Fischler to underline task facing CEECs

Date: 11/07/1996

By Thomas Klau

AGRICULTURE Commissioner Franz Fischler will make a keynote visit to Romania and Bulgaria later this month, with farming on top of the agenda of three days of talks officially dealing with all aspects of the Union's enlargement to Central and Eastern Europe.

Of the ten countries belonging to the select club of Eastern European countries to which the Union has granted a basic right to future membership, Bulgaria and Romania are those generally considered to be lagging furthest behind in the race for accession.

The two countries suffer from the twin plight of a historically backward and largely agrarian economy, and a post-Communist record of unstable and hence economically inefficient government.

Commission officials say they expect Fischler to focus on the necessity to speed up the restructuring of the agriculture sector and the various options available during his visit from 25 to 28 July.

“Fischler will speak with the combined authority of a European Commissioner and a former agriculture minister,” said one official. “When he talks about restructuring the farming sector, he really knows his stuff. It could be quite a keynote visit.”

Experts say both Bucharest and Sofia are facing the challenge of drafting economic diversification policies for their large rural sector to prevent a socially and economically damaging mass migration from rural to urban areas.

“There are limits to what other sectors can absorb” in terms of providing jobs for unemployed former farmers, said the official.

According to a report from the Commission's Directorate-General for agriculture (DGVI), the farming sector employs an impressive 21&percent; of the workforce in Bulgaria and a staggering 35&percent; in Romania - by far the highest percentage in any enlargement country. The importance of farming to both economies is underlined by the fact that it contributes 10&percent; to the former's GDP and 20&percent; to the latter's.

One key problem for farmers in both countries is the current inability of their impoverished populations to pay world prices for food.

As global prices have to be paid for many agricultural investments, such as petrochemicals and machinery, this has led to a severe income shortage for many farmers.

However, with current thinking in Brussels tending towards a lengthy transition period before Central and Eastern European countries are fully integrated into the EU's farm funding policies after they have joined the Union, Fischler is likely to warn his interlocuters in Sofia and Bucharest not to expect too much help too soon.

Fischler's talks are also likely to touch on other key problems which must be addressed before either country can be considered ready for membership of the Union club.

While the ranking of most Central and Eastern European countries in the unofficial priority list for Union membership is open for debate, there is little doubt in Brussels that whatever the timing of enlargement, Bulgaria and Romania will be amongst the last to join.

In Bulgaria, the banking sector's government-induced habit of bailing out inefficient industries threatened with bankruptcy led to major instability in the financial sector.

“Economic restructuring has progressed more slowly in Bulgaria than in several other Central European countries,” explained one offical. “Matters of structural reform were not addressed in 1995 or in the early months of this year.”

A confidence crisis which sent the value of the national currency, the lev, plummeting shrunk foreign-exchange reserves to 480 million ecu, raising a serious threat of debt-default earlier this year.

Salvation came at a price when international lending institutions such as the International Monetary Fund and the World Bank stepped in and agreed to release loans and set up a standby facility.

The price which the Bulgarian government had to pay, however, was a drastic restructuring programme, adopted in May this year, involving the liquidation of 60 companies and the restructuring of another 70.

According to experts, the implementation of this programme will lead to a deep upheaval in the Bulgarian economy, and significally boost unemployment.

But officials in Brussels stress that the country does not really have a choice. “The situation is serious, but we think that the government programme, if implemented, will be adequate,” said one expert.

While in Bulgaria government policy led the country to the brink of a serious crisis, the situation in Romania “is less dramatic but not all that different”, says one EU expert.

As in Bulgaria, financial market concern about macro-economic policy led to a sharp drop in the Romanian leu's foreign exchange value, which plummeted by 50&percent; within a few months.

In Romania, however, the government managed to eschew the painful road of International Monetary Fund-dictated liberalisation, preferring instead to raise expensive new loans on international markets which seem ready, so far, to finance the country - at a premium price.

And while privatisation is well advanced through the implementation of a voucher system, the ensuing large-scale dissemination of ownership has, in many instances, blocked the emergence of a new class of private entrepreneurs and left the old management in place.

Rapid improvement is unlikely, as “parliamentary and presidential elections scheduled for November mean that this year there will be a standstill in the reform process”, said a Brussels-based expert.

And while Sofia does not confront the EU with any specific foreign policy problems, there is concern in Brussels over Bucharest's delay in concluding a friendship treaty with neighbouring Hungary - a country with which Romania has long had difficult relations.

However, tensions over the treatment of the large Hungarian minority in Romania have eased recently. As a result, diplomats expect the treaty to be concluded in the foreseeable future.