DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION

DIRECTORATE B
- POLICY D EPARTMENT -

UPDATE - NOTE

ON
ROMANIA'S PREPARATIONS FOR EU ACCESSION

Abstract: This note gives an overview on the European Commission's monitoring report on
Romania and its presentation on 26 September, as well as an update on recent domestic
developments in Romania.

Any opinions expressed in this document are the sole responsibility of the author and do not
necessarily represent the official position of the European Parliament.

DGExPo/B/PolDep/Note/2006_ [N°] 27/09/2006

[FdR N° 632682] PE 366.235

EN
This note was requested by the European Parliament's delegation to the EU-Romania Joint
Parliamentary Committee.

This paper is published in the following languages: English

Author: Karsten Mecklenburg

Manuscript completed in September 2006.

Copies can be obtained through: E- mail: [email protected]

Brussels, European Parliament, 27 September 2006

Sources: European Commission

Reuters/Factiva
Oxford Analytica
Economist Intelligence Unit

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 CONTENTS

1. EU ACCESSION JANUARY 2007 ...................................4

1.1 Background - the Accession Treaty safeguard clauses ...................................4

General safeguard clauses .................................4

The specific safeguard clause for Bulgaria and Romania .................................5

The specific safeguard clauses applicable only to Romania .................................5

1.2 Background - October 2005 Progress Report / May 2006 Monitoring Report .......5

1.3 The September 2006 European Commission Monitoring Report ............................6

2. RECENT DOMESTIC POLITICAL DEVELOPMENTS ...................................8

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1. EU ACCESSION JANUARY 2007
On 26 September 2006 the European Commission adopted its latest monitoring report on
Romania and Bulgaria. The conclusions of the report were presented the same day to the
European Parliament by president Barroso and Commissioner Rehn. In his presentation, Mr
Barroso underlined that “Our conclusion is that the two countries are in a position to take on the
rights and obligations as Member States of the European Union on 1 January” and that there is
therefore no reason for postponing their accession till 2008, as the accession treaty would
have allowed in the event of serious failings. Mr Barroso insisted that the accession of Bulgaria
and Romania would not go against the effective functioning of the EU: the Commission's
recommendation for 1 January 2007 is based on a “rigorous, strict and objective assessment”
of the real state of the two countries' preparedness.
That said, the president of the Commission said that it was clear that there were still problems
in the two countries and that they had to be rapidly resolved, “To this end, the Commission
has fixed a number of accompanying measures for the accession of Bulgaria and Romania. In
particular, the Commission will set up a mechanism for cooperation and verification of
progress in the fields of reform of the justice system, the fight against corruption and organised
crime. This mechanism contains benchmarks that have to be respected”. Barroso promised that
the Commission would make a regular report to the EP and Council on how this mechanism was
working and on what basis it would decide, if necessary, to use the safeguard measures. Other
accompanying measures are included that guarantee the effective functioning of the Union
beyond the accession of the two countries, he indicated, explaining that the Commission took its
role as “Guardian of the treaties” very seriously.
Commissioner Rehn also congratulated the two countries for the “historic achievement…This is
a result of a combination of Bulgarian and Romanian efforts and the encouragement and
support by the EU”. As for the cooperation and verification of progress mechanism that the
Commission will put in place, Rehn explained that Bulgaria and Romania would be obliged
to produce a report twice a year on progress carried out and that the first of these reports had
to be submitted on 31 March 2007. Mr Rehn said that the Commission would in turn report to
the EP and Council in June 2007. He warned that “if the benchmarks are not reached, we will
apply safeguard measures”. The Commissioner also provided assurances that Community
legislation and the accession treaty contained sufficient guarantees for correct management
of Structural Funds and Agricultural Aid by the two future new members. The new
regulation on Structural Funds includes several levels of control before the Commission can
proceed to payments, which can be interrupted, suspended or cancelled at any moment in the
event of irregularities or fraud, recalled Mr Rehn. In connection with agricultural aid, a
specific regulation adopted on 26 September stipulates that a significant amount of
subsidies could be blocked in 2007 if management structures and payment agencies in the two
countries did not meet EU criteria.

