The EC officials: the plan for recovery and resilience of Romania will generate a growth of GDP of maximum 2.9% until 2026

The high officials of the European Commission explained on Monday that the Plan for Recovery and Resilience of Romania, adopted by the EC, will generate a growth of the GDP of maximum 2.9% until 2026. They said that, for the moment, it is not affected by the political situation in the country, but it is necessary for a functional government to implement it. The officials, who led the discussions with the Romanian authorities, explained that the measures in the plan cannot be modified in time, and, in case the projects included in these will not be finalized according to the calendar, the money cannot be allocated.   PNRR is an instrument based on performance. Romania lodged its plan at the end of May and, similarly to the other member states of the EU will report the situation, biannually, during the European Semester.   The Plan for Recovery and Resilience (PNRR) was approved by the European Commission and, on its basis, Romania will receive 29 billion euro, grants and loans, to invest in different projects until December 2026.   The Plan includes 15 parts, which cover six pillars and are divided in grants and loans. They cover 171 measures (64 reforms and 107 investments) and at their basis there are 507 reference points and objectives. Out of the total, 14, 24 billion euro represent grants and 14, 94 billion euro loans.   The six pillars are: green transition; digital transformation; smart sustainable growth favourable to inclusion; social and territorial cohesion; health, economic resilience, social and institutional; policies for the new generation.    ‘The plan approaches the majority of the challenges for Romania, be it public finances, work market, energy, transport, environment, education and health, it is a comprehensive, ambitious one’ stated, at the information session on Monday, a high official of the European Commission.   More than 40% of the total dimension of investments included in the Plan aim at the climatic changes – investments and reforms. Among the investments there is the modernization of the railway, the better efficiency of energy in public and private buildings, and among the reforms there is the decarbonisation of energy and transport. The intention to adopt a forestry strategy is also included, with corresponding investments for the reforestation measures. A little over 20% of the plan aims at the stimulation of digital transformation.   As regards resilience, the main sectors are : education and skills (deep restructuring of the education system through the project ‘ Educated Romania’, early education, improvement in infrastructure) ; health (construction and modernisation of public hospitals, of services especially in the rural areas) ; work market and social policies ( reform of the pensions and salaries, implementation of an average income of social inclusion) ; administration (modernisation of public administration – investments in digitisation ; stronger fiscal administration).   Among the projects proposed by Romania and rejected, the most important from the financial point of view and on whose basis there were long discussions with the Romanian officials were those connected to irrigations. ‘There was the question how much these measures of irrigation harm the environment and, taking into consideration they represented an important sum, 2 billion euro, required by the Romanian authorities, we wanted, obviously, to receive proof that these irrigation measures will not harm the state of waters. The Romanian authorities could not offer this evidence to the Commission and we insisted for the elimination of these measures from the PNRR’.   The economic impact is expected to take some time, said the representatives of the Commission. According to the estimates, until 2026 it is expected that PNRR generate a growth of the GDP between 1.8 and 2.9%.    Eligible was a project for the construction of a network of gas distribution in Oltenia, which will transport green hydrogen, and this means that ‘in time, this will have to grow the proportion of renewable hydrogen from 20% to 100%, so that we accepted and approved this investment’.   Another investment as regards gas is connected to the gradual elimination of coal. ‘ Romania has committed to close down many of the units which use coal, which are limited and very pollutant. It is impossible that Romania gets immediately from coal to renewable energy. This includes the gradual replacement of the old units with more efficient units which use combined fuel’.   After the European Commission evaluated PNRR and changed the content into proposals for the decision of implementation on the part of the Council, in the next four weeks the Council has to approve and adopt the corresponding decisions. There follows the signing of the agreement, between the Commission and the member state, and first Romania will receive 3.8 billion euro, pre-financing, in the fourth quarter of 2021.   Later, up to twice every year, the member states require new payments to reach the objectives. In a matter of two months, the Commission prepares the preliminary evaluations of the requests and following the decision, the member states receive the financial support instalment.   If Romania or any other member state does not implement until the end of 2026 the projects proposed, no extension of the period is not included for the allocated money to be spent. If the projects are not finalized in time, on the basis of the established objectives, the money cannot be allocated. There is a clear decision: the PNRR measures cannot be modified in time.    ‘We advise the member states not to concentrate too many objectives towards the end (of the period), to avoid the risk of some measures of not being done in time’. When a member state considers they achieved an objective they will lodge the evidence and the request for the payment at the beginning of the following quarter, and EC will check. ‘There will be much work to do, we will check, but we will not expect that dialogue relies on these requests, we will be in permanent contact will all countries’.   Connected to the impact that the lack of a stable government in Bucuresti had on PNRR, the EC officials said’ We hope that a stable government be established very soon. As long as Romania makes sure its commitments regarding reforms and investments are valid, there is no immediate impact’.   They mentioned the fact that a ‘functional government’ is necessary for the implementation of PNRR.  ‘As long as the reference points and the objectives are sure, there is no immediate impact, but, in reality, it would create problems. The commission is always ready to offer support and technical assistance as much as possible. We hope that taking into consideration that the institutions responsible with the implementation of this Plan are in the large majority the same to implement the European structural funds, there should be a certain expertise, so that there is nothing new for them connected to the management of these projects. We hope that the situation (the government) be solved as soon as possible not to have a negative impact, repercussions in the implementation of the Plan’ the EC officials said.