E u r o E c o n o m i c a Issue 2(28)/2011 ISSN: Social and economic cohesion in Romania: an overview. Alina Nuță 1, Doiniţa Ariton 2

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1 Social and economic cohesion in Romania: an overview Alina Nuță 1, Doiniţa Ariton 2 1 Danubius University of Galaţi, alinanuta@univ-danubius.ro 2 Danubius University of Galaţi, dariton@univ-danubius.ro Abstract. Firstly, this article examines the main theoretical framework of social and economic cohesion. Secondly, our study present the real cohesion aspects, involving Romania as a member state of the European Union regional development policy as a whole, highlighting aspects of economy,, market, workforce, education, including the context of economic crisis. Keywords: social cohesion, economic cohesion, regional policy Introduction Discussion of economic, social and territorial (the newest aspect of cohesion) in the context of the European Union brings to the fore the idea of solidarity between EU regions on a large scale (regions that may or may not exceed the limits of a Member State). Social and economic cohesion has been defined by many authors who presented problematic issues as a whole, however, concerns in particular the development unit, which allows suppressing or reducing disparities between EU regions. This article is structured as follows. The following section details the broader context of cohesion policy which is promoted by the European Union, emphasizing the financial aspects that can support such a regional policy. The third section presents the impact of cohesion policy on the main indicators characterizing the Romanian economy, describing them in a comparative analysis, globally and regionally. Conclusions appear in the final section. 2 European Union cohesion policy According to European Parliament s site, The EU s regional policy began in 1975 with the creation of the ERDF, although solidarity mechanisms such as the ESF and the EAGGF have existed since the Treaty of Rome. This policy has been financed by several instruments including the ERDF, the Delors

2 I package, the Delors II package and Agenda 2000; its aim is to reduce differences between regional development levels (European Parliament). Enlargement to 27 Member States in January 2007 brought the following news: - In terms of territories, the European Union increased by 25%; - EU grew by over 20%, reaching over 496 million people; - Added value, however, was about 5% - Average GDP per capita in the EU declined by more than 10%; All elements above stresses the negative economic impact, of reducing the average values of the presented indicators, indicators that demonstrate the increasingly need for more funds to support the development of Union region, that generate wealth and welfare of citizens of Member States in the future. The redistributing funds to areas that require financial support for their own development is achieved through two channels: Structural and Cohesion Funds, instruments aimed to supporting the EU regional policy. There are two Structural Funds: the European Regional Development Fund (ERDF) is currently the largest. Since 1975 it has provided support for the creation of infrastructure and productive jobcreating investment, mainly for businesses; the European Social Fund (ESF), set up in 1958, contributes to the integration into working life of the unemployed and disadvantaged sections of the, mainly by funding training measures. (Kesner-Skreb, M.(2010)) Cohesion Fund was established in (to help Greece, Spain, Portugal and Ireland). The main function of this Fund is to assure the financial support of Member States with a GDP per capita below 90 average GDP per capita of the Union focusing on the financing of environmental objectives and trans-european networks associated to transport infrastructure. Recourse to such resources, however, is conditioned; Member States must ensure that the criteria implemented by the Treaty of Maastricht are respected. Each grant application receives approximately 85 its funds needs. "Projects have selected and Implemented by the beneficiary Member States, Which is Also Responsible for Their monitoring and financial management" (Pociovălisteanu D. Dobrescu, E.M., 2009). Cohesion policy should promote a performance-oriented route. These programs should be based on identifying a limited number of priorities policies (concentration) with a clear vision of how they will be made and on how their implementation will contribute to economic, social and territorial cohesion of the regions or Member States concerned. 15

