Romania: A Case of Differentiated Integration into the European Union

Introduction

Robert Schuman, one of the key architects of the European integration project, stated 73 years ago that Europe “will be built through concrete achievements which first create a de facto solidarity” (Schuman 1950). Since then, there have been concrete achievements and solidarity has materialized. These accomplishments reached their peak in the time between 2004 and 2013, when 13 countries, including Romania, became European Union (EU) member states. Since the foundation of the European institutions, delegation of sovereignty has been one of the main dilemmas. Jean Monnet, another founding father of the EU, in his Memoirs mentioned the issue of sovereignty transfer more than 100 times: but he saw it as a dilemma for others, not for himself. He was already convinced in the 1950s that

our countries have become too small for the present-day world, for the scale of modern technology and of America and Russia today, or China and India tomorrow. The union of European peoples in the United States of Europe is the way to raise their standard of living and preserve peace. It is the great hope and opportunity of our time. (Monnet 1978, 399 – 400)

Romania’s stance towards the EU is still in the spirit of these memorable words.

Common rules and institutions appeared as the common good envisaged to defend the well-being of all Europeans. The common interest must prevail, and coordination and harmonization of economic policies are needed for this purpose, as indicated in various reports, such as that coordinated in 1970 by another supporter of a united Europe, Pierre Werner (Council-Commission of the European Communities 1970). The path from the common market for coal and steel to the single market of today has been long and sprinkled with obstacles. At the same time, the current deepening of the single market is accompanied by serious challenges. Different national interests are not always congruent. The deepening disagreements on various issues (including migration) after the international financial crisis of 2007–2008 reflect the diverse and sometimes contradictory opinions and interests in the EU. At the level of member states from Central and Eastern Europe (CEE), several of them are not willing to give up their monetary sovereignty, while others are not yet economically prepared to join the eurozone. The rules agreed to in the Stability and Growth Pact (SGP), adopted in 1997 and subsequently revised various times, and other binding treaties are not followed by all members equally. In this regard, Romania still has to address its deficits.

The general public support for European integration has remained strong in Romania in spite of all the conditions imposed. Romania’s adherence to the EU, its institutions, and initiatives has remained high, disregarding cases when Romanian expectations were not fulfilled. It gave proof of “good will and determination to meet the benchmarks set by the EU”, even as it was confronted with stricter conditions than other candidate countries (Trauner 2009, 1).

The Romanian economy is well integrated with the EU through trade and investment linkages, and the banking sector is also well integrated with the European financial system (European Commission 2022a). According to the 2022 Flash Eurobarometer, around 77 % of Romanians are in favour of adopting the euro. A majority of Romanians (65 %) are aware that Romania is not ready to introduce the euro (Eurobarometer 2022): at present Romania does not fulfil the nominal convergence criteria (European Commission 2022a), with persistent inflation being one of the most significant hurdles.

Romania is a unique case in the CEE due to its turbulent transition to a market economy and a much longer than initially estimated implementation of the aquis communautaire. Romania went through a slower transition than most other ex-communist states, and was therefore only accepted as an EU member state on 1 January 2007, together with Bulgaria. Even then, key reforms had not been finished in both countries, and the European Commission preserved the right to continue to monitor them after accession. In spite of that, with time Romania has managed to overtake some CEE members in terms of GDP per capita in purchasing power standards and reduce the development gap.

Romania is willing to adhere to the eurozone as soon as it meets the criteria and is able to cope with the competitive pressure. It has specific characteristics in terms of differentiated integration (DI) compared to other EU member states in CEE, which justifies the attractiveness of the Romanian case of DI in the European debate. The Romanian experience can be a lesson for the current candidate states, showing that perseverance is essential in the EU accession and integration process. At the same time, it suggests that a “multi-speed” Europe fits with EU integration models and is the best way forward for further enlargement.

Taking into account that, on the one hand, Romania is still outside the eurozone and is not a part of the Schengen area, and that, on the other hand, it shows strong support for deeper EU integration, it is one of the best examples of DI into the EU. This article analyses the main factors of Romania’s incomplete membership and outlines its progress towards integration.

Literature Review: General Evaluations of Differentiated Integration

The supranational system of governance in the European Union has been accompanied over time by opportunities and challenges, ups and downs, praise and criticism. Romania has long recognized the EU as both a normative power and a valuable common good. Undoubtedly, European integration has been seen as a significant contributor to economic growth, well-being, and stability, in spite of its economic, social, and cultural heterogeneity.

