a thorough enquiry into where it has gone wrong. For the apparatchiks in Brussels, that step is a most unlikely one.

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