Tripling the funding allocated to investments - our chance to become a major industrial player in Europe

The tripling of funding on the principle that for every euro received from the European Union budget, the state comes with one euro and the private sector with another euro, could ensure a total investment budget of almost 200 billion euros for the period 2028-2034, a budget that would place our country among industrial competitors on the continent and transform it into a true regional player, said Dragoş Pîslaru, Minister of Investments and European Projects, at the conference organized two days ago by the Romanian-German Chamber of Commerce and Industry (AHK).

The Minister of Investments and European Projects indicated that at the moment, at the European level, negotiations are in full swing for the multiannual financial framework 2028-2034, based on which our country would benefit from a total allocation of approximately 60 billion euros, of which 10 billion euros could be used for financial instruments or things that can stimulate competitiveness. He said that this is possible because the European Commission's proposal presents unprecedented flexibility: a single fund, with the possibility for each member state to choose between decentralized management (regional programs) and performance-based management at the national level, similar to cohesion policy and the PNRR.

Dragoş Pîslaru stated: "With this flexibility we have a great blessing or a great curse. The great blessing is that we have the full unfettered potential to allocate this money in a good way, without being constrained or supervised by the European Commission. The curse is that before, with supervision, the Commission said, based on the analysis of officials in Brussels, what the priorities were, and this was useful, if you did not have the capacity to do this. The main idea is that we will have the possibility to do one thing: for every euro that the Commission puts in, we want to put in one euro from the national budget. There is no longer any constraint in the sense that the money can only be spent for certain directions. If from an allocation of 70 billion euros - of which 20 billion euros would have gone to agriculture anyway, 20 billion euros would have gone to the administrative-territorial units and only 30 billion euros would have remained for the rest of the priorities (which is almost impossible because only infrastructure has projects postponed in value of about 15 billion euros) - we move to an allocation of 140 billion euros, where we can certainly have about 65-70 billion euros that we can allocate for the great transformation, for the competitiveness profile, for industrial policy, for defense and many other things. What I would like to do is to have a triple financing: one euro from the European Union, one euro from the national budget (10 billion per year in the national budget for seven years is achievable) and one euro from the private sector. Instead of consulting you on the plan, we will say that we will invite you to the plan. We will change the paradigm so that companies that expand their businesses no longer reach civil servants. I would like to move everything towards financial instruments and financial intermediaries. We now have a new financial institution: the Investment and Development Bank, a national promotional bank. This should leverage EIB money and arrangements with the World Bank Group, the European Development Bank. If we put 10-15 billion euros in it, we will have a three-fourfold multiplier effect. We will get 30-40 billion euros out of that. We would need the private sector to contribute to strategic industries, based on a debate about what the future of Romania should look like, but with real numbers and business plans for about 30-40 billion euros, which is achievable. Imagine that we will start in the first quarter of 2025 the programming process for a plan of over 200 billion euros. The process should end in July 2027. This is important because the longer we stay in the preparation process, the closer we get to 2028, which is an election year. That is why we need to finish earlier and have this big plan that is fully pro-European. With this 200 billion approach, we can not only get out of a fiscal budget tension, but have a multiple perspective on both EU money and national money. We will do a study of total factor productivity, we will do sectoral studies on competitiveness and industrial policy. We will do the big transformation studies that will address demographics, competitiveness profile, technology (including AI), defence and dual use. The main idea is to have broad consultations going on, and to involve all line ministries. This is an amazing opportunity to stand out not just with a recovery philosophy of the gaps with Western European competitors, but also with a clear respect for becoming a regional player”.

• Over 24,600 projects, financed from the PNRR at national level

The Minister of Investments and European Projects also referred to the PNRR, but also to the fiscal measures that the Bolojan government had to take. He recalled that the PNRR was blocked in the negotiation since August 2024 and that at least 10% of the European funds allocated to our country were in danger of being suspended, due to the budget deficit problem. Therefore, the government had to take unpopular fiscal measures, thus reconfirming the investment grade rating for our country, but also to maintain the European allocation.

Dragoş Pîslaru mentioned: "What I can tell you is that I have personally managed a situation in which all cohesion funds are intensifying and we will exceed 5 billion euros per year, starting next year, with a rate of contracting that is going very, very well. But the urgency is the absorption of the funds from the PNRR, because we have a deadline, the end of 2026, and we have a lot of money. The revised version is 21.4 billion euros, of which exactly the same amount that we had from the beginning, 13.4 billion euros is the grant component, a non-refundable one. So it is mandatory to use this type of financing. Then we started prioritizing the projects financed from the PNRR. August was a very complicated month in which we asked all the line ministries to prioritize their projects, so that the Ministry of Finance could effectively pay the invoices for the projects that are to be carried out. So, there was a lot of suffering in this process. We have reconciled with the European Commission on the amounts, investments, reforms, and one of the biggest concerns was clarifying what we are talking about there”.

The Minister of Investments and European Projects exemplified the way in which the PNRR is now implemented by presenting to business people within the AHK the existing dashboard on the website of the public institution he leads.

