Fears are mounting that Romania and Bulgaria could face economic sanctions by Brussels for failing to meet basic standards on justice and the rule of law.
A decision will be taken after the European Commission (EC) issues a final report on the issue in July. In an interim report in February, the EC criticized Romania for high levels of corruption and blasted Bulgaria for inaction in combating both organized crime and corruption.
When Romania and Bulgaria joined the EU in January 2007, the EC reserved the right to withhold vital accession funds for agriculture and underdeveloped regions in both countries, at any point up to December next year.
“I have heard the commission is very close to pursuing serious economic sanctions”, said Mike Emerson, senior research fellow at the Center for European Policy Studies in Brussels. “The time is running out for Romania and Bulgaria since the EC is getting increasingly frustrated at the lack of progress”.
But the EC is facing a dilemma, Emerson noted. “If sanctions are imposed then a positive effect would be encourage politicians in both countries to act, But it could prove counter-productive in the sense that it would cause a lot of domestic discontent against these governments and undermine their support,” he said.
Bulgaria’s finance minister Plamen Oresharski remained upbeat in an interview with Emerging Markets. He argued that money laundering and drug trafficking have been curtailed since the EC’s February report through institutional reforms at the national revenue agency and customs agency. Oresharski said harmonized payment systems at border check points will “limit corruption practices”.
According to the World Bank’s 2008 Doing Business Survey, the investment climate in both countries has improved: Romania is ranked 48th out of 175 states in 2008, compared with 55th the year before, while Bulgaria jumped to 46th from 54th. It notes that excessive regulation, corruption and inefficient judicial systems are dragging down the operating environment in both nations.
Florin Citu, chief economist at ING Bank in Bucharest, argues that these factors are undermining the investment image and perceived competitiveness of both countries. “Big companies are not coming because they know they will have to pay bribes and get into trouble. The lack of progress makes investors think Romania and Bulgaria are not progressive or reforming.”
The EC has called on Bulgaria to bring contract killings to trial; Transparency International estimates that 150 high-profile contract killings have been unsolved since 2000. The anti-corruption group also notes that EU funds have in some cases been handled fraudulently, while police officers have passed crucial information to drug traffickers.
The EC has also criticized Romania’s delay in establishing an anti-corruption authority and the lack of prosecutions in corruption trials.
In Bulgaria in April, interior minister Rumen Petkov was forced to resign after admitting conspiring with corrupt businessmen by blocking police investigations into criminal activity. In Romania, the post of justice minister was left vacant for several months this year as the president and prime minister jockeyed for rival candidates.
Both countries are dogged by conflicting interests and power struggles in fractious ruling coalitions ahead of elections scheduled this November in Romania and June 2009 in Bulgaria.