3 Table 1: Trend in the allocation to the structural funds (EU 12) (EU 12 EU 15[*]) (EU 15 EU 25[**]) (EU 25 EU 27[***]) EU budget (billions of euros) Structural Fund budget (billions of euros) Structural Fund budget compared with the EU budget (%) 24% 31% 31% 35.7% Source: * Accession of Austria, Finland and Sweden in Accession of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia in Accession of Bulgaria and Romania in ** Accession of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia in Accession of Bulgaria and Romania in *** Accession of Bulgaria and Romania in Social and economic cohesion in Romania In the regional economy, the funding policy cohesion in the period created 1 million jobs in EU companies, and offered perhaps a contribution of up to 10% to the regional GDP of EU-15. As the various studies show, it has tended to intensify trade and net exports contributing countries, which helps compensation for their contribution to the funding policy. Therefore, simulations of the macroeconomic models show that the net impact of cohesion policy was the GDP increasing across the EU (Nuțǎ F., 2011). 16 Table 2: indicators Average total density growth 1000 inh. inh./km² Average annual % change EU , Romania 21, unu 5, Nord-Vest 2, Centru 2, doi 6, Nord-Est 3, Sud-Est 2, ,

4 trei Sud - Muntenia 3, Bucureşti - Ilfov 2,236 1, patru 4, Sud-Vest Oltenia 2, Vest 1, Economic growth per capita is related to changes occurring in the, and productivity. Because the period , growth was very low in most regions, its impact on regional growth was modest and even negligible in the EU. As shown by the above table, Romania has an important contribution in terms of number of additional people present in the EU, but the density is below average area. The phenomenon of aging that characterizes our country shows that the percentage of annual change is negative, the average EU being positive. Table 3: Economy indicators (1) GDP per head (PPS) GDP per person employed (euro) GDP growth The Lisbon Index 17 Index, EU27 = 100 Index, EU27 = 100 Average annual % change Average score between 0 and EU Romania unu Nord-Vest Centru doi Nord-Est Sud-Est trei Sud - Muntenia Bucureşti - Ilfov patru Sud-Vest Oltenia Vest The development in EU-12 regions has led to a pronounced reduction in regional disparities the GDP per capita over the Union. However, the disparities remain pronounced with levels below one third of the EU average in 7 regions of Bulgaria and Romania and with levels above 50% higher than the EU

5 average in 19 regions (Boariu, A., 2010). The fact that regional disparities in the EU fell has not prevented the growth of the disparities in a number of Member States, especially in the EU-12. For example, coefficient of variation in Romania increased from 15 in 1995 to 44 in 2007, reflecting the relative concentration development in one or two regions, particularly in capital regions. Table 4: Economy indicators (2) in Agriculture in Industry in Construction in Trade, Transport in Financial Intermediation in Other Services R&D expenditure R&D expenditure in the business enterprise sector (BERD) GDP GDP EU Romania unu Nord-Vest Centru doi Nord-Est Sud-Est trei Sud - Muntenia Bucureşti - Ilfov patru Sud-Vest Oltenia Vest with a high rate of income poverty risk (less 60 median national available income) show striking differences from one country to another, varying from one in four (in Romania) to one of ten (Czech Republic). Promoting active inclusion and poverty reduction means to invest in education, training and skills upgrading the labor markets, systems training and education, and health and social services to sustain people to restraint the regions disparities.

6 Table 5: Labor market indicators rate, ages Female rate, ages rate, ages Un rate Female un rate Youth un rate Long-term un (, aged 20-64) (, female aged 20-64), aged active female active active, aged unemployed EU Romania unu Nord-Vest Centru doi Nord-Est Sud-Est trei Sud - Muntenia Bucureşti - Ilfov patru Sud-Vest Oltenia Vest Un has declined significantly between 2000 and Since 2008, un has increased dramatically in many Member States, particularly in Spain and the Baltic states, where they recorded average rate of about 20% in early 2010 (Breska von, E., 2010). Within a generation, women have achieved and exceeded the level of education attained by men. In almost all EU regions, more women than men aged years have higher education, while in case women aged years, the phenomenon is similar only in minority regions.

