Valentin Miron

In general, non-reimbursable funds, both European and national, have a number of shortcomings that lead to slow implementation of local investment projects or, not infrequently, to a complete blockage of their realization. But these shortcomings are not the only reasons why Romania is developing at a snail’s pace.

The almost exclusive use of non-repayable funds to finance projects of local interest may limit the perspective from which the development possibilities of Romanian communities are viewed. What would happen if EU funds were no longer available and how do other countries manage to develop without them?

Local authorities and companies can tap the capital market to finance ambitious projects or refinance debt through bonds. Compared to bank loan, this instrument offers a considerable set of advantages and, when municipal bonds are used, both public authorities and the general public benefit.

Nearly a decade ago, the European Union imposed an excessive deficit procedure on member states to maintain a budget deficit of no more than 3%. As a measure, Romania has limited the ability of public authorities to borrow and develop on their own, making communities increasingly dependent on the government.

We all know that every crisis creates opportunities and Romania undoubtedly has a window of opportunity in the current pandemic crisis. But do we know how to capitalize on it, or will we emerge from this pandemic with few lessons learned?

The fear of ceding control over the implementation and management responsibility of public utility services to private operators is probably the main reason why major investments of local interest have remained at the level of promises. But unfortunately, fear does not seem to be the only reason why public-private partnerships are so rare in Romania.

Often, the urgency of implementing public investment projects makes it necessary to use alternative financing solutions. But just as often, these solutions are ignored for reasons that can hardly be justified.

Both public authorities and private companies have a duty to put the interests of taxpayers or the shareholders they represent above all else. This is why, when taking out a repayable loan, choosing the right financial adviser is essential to avoid a conflict of interest with extremely costly consequences.