Competition, an essential factor for increasing economic competitiveness

The government can no longer rely on growth fueled by deficit, consumption and massive interventions from the state budget, because the future of economic growth is represented by competition, open and properly regulated markets, digitalization, the green transition, intelligently mobilized private capital and the elimination of bureaucratic barriers that hinder investments, said, on Friday, participants in the conference "Evolution of competition in key sectors under the impact of the energy transition and digitalization”, on which the Report on competition in key sectors - 2025, prepared by the Competition Council, was launched.

At the opening of the conference, Bogdan Chiriţoiu, the president of the Competition Council, showed that, although the competitive intensity is increasing in more areas than in those where it is stagnant, there are more and more signs of concentration in some markets and therefore in the food trade and in the logistics area for e-commerce, the institution was forced to impose rigorous conditions to prevent practices that would have affected consumers and suppliers. Some transactions were even abandoned when a formula compatible with the competition rules could not be identified.

The head of the Competition Council specified that our country as a whole has an under-concentrated economy in certain branches, especially in the production sector, where larger and more efficient companies are needed, capable of competing internationally and negotiating from positions of strength. Bogdan Chiriţoiu mentioned, however, that a consolidation of Romanian capital is beginning to take shape, which is taking over foreign companies, and this development is welcome as long as it maintains the competitive balance.

Regarding the macroeconomic model, the president of the Competition Council unequivocally conveyed that the paradigm based on stimulating consumption is exhausted. Romania grew rapidly after joining the EU, doubling its ratio to the average European GDP per capita, but in recent years more and more of the growth has been artificially fueled by huge budget expenditures. The state injected approximately 9% of GDP into the economy in 2024 to achieve growth of only 1%, the largest deficit in the EU, while inflation and the trade deficit deteriorated. The money went towards current payments and imports, not towards investments.

Mr. Chiriţoiu stated that policymakers must shift the focus to the supply side: better functioning of markets, elimination of barriers and structural efficiency, and that massive interventions such as caps must be gradually withdrawn, as has already happened with RCA, where the removal of the cap did not generate price shocks.

Bogdan Chiriţoiu stated: "Our recommendation to the Government is to focus on financial instruments, especially state guarantees, so state guarantees of loans or other similar intervention mechanisms, which do not mean direct cash. It means, of course, a risk to the state, it can be transformed into cash, but so far our guarantee mechanisms have worked well. During the COVID crisis, it seemed to me that the IMM Invest mechanism through the Guarantee Fund and the Counter-Guarantee Fund was the most important intervention we had at that time and so far it seems to have worked well. The costs were low from those guarantees issued and so far no problems have been raised. (...) So, I think this is the future in the short term: state aid with less money.”

The head of the Competition Council also said that the capping of the commercial mark-up for 13 basic foods, introduced in July 2023, should not be extended beyond March 31, 2026, and the market should return to normal operation.

• Support for large energy consumers

Regarding the energy market, Bogdan Chiriţoiu showed that, although the prices paid by consumers seem higher than a few years ago, the difference comes from the fact that the state no longer covers part of the bill for everyone, but only through vouchers for vulnerable categories. The real price of energy is not higher than before, and the liberalization of the market, also supported by very advantageous commercial offers, has led to price drops for new customers.

The President of the Competition Council said: "On energy, we will have to find a solution for large consumers. We are very pleased that things seem to be settling down on the retail side - we see for households, the general concern is for the impact on households -, but I think we also need to look at the impact on industrial consumers and especially large ones. And here the problem remains that in Europe we have expensive energy - it is expensive by intention, it is not a coincidence, it is the result of choices that we have made in Europe, of policies -, so it is an assumed thing that we have expensive energy. At the same time, in order to be able to compete with the rest of the world, for the big consumers, must find formulas for making energy cheaper and I think that this is a priority for us, at the Council, and I think also for ANRE, and certainly for the ministry and the Government, to find options to support the activity of companies like Alro, Sidex and other large energy consumers. We have energy in Romania, a lot of energy is produced, there are many investments, especially in renewables, but gas investments will also come into operation in the coming period. So, we will have production, the problem is how we can organize the market and how the state can support so that we have stability in the market and, I repeat, for some large producers to manage to obtain prices that allow them to compete in Europe, but especially outside Europe”.

He also said that the Government and the Competition Council are working on simplifying the control of foreign investments, so that the process remains more tortuous only where there are real national security risks, without blocking unproblematic transactions. The Head of Competition mentioned that the Industrial Licensing Office is almost operational and will concentrate in a single point the documentation necessary for the opening of new production capacities, drastically reducing bureaucracy and the project will be extended to the services area. The institution also continues to collaborate with the ASF to improve the RCA legislation, so that the market functions without recurring administrative interventions.

• European support for investments in green technologies

Teresa Ribera, Executive Vice-President of the European Commission and Commissioner for Competition, emphasized, in a video message to the conference participants, that clean industries, properly regulated digital markets and strict enforcement of competition rules are the pillars of Europe's competitiveness.

Teresa Ribera stated: "To date, over euro12 billion in state aid has already been approved under this framework. This helps industries to innovate, create jobs, grow sustainably, while maintaining a level playing field. At the same time, we are committed to keeping digital markets open and competitive, while protecting democracy and citizens' choices.