7 Table 6: Age structure indicators aged 0-14 years aged aged 65+ with low educational attainment with medium educational attainment with high educational attainment aged with high educational attainment,,,, aged EU Romania unu Nord-Vest Centru doi Nord-Est Sud-Est trei Sud - Muntenia Bucureşti - Ilfov patru Sud-Vest Oltenia Vest EU has the highest values of life expectancy worldwide. Consequently, the average age and proportion of aged 65 years is also the highest rates in the world. This has implications for health services and on. An increase in the proportion of elderly implies an increasing demand for health care and related services. Table 7: Education indicators

8 Early school leavers aged (people with at most lower secondary education and not in further education or training) Participation of adults in education and training, 2008 aged avg EU Romania unu Nord-Vest Centru doi Nord-Est Sud-Est trei Sud - Muntenia Bucureşti - Ilfov patru Sud-Vest Oltenia Vest Europe 2020 objective to increase the percentage of people aged between years with higher education or equivalent to 40% was achieved in less than one of six regions, and most other regions will have to significantly increase their capacity and number of the young people remaining in education to achieve this goal by 2020 (Chirilă, C., Chirila, V., Turturean, C.,2010). The objective of Europe 2020 on "early school leavers" of more than 10 youth aged 18 to 24 years without further education after primary school was achieved in one of four regions, but this objective will require substantial efforts in many regions, particularly in Malta and in the 17 regions of Spain and Portugal where the rate is still over 30%. Inflows of foreign direct investment have registered an average of 4.6 EU GDP in , and outflows of FDI stood at 6.1 GDP. Thus, the EU has invested more beyond its borders than foreign companies invested in the EU. Net inflows amounted on average to over 5% in Romania. Bulgaria and Romania have posted significant as main recipients of remittances of elsewhere in the EU. In 2008, they amounted to 5.7 billion euro or 4.2 GDP in Romania and 1.5 billion euro, ie 4.5 GDP in Bulgaria. Thus, remittances are an important source of income for households in the two countries (Breska von, E., 2010). Over 80% in remittances were sent to Romania from Italy (2.5 billion) and Spain (2 billion euro), and about 55% to Bulgaria from Germany (450 million) and Greece

9 (425 million). Remittances have grown rapidly in Romania in , registering about 1 billion per year. But because of the crisis remained unchanged in 2008 and declined sharply in Conclusion Structural and institutional reforms are important to obtain a maximum cohesion impact. But the pulse of reform in the last decade has been relatively slow, which affected the impact of "practical" politics. Europe 2020 set a new framework that must adapt cohesion policy. A key aspect of it will be to establish closer links between planning and implementation policy and macroeconomic objectives and structural reforms and institutional pursued. 5 References Boariu, A.(2010)- The Access to financing of small and medium enterprises in Romania and implications of current crisis, published in the volume of the International Scientific Conference "Globalisation and Higher Education in Economics and Business Administration" (GEBA 2010), IVth international Conference, Volume 2, Al. I. Cuza University Publishing House, Iasi, 2010, ISBN , pages ; Breska von, E.(2010) Investing in Europe s future : Fifth report on economic, social and territorial cohesion. Luxembourg : Publications Office of the European Union; Chirilă, C., Chirila, V., Turturean, C.,(2010) - The impact of economic fluctuation upon Romanian un rate, published in the volume of the International Scientific Conference "Globalisation and Higher Education in Economics and Business Administration" (GEBA 2010), IVth international Conference, Volume 3, Al. I. Cuza University Publishing House, Iasi, 2010, ISBN , pp Nuţă, F. M., The Relationship between Stakeholder s Pressure and New Performance Dimension Including Social Responsibility, EuroEconomica 1(27)/2011, ISSN Pociovălisteanu, D, Dobrescu, E.M.( 2009)- The Role of Structural Funds in Economic and Social Cohesion Process, European Research Studies, Volume XII, Issue (2) ; Kesner-Skreb, M.(2010) - Economic and social cohesion of the European Union, Financial Theory and Practice 34 (4) ; European Commission (2007) - Growing Regions, growing Europe, Fourth report on economic and social cohesion, Luxembourg : Office for Official Publications of the European Communities; European Union (2009) Regional Policy- Cohesion policy: response to the economic crisis, spring 2009, p. 2-4; 22