The successive stages of enlargement of 2004, 2007 and 2013 increased the EU’s heterogeneity. As it impacts the political willingness to integrate further, DI appears as a tool which enables the accommodation of heterogeneity and thereby the stabilisation of European integration, especially in times of a severe nationalist and populist movements against integration (Bellamy and Kröger 2017).

Efforts in the direction of reconciliatory heterogeneity, in the positive sense given by Stubb (1996), have intensified in the last decade. Heterogeneity has been a major determinant of flexible integration for EU member states for a long time, even prior to 2004 (Holzinger and Schimmelfennig 2012). Internal DI, among EU member states, had already been an instrument used to overcome integration deadlock in EU treaty negotiations and legislation, both with regard to the heterogeneity of economic preferences and capacities and to national self-determination (Schimmelfennig and Winzen 2020).

The eastern enlargement coincided with regional and international crises, which brought intra-EU frictions and pressure to an unprecedented level. As well as market failures and the eurozone sovereign debt crisis between 2008 and 2012, other serious challenges included migration issues starting from 2014–2015, Brexit, the Covid-19 crisis and the severing of economic relations with Russia because of its attack on Ukraine.

On the one hand, the current period of high inflation and high debt costs in the middle of the green and digital transitions is affecting the economic situation of EU member states and their attitudes towards the integration process. On the other hand, the EU’s authority continues to grow in strength by “failing forward”:

In an initial phase, lowest common denominator intergovernmental bargains led to the creation of incomplete institutions, which in turn sowed the seeds of future crises, which then propelled deeper integration through reformed but still incomplete institutions—thus setting the stage for the process to move integration forward. (Jones, Kelemen, and Meunier 2021, 1519–20)

The solutions adopted by the EU in order to tackle the Covid-19 crisis, including the Next Generation EU recovery package, were a resourceful response to a harsh medical, social and economic crisis. The new test the EU has to pass, namely how to solve the Ukrainian crisis and mitigate the costs associated with the energy crisis, has also influenced general support for the EU. As Vergioglou and Hegewald (2023, 206) underlined,

in cases where member states are granted an opt-out or are allowed to integrate into a policy area they were previously excluded from, support increases. In contrast, support decreases when member states are not granted a requested opt-out or are excluded from a policy area they would like to join. These findings carry important implications for the EU’s legitimacy. While differentiated integration has the potential to enhance citizens’ legitimacy perceptions, it can also undermine them simultaneously.

Vergioglou and Hegewald identify two streams in the DI literature. One views differentiation as “a valuable tool to counter contemporary political challenges to integration, such as Euroscepticism, by accommodating national preferences in sensitive policy areas, while facilitating further integration among the willing” (2023, 207). This reflects the “multi-speed”, “multi-tier” and “multi-menu” differentiation, as defined by Schimmelfennig, Leuffen, and De Vries (2023, 6): Multi-speed means “differentiation by time”, hence “differentiation is a transitional, temporary phenomenon, converging toward uniformity in a reasonable period”. Multi-tier is differentiation across space: “Whereas the ‘core Europe’ group is integrated uniformly (with only a few or minor opt outs or exemptions), the extent of differentiation increases as we move from the core toward the peripheral circles of states” (6). And “multi-menu differentiation is differentiation structured by policies” (6). Therefore, models of DI can be grouped into the three categories “time”, “space” and “policy” (Bellamy and Kröger 2017).

The second stream identified by Vergioglou and Hegewald consists of researchers considering differentiation as “fostering discrimination and creating different classes of EU citizens” (2023, 207), which has a stronger potential to influence citizens’ public opinion and attitudes towards the EU, mainly in a negative sense. The most often cited examples of DI are the eurozone and the Schengen Area: “both have exempted members unwilling to participate, and both continue to exclude members that do not meet the prerequisites” (Schimmelfennig, Leuffen, and De Vries 2023, 4).

Schimmelfennig and Winzen (2020) and Schimmelfennig, Leuffen, and De Vries (2023) distinguish between exemptive (voluntary) and discriminatory (involuntary) differentiation, which may affect both efficiency and the perceived legitimacy of DI. Voluntary differentiation means opt-outs from specific policy areas. Discriminatory differentiation is defined as a temporary or conditional exclusion of member states from participation in EU policies, such as temporary exclusion of new member states from the freedom of movement in the internal market or the conditional exclusion from the eurozone or the Schengen area of member states that do not meet economic and security prerequisites. This distinction is important insofar as it may not only affect the efficiency but also the perceived legitimacy of DI.

