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Tuesday, September 21, 2004
Business in Romania blog
BUCHAREST/BRUSSELS, Sept 20 (Reuters) - The European Union reassured Romania on Monday that it could still join the bloc in 2007 despite doubts over the pace of the Balkan country's reforms.

The EU's executive Commission said it could still bestow the status of "functioning market economy" on Romania in a key report on Oct. 6 even though the country did not yet have the capacity to cope with market forces within the EU.

Romania needs the market economy tag to join the EU in 2007 along with neighbouring Bulgaria, which is more advanced in accession negotiations.

"It is still a possibility," Jean-Christophe Filori, the Commission spokesman for enlargement told reporters.

Doubts over Romania's status emerged earlier on Monday when a Romanian English-language paper quoted the head of the Commission's delegation in Romania, Jonathan Scheele, as saying that the ex-communist country would not get the title this year.

Scheele's office later said that his full statement distinguished between two economic criteria - a "functioning market economy" and "capacity to resist competitive pressures," which Romania might not possess in the mid-term.

"I distinguish here the sub-criterion 'functional market economy', which Romania nearly achieved in 2003, from the second sub-criterion - 'capacity to resist competitive pressures' - which will need to be reached by 2007," Scheele said.

Investors are keenly watching Romania's progress towards the EU, with any setbacks certain to hit the country's foreign denominated bonds.


Filori said in Brussels that the EU would still like to sign the accession treaty next year jointly with Bulgaria and Romania despite the latter's slower progress in negotiations.

"It is still our preferred option, but there is no guarantee," he said.

Bulgaria and Romania missed the first wave of the EU's eastern enlargement in May, when 10 mostly east European countries joined.

Both countries are now eagerly awaiting next month's report by the Commission, which will say whether they have made enough economic and administrative reforms to be fit to enter the 25-member bloc.

The report is certain to criticise Romania for rampant corruption, the ailing judiciary system, often incompetent administration and state aid to inefficient industries, despite noting the country's progress in reforms.

Officials in Romania, which failed to get the "functioning market economy" tag last year, say they expect to earn it next month due to robust economic growth, falling inflation and progress in privatisations.

Romania still has to wrap up entry talks in 5 out of 30 policy areas of negotiations while Bulgaria has already been declared a "market economy" and has closed all negotiations.

Competition will be a difficult area as Romania will have to convince the EU it would end aid to firms that is incompatible with the bloc's strict rules.

State aid is a long-time practice in the coiuntry to keep inefficient state industries afloat.

By Antonia Oprita and Marcin Grajewski

Posted by Mihai : 9/21/2004 07:49:00 pm EU reassures Romania it may still join in 2007
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