With our rules, we ensure that large digital platforms operate in a fair and transparent manner. We prevent monopolistic practices, support stocks and ensure that technology works for people and not the other way around. Open digital markets offer more choice, lower prices and innovation that thrives on a level playing field. With our competition rules and instruments such as the Digital Markets Act, we help promote a fair and diverse media landscape and tackle practices that can undermine media pluralism. We do this, for example, by protecting independent media providers against anti-competitive practices in online advertising. (...) Our experience shows that competition policy is an engine that stimulates innovation, growth and resilience. This is why our policies focus on real market dynamics, stopping cartels, preventing pollution and allowing companies to expand responsibly. Competition policy cannot do everything, but, combined with a fully integrated single market, it allows companies to grow across borders, increase supply chain resilience and compete globally. When companies compete on a level playing field, innovation flourishes, supply chains are strengthened and citizens are the real beneficiaries. Therefore, clean industries, better digital markets and strong competition are the pillars of Europe's competitive advantage for the 21st century".

For his part, presidential advisor Radu Burnete showed that the deficit has mainly fueled external imbalances and that our country must consolidate its companies, develop diversified financial instruments and accelerate the absorption of the remaining funds from the PNRR. Cheap energy, real digitalization and education are the three conditions without which Romania will not be able to truly participate in the accelerated development of the economy with the support of artificial intelligence, said the presidential advisor.

Radu Burnete warned: "The past few days, several economists sent me a paper that is not yet public, in which they also analyzed Romania's competitiveness in the last 10 years. From that paper it emerges that, after the pandemic, we started to have problems, that the trend is reversing. That is, where we were recovering until then, with great strides, in competitiveness compared to the European environment, in recent years it seems that we are starting to lose and I am not sure why this is happening, but it raised an alarm bell for me”.

• Antonio Gomes, OECD: "The green transition requires a combination of competition, innovation and industrial policy”

Antonio Gomes, Deputy Director of the OECD's Financial and Enterprise Affairs Directorate, said that the global economy is in the midst of a "twin transition”: green and digital. He showed that the energy transition and digitalisation are reshaping markets and business models, and competitive markets are indispensable for the uptake of clean technologies. Furthermore, industrial policies, carbon pricing and smart regulation are needed to create real incentives for clean technologies, but they must be integrated into a competitive framework to avoid huge costs for consumers. In the absence of competition, green measures become unpopular and ineffective.

Antonio Gomes said: "The green transition requires a combination of competition, innovation and industrial policy. Left to their own devices, markets will not generate enough green innovation, as they have shown. And because of what we call a lock-in, firms that have invested in certain technologies will tend to continue investing in the same technologies over time. And this means that, in the absence of appropriate public policies, firms will tend to favour polluting technology and innovation over clean technology. And so, to create the right incentives for them to switch to greener alternatives, industrial policy and appropriate regulation are needed. For example, green subsidies can accelerate technological change and reduce the costs of delaying the transition. A clear carbon price can, in turn, help trigger incentives for the private sector to move to the green economy. Pro-competitive rules and regulations can also help to deploy renewables and the associated innovative business model. So markets Competitive and open markets are absolutely essential as a driver for entrepreneurship, innovation and the adoption of cleaner technologies. Competitive and open markets are the ones that will enable investment at the scale we need, will enable learning by doing, will enable cost reduction and will accelerate diffusion. Where industrial policy is needed, it should be designed in a progressive way to ensure that the underlying policy objectives are achieved, while ensuring that there is a market. So competition is very important to avoid unnecessary costs for consumers”.

The OECD representative also drew attention to digitalization, where he showed that massive investments in data centers will go to countries with affordable energy, solid infrastructure and clear rules for the development of renewables. This represents a challenge for Europe, which according to data provided by Mr. Gomes, is preparing for an explosive increase in data center energy consumption - from 96 terawatt hours today to 230 terawatt hours in 2035, an increase of 150%, noting that the consumption in 2035 represents 66% of the current electricity consumption on the old continent. Under these conditions, the main winners will be regions with fast-track authorization and functional markets that already attract such investments.

• Reduced competitive pressure in the banking sector

The Chief Economist of the Competition Council, Oana Romano, explained that protecting competition, not competitors, is the mechanism that forces companies to become more efficient, reduce costs, innovate and transform resources into value. In her opinion, competition is the "invisible architecture" of economic freedom and is manifested both in the goods market and in the labor market, where labor mobility and fair wages directly influence productivity. She specified that the report prepared by the Competition Council shows decreases in competitive pressure in the banking sector and in optional auto insurance, but significant increases in the energy market and in the RCA area, that e-commerce remains a transformative sector, in which new business models, self-service technologies, developments related to local and ecological products and negative effects of prolonged caps on products not directly affected appear.

Sergiu Neguţ, president of Romanian Business Leaders, stated that the deficit of almost 10% of GDP means costs transferred to future generations and that fiscal adjustment was inevitable. The representative of a part of the entrepreneurs in our country said that, in the context where the state no longer has money for broad support schemes, the solution lies in using leveraged instruments: investment funds partially funded by public money, government guarantees for loans, the involvement of pension funds in financing the real economy and the acceleration of transactions by reducing bureaucracy. Sergiu Neguţ also said that our country has a breakthrough strategic focus in applied technology, IT and artificial intelligence, areas where it can quickly catch up with more advanced states, but, in order to maintain the current level of competitiveness, the state's digital infrastructure must be modernized at an accelerated pace and the administrative barriers that slow down investments must be eliminated.