A Historical Perspective of Romania’s European Integration Project: Initial Status, Expectations and Changing Priorities

In the first decade after the fall of the Iron Curtain, Romanian citizens were labelled as “euro-ignorants”. According to Idu (2001), the fact that almost 90 % of the population supported the EU accession process showed that only a minority thought about the costs of integration. The main reason for this “euro-ignorance” was the lack of access to information and consequently the lack of knowledge of integration issues. In spite of such assessments, the population had high expectations and were open to listen and participate in debates. The initial aspirations were related to increasing quality of life and living standards in Romania to a level comparable to the Western world, based on infrastructure development, access to knowledge and capital, democratization, free movement of persons, and reduction of corruption. The exact process and successive steps of reaching all these were not known in detail by the population at large, but enthusiasm for change and trust in a bright future were present everywhere.

Romania is considered “a late starter in the reform process, with key measures in the area of liberalisation and enterprise reform only coming on stream in 1997” (European Commission 2004, 33). That delay overlapped with vulnerabilities of structural origin (Zaman 2007). In the first years of transition, the slow progress in the reform of the public sector and the extremely volatile legislative framework “eroded the credibility of the Romanian economy and kept foreign investors away.” Consequently, “FDI [foreign direct investment] remained below its potential level, with inflows derived mainly from the privatization process” (both quotes Socol and Socol 2007, 66).

In its 1997 opinion piece on Romania’s application for EU membership, the European Commission wrote that it “considers that negotiations for accession to the European Union should be opened with Romania as soon as it has made sufficient progress in satisfying the conditions of membership defined by the European Council in Copenhagen” (European Commission 1997, 115). Even if Romania had made “considerable progress in the creation of a market economy”, “it would still face serious difficulties to cope with competitive pressure and market forces within the Union in the medium term” (European Commission 1997, 34–5). Besides, “despite the progress that has been made, Romania has neither transposed nor taken on the essential elements of the acquis, particularly as regards the internal market” (European Commission 1997, 115). Questioning Romania’s capacity to assume the obligations of membership in the medium term and also pointing to specific sectors such as “environment, transport, employment and social affairs, justice and home affairs as well as agriculture” (European Commission 1997, 115), the European Commission confirmed that the reform process had to continue before accession negotiations could start.

In 1998, the Commission published its first regular report assessing Romania’s progress towards accession (European Commission 1998). It underscored that reforms need to be continued in various areas, including the creation of the legal basis for the fight against corruption, protection of minority rights and reform of the public administration. At the economic level, the report pointed to the deterioration of the national economy, demonstrated by “the worsening of the external accounts, pressures on the floating exchange rate and fiscal tensions that have appeared in 1998” (13). It emphasized Romania’s failure to accelerate structural reforms and restructure of state enterprises. One of the key conclusions was that “Romania has made very little progress in the creation of a market economy and its capacity to cope with competitive pressure and market forces has worsened” (22). In the following report of 1999 regarding political and economic criteria—the ability to assume the obligations of membership and the administrative capacity to apply the acquis—the Commission concluded that previously identified problems persisted (European Commission 1999). Corruption was “still a widespread problem in Romania”, while the economic situation remained “very fragile” (13, 21). In spite of this, however, in 1999 the EU agreed to open talks for full membership with Romania, even if this candidate country was considered unready for that challenge (Gallagher 2009). This is an example of “positive cases”, in the sense described by Vergioglou and Hegewald (2023), as Romania’s expectations were surpassed. In spite of its incomplete fulfilment of the membership criteria, the Helsinki European Council of December 1999 decided to open accession negotiations with six CEE countries, including Romania (European Parliament 1999).

Initial Structural Transformations, 1990–2000

At the beginning of the 1990s, the Romanian economy was primarily centralized and the state played a major role in all economic activities. Structural problems, as in most other countries, had already been present for almost two decades: having been exacerbated after the oil shocks of the 1970s, they became evident with price liberalisation. Administrative instruments and fiscal stimuli that had previously been implemented to spur productivity had been shown to be ineffective. The dissolution of the Council for Mutual Economic Assistance (COMECON) in 1991 was considered “a pure formality,” putting an end to transferable rouble operations, trade agreements and five-year fixed traded prices (Richter 2016).

The economic reforms and restructuring included privatisation, economic reorganisation and new policies, labour market reforms, as well as deep-reaching institutional transformations. These were accompanied at the beginning of 1990s by a sharp increase in unemployment and inflation (Chivu 2019), with a direct impact on the GDP’s structure and evolution. All key macroeconomic indicators reflect that the Romanian economy was hit hard by the abrupt political changes: the deep recession until 1992 (Figure 1); the inflation rate surpassing 100 % during 1990–1994 (Figure 2); and an extremely high unemployment rate as compared to communist times (Figure 3).