1.1. Background - the Accession Treaty safeguard clauses

General safeguard clauses

For cases of serious shortcomings in the fields of general economy, internal market, or
justice and home affairs, safeguard clauses could be applied to the EU's relations with the
new member state until up to three years after accession (Accession Treaty Protocol Art. 37,
38). These clauses may be resorted to in order to impose particular measures on the respective
state or be applied by member states as a protection measure authorised by the Commission but
do not lead as such to a postponement of accession. They were also part of the 2004 accession
treaties.
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The specific safeguard clause for Bulgaria and Romania

The Accession Treaty Protocol for Romania and Bulgaria contains in Article 39 as another
precautionary measure a specific safeguard, the postponement clause. It entitles the
Commission to recommend to the Council at any time before the entry into force of the treaty to
postpone the envisaged date of accession of either country by one year to January 2008 if there
is clear evidence that Bulgaria or Romania will be manifestly unprepared to meet the
requirements of membership by 1 January 2007 in a number of important areas. This safeguard
clause can only be invoked by a unanimous decision of the member states after recommendation
by the Commission.
There are no provisions in the accession treaty to postpone membership beyond 2008. (In a
worst-case scenario, however, accession could be delayed indefinitely if a current member state
should fail to ratify the accession treaty). This would however be unprecedented. Until today,
only four Member States have not ratified the accession treaty: Germany, Belgium, France and
Denmark. Their intention is to wait for Commission's recommendation before ratifying.

The specific safeguard clauses applicable only to Romania

In addition, if Romania does not satisfy a set of specific commitments related to 11 sectors of
Justice and Home Affairs and Competition the Council can take the decision by qualified
majority, upon the recommendation by the Commission, to postpone Romania's accession by
one year to January 2008. Both Prime Minister Tariceanu and President Basescu have
repeatedly stated that Romania is going to fulfil all criteria and that they do not consider a
postponed accession an option.

1.2. Background - October 2005 Progress Report / May 2006 Monitoring Report

The October 2005 report concluded that Romania would be ready by accession in a large
number of areas. A number of other areas required increased efforts, and 14 areas gave rise to
serious concern. Since then, further progress had been made.
The last monitoring report of 16 May 2006 noted progress in numerous areas, e.g. justice
reform, competition policy and macroeconomic stability. Only 4 areas gave still rise to serious
concern:
• direct payments to farmers and operators under the common agriculture policy
• setting up a proper integrated administration and control system (IACS) in agriculture
• treatment facilities on BSE and animal by-products
• tax administration IT systems for inter-operability
At the same time, the report urged Romania to concentrate all efforts on the outstanding reforms
with particular attention to their actual implementation and enforcement, and even accelerate
efforts in some areas if it wants to be ready for accession on 1 January 2007.
But contrary to expectations, the May report did not settle the final recommendation for the
accession date, January 2007 or 2008. A final decision was thus expected on 26 September,
when the Commission presented its next / last monitoring report to Parliament.

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1.3. The September 2006 European Commission Monitoring Report

Based on the solid progress achieved, the Commission considers that both Romania and
Bulgaria will be in a position to take on the rights and obligations of EU membership on 1
January 2007.
To address the limited number of areas where further work will be necessary, the
Commission proposes a package of rigorous accompanying measures. The Commission will
set up a mechanism for cooperation and verification of progress in the area of judicial
reform, fight against corruption and organised crime . For the protection of the EU’s
financial interests a special regulation has been adopted on 26 September for agricultural
spending. The Commission has also stressed that EU rules provide for comprehensive measures
to counter further risks, in areas such as food safety.
Based on the earlier assessment of the May 2006 monitoring report the main findings and
conclusions of the 26 September 2006 monitoring report of the European Commission are as
follows:

European Commission - 26 September Monitoring report

Main findings on Romania

Political criteria
In the May monitoring report the Commission concluded: “Romania needs to continue its efforts
and demonstrate further results in the fight against corruption. It also needs to consolidate the
implementation of the ongoing justice reform and further enhance the transparency, efficiency
and impartiality of the judiciary."
In the fight against high-level corruption, Romania has made significant progress since May
both in completing its legislative framework to fight corruption and in establishing a solid track
record of serious non-partisan investigations of high- level cases that have led to indictments and
judicial proceedings. The National Anti-Corruption Directorate (DNA) now regularly launches
investigations on the basis of information from public control bodies, which shows that the
institutional framework has become more effective. Furthermore, two national campaigns have
been started to raise awareness among the public, and civil servants in particular, of the negative
consequences of corruption.
The main challenges as regards fighting corruption are firstly in ensuring the sustainability and
irreversibility of the recent progress in serious non-partisan investigations into high-level
corruption. Secondly, all political actors need to demonstrate their commitment to fight
corruption, ensuring that no one is perceived to be above the law.
Results in the ongoing reform of the justice system are tangible: the interpretation and
application of the law is being further harmonised and staffing levels are increasing. The
legislative framework underpinning the ongoing reform was consolidated in May through the
adoption of the Law on Mediation. A Fundamental review of Civil Code, Criminal Code, Civil
Procedure Code and Criminal Procedure Code has been started. Overall working conditions
have improved and a study has been launched to manage staff resources more efficiently. In
addition, the number of cases pending before the civil section of High Court has decreased by
approximately 15%. All courts and prosecutor's offices have been given online access to
legislation and case law.
Romania now needs to ensure a more consistent interpretation and application of the law.
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To address the outstanding issues the Commission identified, specific benchmarks that have to
be fulfilled. Romania will have to report regularly to the Commission on the progress. The first
such report is due by 31 March 2007. Should Romania fail to address the benchmarks
adequately, the Commission will apply the safeguard measures of the Accession Treaty.
Economic criteria
Romania continues to be a functioning market economy though fiscal policy should be
reinforced to increase the tax collection rate. Romania is now on track to meet the criterion on
the ability to cope with market pressures within the Union.

Transposition and implementation of EU laws and standards

In its May report, the Commission identified a number of areas where progress was needed in
Romania’s preparation for EU membership.
Since May, progress has been achieved in most of these areas. However, a limited number of
areas remain where the Commission needs to see further progress in the months leading up to
accession and beyond.

Agriculture - managing of direct payments under the CAP

Despite the progress achieved, the Commission does not yet consider Romania fully
prepared to ensure the management and distribution of the majority of EU agricultural funds.
While the institutional structure of the two paying agencies is in place, they are not yet
operational. To be fully operational, the paying agencies still need to hire and train additional
staff, acquire the relevant IT equipment and establish internal control and inspection structures.
There remains a real risk that the integrated administration and control systems (IACS) will
not be functioning prope rly in Romania by the time of accession. Sustained and, in certain
areas, reinforced efforts will need to be deployed in order to ensure the quality of the IACS.
Any member state must guarantee the correct allocation of agricultural funds. Any shortcoming
in this respect may delay the disbursement of funds or give rise to correction or recovery of the
EU taxpayers’ money. In addition, a special mechanism is adopted to address the remaining
systemic deficiencies in the management of EU agricultural funds covered under IACS. This
allows the Commission to provisionally reduce by 25% the agriculture payments covered by
IACS.