"What you can practically see is the revised version of the PNRR, which was approved by the Commission and will be formally approved on November 13 by the EU Council. It is just a formality, but you never know, that is why we are very careful and provide explanations about how things are going. (...) We are now on a very good path and we are clarifying exactly what the projects are, what we are talking about, where those projects are, what the areas are and how to monitor them, something that has never happened. The Ministry of Investments and European Projects did not have the universe, the list of projects, there was no indexed database, nothing. There was a delegation to the line ministries that had the investment portfolio and reported on milestones and targets, not on the progress of the project. (...) If we compare where we are now with the situation four months ago, it is not necessarily bad. We basically had a crisis management, which is still ongoing. We now have the additional data, to make sure what the real physical progress is for each of the projects and then the progress of payments for each of the projects, which is a kind of hygiene factor. We have over 24,600 projects that we are talking about, so this is not an easy exercise. The idea is that now we have the whole country as a construction site. Moreover, we are talking about open data that can be used by any academic, consultant or any other person, who can download it, which ensures us total transparency and (...) the fact that no one is contesting the use of the money. At this point, I believe that the funds will not be cut, they will not be suspended, that we can reach our budget target this year, we can reach our budget target next year. Basically, we have secured a budgetary vision that allows a considerable amount for investments and, thanks to European funds, we have an enormous amount available for investments, and the projection for next year is about 10 billion euros for investments. If we add the fact that we still have 5 billion euros for cohesion and that the budget was made in close partnership between the Ministry of European Funds and the Ministry of Finance, we have the perspective that maybe things are done well this time. It will be a difficult period to have all these things implemented. I am confident that some of the most important projects will be implemented: we will have A7. We will have, I would say, all eight new hospitals and we will complete a lot of projects that are at the local level and that can be done in three, four months. We will complete a large part of these projects. Will we reach 100% absorption? That's what I think now. (...) We are now prioritizing public finances in European projects, which is an important thing, because before there were many other national ideas or national money diverted to other things. Now the money is being directed in this particular direction. We don't have the opportunity now to move money from one sector to another for the PNRR, because the roadmap is established for the years 2025 and 2026”, Dragoş Pîslaru showed.

• Bureaucracy, an impediment for investors in our country

For their part, German businessmen in our country stated that they are satisfied with the government's plan, but reiterated that they would like a legislative simplification and a reduction in the existing bureaucracy at the level of local and central public administration.

Volker Raffel, president of AHK and CEO of E.On Romania said: "It is about European funds and I think we all need to make the most of the moment we are in and use the funds in the most efficient way to encourage economic growth in Romania. The chance is there, the money is there. Let's absorb it, this would be the first priority. The second is represented by the allocation of European funds, which are linked to certain conditions, and one of them concerns better control or better management of state-owned companies. This is certainly one of the topics that is ultimately in the interest of the Romanian state. It is not about whether a company is state-owned or privately owned, but about good commercial logic in the management of these companies, which is part of the conditions for European funds. Part of it, of course, is to make sure that there is a common acceptance across Europe that the amounts allocated from these funds are well invested. The message from the AHK community is that we all knew that the new government found a difficult situation and that part of the solution was to increase taxes, but we all stressed from the very beginning that it is not just about increasing taxes, which is an easy thing to do, because you risk having higher taxes on a weaker economy and not earning more. This measure makes sense and is only acceptable through reforms, and reforms require reducing bureaucracy, because bureaucracy, on the one hand, is defensive, but on the other hand it slows down the economy. So, it's about reducing bureaucracy and state reforms, which I hope very much for, and I think the entire business community, not only the international one, but also the national one, hopes that these reforms will be a success”.

For his part, Sebastian Metz, CEO and member of the AHK Board of Directors, stated that MIPE is an essential institution for increasing the competitiveness of our country and for the digital and green transformation.

Sebastian Metz specified: "We want the reforms to be carried out and we need cost reductions in the public sector. But what we don't want is to reduce public investment. (...) So, don't reduce public investment, try to reduce costs, especially when it comes to public consumption. And when we talk about public consumption, I think everyone knows what the sensitive points are, in order to have a more sustainable budget. (...) Regarding competitiveness and where to increase it, we need a decision-making process regarding European funds that is more decent, decentralized. So, we need to invest the money where local economies need the money, and of course, at a decentralized level it is best known where to invest the money. Some benchmarks should be established to indicate in which direction and how the money should be spent. But I think that the administration and orientation of public funds can be decentralized at a local or regional level. (...) And last but not least, the business environment would like to know what Romania's industrial policy is regarding the areas that would bring added value. Because right now it is not known. There is talk of semiconductors, biotechnology, rare earths, energy, but there is no government decision on Romania's industrial policy for the next ten years".

In light of the above, tripling financing through joint contributions from European funds, the national budget and private capital represents a major opportunity for Romania to become a competitive regional actor, but the success of this strategy depends on the state's ability to manage the available resources transparently and efficiently. The business community emphasizes that this perspective can only become a reality if concrete reforms are implemented: simplifying legislation and reducing bureaucracy, decentralizing the decision-making process regarding the allocation of funds, protecting public investments and defining a clear industrial policy for the coming years. Thus, real collaboration between the government and the private sector, coupled with responsibility in the use of European funds, can transform the current moment into a turning point for the country's economic development.