Figure 1:

Romania’s GDP growth rate, 1980–2022 (%). Source: International Monetary Fund 2022.

Figure 2:

Romania’s inflation rate, 1980–2022 (harmonized index of consumer prices HICP, %). Source: International Monetary Fund 2022.

Figure 3:

Romania’s unemployment rate, 1985–2022 (% of total labour force). Source: International Monetary Fund 2022.

In 1994 the second stage of the Economic and Monetary Union set out in the Maastricht Treaty started, and in December that year the European Council Meeting in Essen adopted the Pre-accession Strategy, a cornerstone of the EU’s Eastern enlargement, which clarified membership criteria. Shortly after this, in 1995, Romania set up a commission to develop a national strategy to prepare for EU accession. It became an EU member state on 1 January 2007. Box 1 summarizes the steps Romania took towards EU accession. The national commission in charge of the preparations for accession included personalities from public life, science and research, specialists in economics and other institutions and fields of society, such as employers’ organizations, trade unions, non-governmental organizations as well as experts nominated by parliamentary and political parties. Its first significant result, the so-called “Snagov Agreement” between the parliamentary parties, named after the locality where it was prepared and signed on 21 June 1995, made possible the emergence of a spirit of national cohesion and general support for the integration process, a prerequisite for creating wider social trust in the European project, consistent with the aspirations of the population after the bloody revolution of December 1989.

The Romanian Academy played a fundamental role in bringing together not only Romania’s political parties, but also people from so many groups in society, motivating them to express their opinions, which were then, after intense debates and negotiations, synthesized in thousands of written pages (Ioan-Franc 2000). Participants were ready to listen to others’ opinions, even divergent ones. There is a major difference between real debates with multiple perspectives and the previously dominant debates, where participants considered they possessed the absolute truth. Avoiding such a “dialogue of the deaf” was one of the greatest merits of the Snagov debates and the reason why Romania advanced on its path of accession. The occasion proved to be a catalyst for consensus, solidarity and openness.

Thus, through open and active debates, it was possible to firmly outline Romania’s option to become a member of the EU and to create the preconditions for Romania’s medium-term economic strategy, adopted in 2000, shortly after the Helsinki European Council of December 1999. It was the first time in decades that a nation-wide consensus could be reached without any constraint from political forces. Its major objective was the “creation of a smooth-functioning market economy, consistent with EU principles, norms, mechanisms, institutions and policies” (Isărescu and Postolache 2020, 19).

In the 1990s, there were significant gaps between Romania’s GDP per capita, output, labour productivity, and export per capita, and the EU average. The economy was weakly structured and state intervention was inconsistent, which led to frequent changes in economic legislation and a stop-and-go approach to the transition process, with high transaction costs and low credibility (Dobrescu 2002, 117). It was evident that the twin transitions ahead, namely to a market economy and an information society, were no easy tasks. According to institutional economics, the role of the state in the transition to market economy should be to enforce contracts, guarantee property rights, provide high-quality public services like education and health systems, social security and infrastructure, and also “to set up an effective juridical and regulatory framework”. Efficiency, discouragement of rent-seeking activities and acceleration of necessary reforms in a “predictable, transparent, and accountable” environment were to be among the key priorities of the reform process (Dăianu and Vrânceanu 2000, 4).

In Romania, national policies “were dominated by entrenched interest groups embedded in state-owned-enterprises.” Therefore, the first decade of transition in Romania can be described as one “marked by limited structural reforms”, while “lack of financial discipline resulted in unsustainable macroeconomic policies which ended in two major economic crises, hyperinflation, and substantial decline in standards of living” (The World Bank 2004, 2). So, the major result obtained between the “Snagov Agreement” of 1995 and the adoption of Romania’s medium term economic strategy in 2000 was the nation-wide consensus that EU accession was the only path leading to national progress, stability and the chance to catch up to the rest of Europe.

The Pre-Accession Years, 2000–2007

Romania’s integration into the EU required in-depth political, legal, institutional, economic and social reforms, which entered a new stage in the early 2000s. While Romania had the political will to join the EU, there were limitations with regard to its capacity to fulfil the essential criteria. Therefore scrutiny of political conditions—the strict monitoring of respect for the rule of law, for democracy, and for human rights—played an important role in Romania’s EU accession. In order to mitigate the negative effects of the accession process, the negotiations between February 2000 and December 2004 related mainly to temporary derogations, on both sides, of elements of the acquis communautaire, the implementation of which proved to be much more difficult than its adoption (Pridham 2006).