Food safety
Since May, Romania has signed tendering contracts for the collection and treatment of dead
animals and animal products. This is a clear step forward. However, the planned deadlines of
late November 2006 for the modernisation and construction of the required rendering plants are
very tight, as this requires the approval by the Romanian veterinary authorities and notification
to the Commission. Restrictions on the use of certain animal by-products will be imposed, if,
prior to accession, Romania fails to set up an adequate collection system and treatment of
dead animals and animal by-products throughout the country and to complete the upgrading of
the rendering establishments,
Food safety is a main concern for all EU citizens. Food products must fully respect all EU
requirements. If Romania is not ready before accession, the Commission will apply measures to
ensure that no risk materials enter the internal market.

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Classical swine fever, an infectious disease, is present in Romania. The country is currently not
allowed to export pigs, pig meat and certain pig meat products to the EU. This ban will be
continued until the disease has been eradicated.
In addition, the list of agri-food establishments which are currently not allowed to sell their
products in EU member states because they do not yet meet all the EU requirements will be
updated by the date of accession.

Tax administration
Since May, Romania has successfully passed the required conformance tests to operate intra-
community exchanges of VAT and information on excise duties. This means that Romania's IT
systems are now reliable and can interoperate with those of the current Member States.
Consequently, there will not be fiscal frontiers with Romania.

Motor vehicle insurance

Progress has been made in this area. The institutions required by EU laws and standards for
Motor Insurance are in place but not yet operational. The financial independence of Romania's
Green Card Bureau has to be ensured. This situation leads to persistent concerns for the signing
by Romania of the Multilateral Agreement of the UN Council of Bureaux prior to accession.
In case the agreement is not signed 1 border checks of insurance certificates would automatically
be maintained for Romanian vehicles leaving Romania and entering into the EU. Practical
arrangements would have to be found with the neighbouring countries (Hungary) concerning
the organisation of these border checks.

2. RECENT DOMESTIC POLITICAL DEVELOPMENTS IN ROMANIA

Relations inside the government coalition have deteriorated in recent months. Divisions
between the two senior government parties, the National Liberal Party (NLP) and the
Democratic Party (DP) are evident and could still lead eventually to the breakdown of the
coalition. Only the need to secure Romania's EU accession in January 2007 has been preventing
the breakdown. Nevertheless, the intra-coalition conflicts are hindering co-operation in
important policy areas, such as reform of the public administration.
Assuming that Romania joins the EU in beginning 2007, there is a real risk of an early election
next year. The DP has addressed this already end of August, saying the early elections would
allow the next government a stronger and renewed mandate. The NLP and the DP will almost
certainly not stand again as an alliance, but another coalition government will be the likely
outcome.
Economic policy has been the main focus of disagreement between the centre-right National
Liberal Party (NLP) and the centre-left Democratic Party (DP), the two senior partners in the
ruling coalition. The NLP favours neo- liberal policies with low government spending, whereas
the DP favours a more social democratic approach, implying higher government spending. But
current tensions include also the screening process for former collaborators with the
Communist security services, as reform of the security services has been debated. High- level

