A lack of transparency and stable regulations, as well as the constant need to renegotiate how government funds are allocated, has created a fire sale style of politics in Romania and much of the Balkans. This chaotic approach, while healthy for ruling parties and their political clientele, makes real local development impossible and prevents state-owned enterprises (SOEs) from competing under normal market conditions.

These are the main findings of a major new report published by Expert Forum (EFOR), a Bucharest-based think tank which promotes transparency and good governance in Romania and Moldova and much of the Western Balkans (Bulgaria, Croatia, Serbia).

“We have concentrated on the transfer of funds for local development and SOEs because these are the principle sources of patronage and illicit funding for political parties,” said Sorin Ionita, president of EFOR. “If these two taps were to be turned off, Romanian politics would lose between 80-90 per cent of the funding on which it relies for campaigns and the process of party-building.”

At a conference in Bucharest EFOR gave a number of examples of how funds from the current National Programme for Local Development (PNDL 2) – launched in July 2017 – were directed towards those town and county councils most loyal to the ruling PSD-ALDE coalition. It also pointed out that Ionel Arsene, the leader of the county council which receives the most funding (Neamt, in northeastern Romania), is currently on remand awaiting trial for corruption. Neamt is due to receive a total of 323 million lei (69.3 million euros) as part of PNDL 2.

As Mr Ionita demonstrated however, such clientelism is not new in Romania, and has been a feature of the country’s politics for more than a decade: governments of all stripes have been guilty of allocating funds to loyal barons in Romania’s regions.

“This type of government makes public services more expensive,” added Mr Ionita, pictured above at the Bucharest conference. “Money is allocated ad-hoc and used poorly. Innovation and long-term investment are discouraged.”

He also underlined the impact fire sale government has on European Union funding. “Councils run away from EU funds,” he said. “They come with too many checks and balances. Far better the soft Romanian funding, which while not always being a reliable source comes with very few control mechanisms.” Romania’s rate of absorption during the current EU budget cycle (2014-20) is lower than during the previous cycle, the first after Romania joined the Union in 2007.

At SOEs the story is much the same: managerial appointments are politically-motivated, often short-term and stifle investment and development.

EFOR places the blame for the emergence of such fire sale politics on a lack of control, something for which Romania’s parliament is more than partially responsible. Parliament has over the past 12 months changed the management of the Competition Council, the regulators of the energy and ITC markets, as well as the local government ombudsman, all of which helped to temper some of the excesses.

“We have not yet worked out how to match democratic control of institutions with professionalism,” says Mr Ionita. “In other countries, parliament acts as an equilibrating factor. In Romania, parliament has proven to be catastrophically bad at selecting professional people. It favours instability, and practices which reduce politics to the lowest common denominator. There will always be some political favouritism, and finding a formula that reconciles this with at least a minimum level of professional competency is something that is on our agenda for the future.”