In 2000, Romania’s GDP per capita purchasing power was only 25.6 % of the EU-25 average, increasing to around 30 % in 2003–2004. Macroeconomic trends continued to improve after this, stimulated by robust GDP growth rates. However, the improvement of Romania’s economic performance, as reflected by the evolution of the output-side real GDP, soon overlapped with the adverse effects of the international financial crisis starting in 2007. Despite this, the impetus provided by Romania’s EU accession, and related institutional reforms, supported a positive net effect on economic growth (Figure 4).

Figure 4:

Output-side real GDP at chained purchasing power parity in Romania, 1960–2019 (in million US dollars). Source: Feenstra, Inklaar, and Timmer 2015; Penn World Table Database.

In terms of real GDP, the period of highest growth was that of 2000–2008, in contrast with the recessions of 1988–1992, 1997–1999, 2009–2010, and 2020 (Figure 1). The inflation rate remained in double digits, however, throughout the whole period 1990–2004, even if it visibly lessened after 1997 (Figure 2). The International Monetary Fund arrangements of 2001–2006, implemented due to Romania’s volatile and precarious balance of payments from 1997 to 1999, led to specific fiscal and monetary policy measures and were considered a helpful initiative for the fulfilment of the Copenhagen economic criteria. However, the issue of the balance of payments remains a current problem (Figure 5). Since the end of 1998, the European Commission prepared regular reports to the European Council, evaluating Romania’s progress towards accession. In contrast to the Copenhagen political criteria, which were in general accomplished by 1998, the economic criteria required a longer time to be fulfilled (European Commission 1998).

Figure 5:

Romania’s balance of payments, 1980–2022 (% of GDP). Source: International Monetary Fund 2022.

Evaluation of Romania’s EU Membership

Currently, democratic backsliding can be observed in several EU member states, in spite of the rule of law conditionality regulation (Bellamy and Kröger 2021). Euroscepticism related to loss of national sovereignty has been increasing; populism has been on the rise. The war at Eastern Europe’s borders comprehensively threatens economic, social and political stability in the region. However, in spite of everything, for Romania its EU membership continues to be a key impulse for economic stability and growth. The benefits from the free movement of goods, services, capital and workers have been obvious, in spite of the accentuated brain drain Romania has experienced. It still remains outside the Schengen area and the eurozone, and the European Commission recommended only in November 2022 that the Cooperation and Verification Mechanism (intended normally for countries in their accession process) can be closed (European Commission 2022b).

Economically, Romania is deeply integrated into the EU’s internal market. It had already been highly integrated before EU accession, and currently, more than 70 % of its trade flows are intra-EU, while around 85 % of its foreign direct investment (FDI) stock originates in an EU member state (National Institute of Statistics 2022; National Bank of Romania 2021a). In the field of trade in goods, the role of the EU internal market increased considerably between 2005 and 2020. Exports to the EU as a share in Romania’s total exports increased 8.5 percentage points between 2005 and 2020, in spite of the pronounced decrease of 2009–2013, as a direct result of the eurozone crisis (Figure 6).

Figure 6:

Romania’s exports to and imports from the EU, 2002–2021 (% of its total exports and imports of goods). Source: Eurostat 2023a.

Romania’s EU integration has been accompanied by more benefits than losses. In the last 16 years, economic progress has been steady and the gap between Romanian GDP per capita and the EU average, as well as the share of the population at risk of poverty or social exclusion, has decreased continually. While economic growth has been strong, risks have intensified, especially in the aftermath of the Covid-19 crisis and since the Russian attack on Ukraine (Organisation for Economic Cooperation and Development 2022). These risks include continuously high inflation, mostly due to increases in energy and food prices, as well as higher interest rates, a vulnerable element in an economy where the corporate and personal debt amounts to 54 % of the GDP and highly indebted companies are important in the economy (41 % of total companies) (National Bank of Romania 2021b). In addition, there is an unsustainable fiscal deficit (Figure 7), especially in the context of insufficient absorption of EU funds, uncertainty over the financial sustainability of the pension system, a still low administrative capacity to manage European funding, low tax collection, high, and increasing, regional disparities, below EU average educational and health outcomes, and large transport infrastructure gaps, which are slowing down investment. Along with these problems, the regulatory environment is unpredictable because of a low level of trust in national institutions (Organisation for Economic Cooperation and Development 2022).

Figure 7:

Romania’s general government net lending/borrowing, 1990–2022 (% of GDP). Source: International Monetary Fund 2022.

