Romania says poverty reduction is ‘impossible target’


Romania, one of the poorest countries in Europe, has never dealt with poverty reduction in the twenty years since its transition to a market economy, which makes any commitment to the EU's 2020 poverty reduction goals seem "utopian". EURACTIV Romania reports.

Most Romanians associate the last two decades with a continuous process of impoverishment and deteriorating living standards, according to Romania's Life Quality Research Institute, quoted by the Financiarul daily.

Starting from an official poverty rate of 7% in the beginning of the 1990s, the number of people in this category had tripled by 2008, when the economic crisis began.

But this evolution was uneven, the research reveals. In 2007, there were approximately 2.1 million poor people recorded in official statistics. One year later, their numbers had decreased by one million, mainly due to emigration. Improving living standards were also a factor, but a much less relevant one, the institute says.

The research identifies several causes of such poverty: unemployment, unfavourable exchange rates for foreign currency and money transfers by Romanians abroad, as well as poor interest rates in the banking sector.

Unemployment is on the rise, with the International Monetary Fund predicting a 10% rate by the end of this year. In comparison, unemployment stood at 6.1% in 2007, 4.1% in 2008 and 4.4% in 2009.

Similarly, the exchange rate of the national currency, the leu (lei in plural), changed from three lei to the euro in 2008 to four lei to the euro in 2009. This led to rising interest rates and a higher number of borrowers defaulting on their debt.

The volume of currency transfers to the country by Romanians working abroad is also not to be underestimated. These amount to 5-6% of the country's GDP, but fell considerably as a result of massive restructuring in the European construction and agriculture industries following the crisis.

In 2007, one of the minority groups most affected by poverty was considered to be the Roma, among whom the absolute poverty rate was almost five times higher than the national average.

Nowadays, 75% of Romanians suffer from poverty and live in rural areas. However, poverty has soared in urban areas, mainly as a result of rising unemployment. The most vulnerable groups are children, teenagers and the elderly.

In the absence of government policy to create jobs, the average time that people spend unemployed has stretched to over two years.

At political level, the absence of measures to tackle poverty is striking. Large-scale social assistance programmes cannot be implemented, because funds are missing and constraints on public spending have been imposed by the IMF.

Public investment programmes in sectors such as infrastructure, which could in theory bring life to the labour market, have failed and the absorption level of EU funds remains below expectations.

In this context, the effect of any changes that the government is able to make to reduce poverty in the next ten years will be limited at best, observers say.

"Poverty reduction has never been part of Romanian strategies in the last twenty years," says Professor Catalin Zamfir, director of the Institute for Quality of Life Studies. "There are no clear, focused programmes with such an objective. As a consequence, we are witnessing a serious deterioration on the labour market and great difficulty for people to integrate into society."

As for the future, Professor Zamfir says the neo-liberal strategies professed by the country's elite would never have the objective of bridging the social gap. As a consequence, the country's hopes of achieving the EU's poverty reduction goals are "unrealistic," he said.

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According to EU data, the relative poverty rate in Romania fluctuated between 2000-2007 with an upward trend during 2003-2006, and hit its peak in 2006 (18.6%). In 2007, about 18.5% of Romanian citizens were considered to be in poverty.

In 2006, rural areas were still confronted with higher incidences of poverty (29.6%) than urban areas (9.6%). Between 2000 and 2007, absolute poverty decreased substantially, from 35.9% to 9.8%, which remains the lowest year on record since 1995.

According to Eurostat data for 2008, 76% of Romanians (compared to 37% of the EU 27) could not afford a week's holiday away from home. 49% could not afford a personal car and 19% could not afford to eat meat, chicken or fish every other day (the average EU figure is 9%, 30% for Bulgarians, 23% for Latvians, 26% for Hungarians, 21% for Poles and 29% for Slovaks).

Romania, Bulgaria, Hungary and Latvia have the highest level of material poverty. In 2008, 17% of the EU population was exposed to material privation, with the highest rates in Bulgaria (51%), Romania (50%), Hungary (37%) and Latvia (35%). The lowest rate (4%) was registered in Luxembourg, the Netherlands and Sweden.

The fight against poverty is one of the five priorities of a draft ten-year economic plan unveiled by the European Commission in March, called 'Europe 2020' (EURACTIV 03/03/10).

The strategy defines five headline targets at EU level, which member states will be asked to translate into national goals reflecting their differing starting points:

  • Raising the employment rate of the population aged 20-64 from the current 69% to 75%.
  • Raising the investment in R&D to 3% of the EU's GDP.
  • Meeting the EU's '20/20/20' objectives on greenhouse gas emission reduction and renewable energies.
  • Reducing the share of early school leavers from the current 15% to under 10% and making sure that at least 40% of youngsters have a degree or diploma.
  • Reducing the number of Europeans living below the poverty line by 25%, lifting 20 million out of poverty from the current 80 million.

In a series of articles, the EURACTIV network will present the state of play in individual EU countries on each of the targets. The first series of articles focuses on poverty reduction, a target seen as controversial in several circles (EURACTIV 01/03/10EURACTIV 25/03/10).

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