1
In accordance with Art.2 of the Motor Insurance Directive
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members of most parties have been the target of allegations. On 12 September 2006, President
Basescu has suspended Defence Minister Teodor Atanasiu so that a criminal investigation can
proceed regarding on whether the minister ordered surveillance by military spies on Memb er's
of the President's office. Constitutionally, the President is permitted to suspend any minister in
such circumstances; however, Atanasiu happens to be a close ally of Prime Minister Calin
Popescu-Tariceanu, the main opponent to President Basescu for the moment. Atanasiu is the
first minister investigated while in office.
President Basescu's strength derives from his continuing high popularity, but he is unable to
dissolve parliament, since only the PD favours such a move. Tariceanu's Liberals are drawing
closer to the two smaller parties in the coalition, which are dominated by figures who made
fortunes out of the chaotic shift to the market economy after 1989. The Conservatives reportedly
plan to impeach Basescu, for which a two-thirds parliamentary majority is required. If Social
Democrats (PSD), the heir of the pre-1989 Communists and the largest parliamentary party,
joined them, he could however be in jeopardy.
President Basescu's opponents inside and outside the coalition fear that he intends to try to
remake the political class by encouraging criminal prosecutions against senior politicians who
have grown very wealthy in the past decade. On 13 September, Leonard Orban, Romania's chief
EU negotiator, informed that about ten politicians would face criminal charges in the coming
weeks. Former Prime Minister Adrian Nastase (2000-04) is already facing trial, and his
successor, Mircea Geoana, has put pressure on him to quit the PSD to spare it embarrassment.
The EU is rather satisfied with efforts by Monica Macovei, the non-party justice minister, to
make the justice system immune from overt political interference. She is widely feared by
parliamentary forces, who wish their profession to remain one of the most lucrative in the
country and beyond the law in key respects. In early September, they emasculated a bill
designed to ensure that up to 100.000 public officials and elected politicians would have to
disclose the extent and origins of their wealth and allow an oversight body to check the accuracy
of their submissions. This was despite vociferous backing for Macovei's proposals from the
European Commission, who fears what may happen to the 30 billion euros Romania is due to
receive from EU funds over the next five years.
Media reports see Monica Macovei already as main candidate for nomination as the
European Commissioner for Romania, because of her good connection to Brussels as well as
her integrity. (Also Prime Minister Popescu-Tariceanu is handled as a possible candidate.)
An oligarchy composed of businessmen active in politics - either directly or through
compliant allies - fears however that EU efforts to improve standards in public life will alter the
rather lax climate that has enabled them to grow very rich. Inside Tariceanu's Liberals, they
have acquired almost full control. Leading party figures in favour of creating a new pro-reform
movement with Basescu's PD are on the verge of expulsion. They include Tariceanu's two
predecessors as party leader, Theodor Stolojan and Valeriu Stoica.
Many independent media are also falling into the hands of the oligarchy. Campaigns have been
launched against reformers , accused of links with the pre-1989 secret police, the Securitate.
In April, Basescu allowed the National Council for the Study of Securitate Archives (CNSAS)
to declassify the communist-era personal files of people now prominent in public life. There is
evidence that the information is being leaked selectively in order to discredit leading
reformers. The best-known case concerns Mona Musca who was, until recently, the country's
most popular politician and head of the PNL reform wing. After a relatively minor act of
collaboration in 1977 was revealed, she was expelled from the PNL in August and has been
reviled in much of the media. By contrast, pre-1989 political activists who went on to join the
PSD and ultra-nationalist parties have used influence to keep their files undisclosed.
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The CNSAS is composed of party representatives and well-known liberal intellectuals. The
latter's prestige has been tarnis hed as it emerges that they have been as willing to shelter allies
from disclosure as the post-communist parties.
Basescu and his PD allies may be popular, but they are increasingly isolated politically as the
oligarchy defends its sectional interests in the face of inconvenient reforms. Dan Voiculescu,
the media mogul leading the PC, whom the CNSAS unmasked as a Securitate informer in
August, has reportedly told the EU to mind its own business and stop interfering in Romanian
affairs.
If anti-reform forces remain indeed in the ascendancy, they could block further reforms that
the EU will insist on, if Romania joins in January 2007. As well as improving the allocation
of funding to modernise agriculture, these are likely to target runaway corruption. If the
oligarchy is strong enough to keep a divided government in office, then Romania may not be
able to prepare well for the shock of EU membership, particularly in the economic realm.
PD-PNL infighting and frequent ministerial changes mean that little coordina tion exists in
government.
As EU membership draws closer, leading politicians are absorbed with power struggles over
personalities or patronage. Substantive policy issues are not being given serious attention
and, with the exception of such isolated ministers as Monica Macovei, the EU may find it hard
to identify local partners with whom it can promote a durable reform agenda. Until new
elections are held, politics are likely to remain deadlocked with oligarchic interests being able to
block the forces of renewal.

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