While the political will to adopt the euro has been strong, both endogenous and exogenous economic factors have prevented Romania from entering the eurozone. According to official declarations, Romania had set 2014 as the initial target for euro adoption, but this deadline was postponed successively to 2019, 2024 and finally to 2029. The most recent Convergence Programme underlines that Romania maintains its commitment to join the eurozone (without mentioning any specific year in which this might take place). However, the government’s current efforts focus on the post-pandemic economic and social recovery and containing the negative effects of the military conflict in Ukraine. These are felt on 3 levels: the prices for raw materials, food and energy have risen, generating a further accelerated increase of inflation; supply chains have been disrupted, with a direct effect on trade, supply-demand balance, production activities and costs; and both consumers and the business environment generally show a lower degree of confidence, due to the tightening financial conditions, the potential flight of capital from emerging markets, and problems arising from the arrival of a large number of refugees (Guvernul României 2022).

A favourable period to adhere to the European Exchange Rate Mechanism (ERM II) emerged between 2015 and 2017, but it did not happen, even though Romania, at the time, nominally met all the convergence criteria in the Maastricht Treaty. Even if the Romanian national currency (RON/leu) has exhibited, on average, a low degree of volatility against the euro in the long run, this has been a consequence of an efficient and wise monetary policy and the credibility of the National Bank rather than a direct reflection of key macroeconomic indicators (European Central Bank 2020). The surge in inflation is among the factors holding back healthy growth, as are the fiscal deficit, the current account deficit, and the increasing public debt. Since April 2020, Romania has been subject to an excessive deficit procedure under the corrective arm of the Stability and Growth Pact. The support measures adopted to address the consequences of the Covid-19 pandemic have been justified; they do, however, endanger the sustainability of public finances, as underscored by key macroeconomic indicators (European Central Bank 2022).

The effects of EU membership on Romania can be assessed through specific measurable indicators, such as the nominal and real convergence criteria. As one of the countries committed, under the Treaty on the Functioning of the European Union, to adopting the euro, Romania strives to fulfil the convergence criteria. However, according to the Convergence Reports of 2020 and 2022, requirements relating to inflation rates will not be met in the medium term (European Central Bank 2020, 2022). The government deficit also remains high. This indicator breached the 3 % reference value in 2019. Consequently in April 2020 a procedure was launched under which the country was required to rectify its excessive deficit by 2022 at the latest. This objective proved impossible to achieve due to measures necessary to counteract the negative effects of the Covid-19 crisis and the war against Ukraine. As mentioned, the Romanian leu does not yet participate in the ERM II, but is “traded under a flexible exchange rate regime involving a managed floating of the currency’s exchange rate”, with a low degree of volatility (European Central Bank 2022, 130). Even though long-term interest rates are now well below the 10 % rate of 2010, the new credit tightening will affect Romania’s capacity to comply with this criterion. Public debt remains under 50 % of the GDP, but still 10 percentage points higher than in 2019 (European Commission 2023).

Influential Romanian economists maintain that, even if national efforts are necessary, the EU should offer more flexibility, as room for policy manoeuvres matters a lot for an economy with significant rigidities and still in need of structural reforms. Romania needs economic growth based on productivity gains, which means more public and private investment as well as technological innovation. Essential public goods, such as basic infrastructure, education and health, have to be financed with a more adequate level of tax revenue. Presently, Romania does this with 28 % of its GDP, compared to a CEE average of more than 40 %. There is a need for a growth model that better harnesses internal resources in order to generate competitive advantages, so that Romania can avoid the “middle income trap” (Dăianu et al. 2016).

Romania’s quality of life and living standards have increased due to benefits from the Common Agricultural Policy and Cohesion Policy. The nominal GDP per capita of above 10,000 euros in 2022 represents around one third of the EU-27 average value. In purchasing power standards (PPS) the GDP per capita in 2021 stood at around 74 % of the EU-27 average, and in 2022 at 77 %, as compared to 52 % in 2010 and 55 % in 2011 (Eurostat 2023b). In this measure, Romania has recovered ground fast, surpassing Latvia, Croatia and Slovakia in the last five years (Figure 8). This is one reason why public opinion remains optimistic about the EU and the majority of the population supports EU initiatives and the continuation of the integration process.

Figure 8:

GDP per capita in the CEE countries in 2011–2022, PPS (%, EU-27 = 100 %). Source: Author’s compilation, based on Eurostat 2023b.

Since its EU accession, Romania has recorded significant progress in various areas, and its progress compares well to other member states. However, its infrastructure has not developed at the expected pace. In the second pillar of the global competitiveness index, which concerns infrastructure, Romania is placed 55th among 141 countries, well behind countries such as Poland (25th), Slovakia (30th) or Hungary (27th). The urban-rural gaps in terms of income, living standards, and labour specialisation also remain at a high level (World Economic Forum 2019).

Romania’s Stance toward the EU after 2007

The general attitude of Romania’s population regarding the European project and its major priorities has been positive. Political leaders, scholars and economic actors have supported Romania’s integration into the EU, as they have seen it as the only sustainable path to economic development. In the Standard Eurobarometer 68, conducted in autumn 2007, shortly after Romania’s EU accession, Romania featured an optimism index over ten percentage points higher than that of the EU as a whole. The economic optimism index was the highest of all member states, and trust in the EU institutions was very high (Eurobarometer 2007).

Each subsequent Eurobarometer has confirmed Romania as one of the most enthusiastic and optimistic member states of the EU, while trust and confidence in national institutions has remained low. According to the Standard Eurobarometer 95, conducted in June–July 2021, for the question “Which of the following do you think is the most positive result of the EU?” (with a maximum of three answers), “the free movement of people, goods and services” was mentioned by 43 % of the Romanian respondents, as compared to the EU average of 51 %. “The economic power of the EU” was important for 29 % of the Romanian respondents (EU average 23 %); “peace among the member states of the EU” and “the level of social welfare” for 28 % (EU averages 47 % and 18 %, respectively); “educational exchange programs” as well as “the political and diplomatic influence of the EU in the world” for 27 % (EU averages 19 % in both cases) and “solidarity among EU member states” for 24 % (EU average 22 %). “The Common Agricultural Policy” received 21 %, the second highest after Poland (23 %), much larger than the EU average of 9 % (Eurobarometer 2021). Differences between the Romanian respondents and the EU average can thus be seen in fields such as peace, the Common Agricultural Policy and social welfare (Figure 9).

Figure 9:

Positive results of the EU – Romanian standpoints as compared to the EU average (%). Source: Author’s compilation, based on Eurobarometer 2021.

For Romanian respondents, the feeling of community among the EU citizens is offered mostly by solidarity, education, healthcare and pensions (21 % each), as well as the rule of law (20 %) and the economy (19 %). Conversely, culture, history, geography, values, sports, inventions, science and technology, religion, care for the environment and languages have a lower relevance. Romanians can be seen to be rather pragmatic, focusing on economic benefits, well-being and access to high-quality education. However, there is a remarkable difference between the aspects considered important by the population at large, and the business sector, on the one hand, and political leaders on the other. The former are interested in the economic and social benefits. The latter put more and more emphasis on values, norms and rules, especially in the context of the ongoing war in Ukraine. As the divide between East and West is increasing, national authorities are focused on a clear differentiation between like-minded and not-like-minded partners outside the EU (in line with the EU agenda), which has been evident in the public discourse in Romania especially in the last two years (Figure 9).

Synthesis of Romania’s Specificity in Terms of Differentiated Integration

Compared to the 2004-accession-wave countries, Romania had to wait longer in the EU antechamber, as the European Commission considered it not sufficiently prepared to carry the obligations of EU membership. Even in 2007, Romania entered the EU “with unfinished reforms in key sectors” and it “refrained from completing them in the first years of membership” (Trauner 2009, 11), which is why Romania and Bulgaria were the only new member states where the European Commission preserved the right to continue to monitor key reforms after their accession. Romania and Bulgaria are also the only EU members outside the eurozone which are actively pursuing euro adoption, as the risks associated with giving up an independent monetary policy are considered lower than benefits such as diminished transaction costs, lower interest rates, a better credit rating and consequently an increased attractiveness for investors (Trauner 2009).

However at present, 16 years after accession, Romania is not yet part of the eurozone, nor of the Schengen area. Many of its experiences within the EU pertain to the category “negative cases”, where reasonable expectations were not fulfilled. But there are also “positive cases”, where expectations were met and even surpassed. With the exception of some post-accession temporary provisions, Romania has never requested opt-outs from policy areas. There are also situations when Romania was not obliged to adhere to some treaties, but did so. One relevant example is the European Fiscal Compact (EFC), adopted in 2013 by all eurozone members plus Romania, Denmark, and Bulgaria, while Hungary, Poland, and Sweden received opt-outs and were subsequently not obliged to implement any laws for the enforcement of the EFC into their national legislative systems (Vergioglou and Hegewald 2023). Romania’s adherence can be explained by its focus on “output legitimacy”, which is “closely linked to efficiency in that it focuses on (perceptions of) the welfare benefits”, not on “procedural justice and legitimacy, which build on the perception that authoritative decisions are made according to the proper procedures, typically meaning ‘constitutionally’ and ‘democratically’ in the EU context, but also on distributive justice, which refers to concerns about the distributional outcomes of these decisions being fair” (Schimmelfennig, Leuffen, and De Vries 2023, 13).

The Cooperation and Verification Mechanism (CVM), intended for countries on their path to accession, remained in place for Romania for almost 16 years after it became an EU member. It was terminated by the European Commission in November 2022. At the end, the core points that remained were national reforms in the fields of the judiciary and the fight against corruption. Lacatus and Sedelmeier maintain that for Romania the persistent CVM monitoring had a positive impact on state compliance, in spite of the lack of material sanctions. It stimulated the domestic institution-building process, that is strong anti-corruption institutions considered a powerful base for the fight against corruption, even if they are still seen as vulnerable to governmental interference (Lacatus and Sedelmeier 2020).

In contrast, Mendelski (2021) questions how the fight against corruption was conducted. On the one hand, Romania’s fight against corruption did improve capacity in terms of human and financial resources, as well as speeding up results: for example, increasing the number of people indicted, prosecuted and convicted. But on the other hand, it has led to deviations from the principles of due process and reasonableness. Dimitrov and Plachkova (2020) go further and doubt the efficiency of the CVM as a post-accession conditionality, deeming it unable to achieve its initial goals.

Conclusion

Romania witnessed a turbulent transition to a market economy in the 1990s. When the communist regime collapsed, the economy had been in recession since 1988 at the latest, while the inflation rate was double-digit due to the severe austerity measures imposed for the payment of external debt accumulated in the 1970s. This had dramatic consequences for the economic situation and living standards, deeply affecting Romania’s capacity to recover after 1990. The state had been the predominant economic actor and rent-seeking activities were prevalent, while structural issues had been accumulating. In the first decade of transition, the “Snagov Agreement” (1995) and the adoption of Romania’s medium term economic strategy (2000) were two milestones indicating a nation-wide consensus toward EU integration, even if they could not accelerate the process of transition.

Romania started EU accession negotiations in February 2000, together with Bulgaria, Latvia, Lithuania, Malta, and Slovakia. With many impediments, hurdles and delays, the twin transitions to a market economy and an information society have materialized, even if incompletely. The aquis communautaire was adopted, but its implementation proved to be a much longer process than initially estimated, so that it was accepted as an EU member state only on 1 January 2007, alongside Bulgaria. Even then, the reforms in key sectors were not finished, so that the European Commission preserved the right to monitor key reforms even after accession. Furthermore, the general economic situation was not favourable, as shortly after Romania’s and Bulgaria’s EU accession the international financial and economic crisis deeply affected the whole EU. The asymmetric shocks were evident, but the structural transformations, supported by capital infusions, still led to significant progress as compared to the beginning of 1990s.

For the Romanian authorities, the goal was socio-economic development at the same time as a process of convergence with Europe and a reduction of disparities both at national and European levels. Inequalities were to be reduced through the absorption of EU funds (first the Phare programme, later structural and cohesion funds), the attraction of higher FDI and more intense participation in trade flows. This goal is still valid today. Now a market economy, Romania continues to adapt to EU objectives. At present, green and digital transitions are in progress. Romania is aware of its own weaknesses and strengths while it supports the EU’s goals.

Romania accepted the delegation of sovereignty as well as the conditions imposed, however the pace of its reforms was slow. Economically, from the perspective of trade, investment and the financial sector, integration followed market rules. As regards common rules and institutions, Romania had the political will to integrate into the EU, but lacked the administrative and economic capacity. Still, with the exception of temporary post-accession provisions, Romania has not resorted to opt-outs, in contrast to other EU member states. Of the three main categories of DI (“multi-speed”, “multi-tier” and “multi-menu”), Romania is an evident supporter of a “multi-speed” Europe. It is willing to adhere to the eurozone as soon as it meets the criteria, in order to be able to cope with the ensuing competitive pressures. Romania thus has specific characteristics in terms of DI compared to other East European EU member states, and is most similar to Bulgaria.

At present, the increasing external debt and labour shortages, supply-chain bottlenecks, high energy prices, and persistent inflation, associated with higher financing costs, are among the vulnerabilities and potential threats for Romania. In the long run, this will affect its capacity to fulfil the nominal convergence criteria. However, Romania will continue to pursue its objectives of deeper integration into the EU and joining the eurozone. This perseverance in spite of all obstacles could inspire current EU candidate states.