CĂTĂLIN PĂUNA, WORLD BANK: The countries which were the most affected by the crisis were those who were the net beneficiaries of European funds

The European funds who were the most affected by the economic crisis were net beneficiaries of European funds, Cătălin Păuna, senior economist of the Bucharest Office of the World Bank, said yesterday.

Present at the "Romania, where to? European assessments and implications for Romania", he warned that the absorption of European funds could not prevent the accumulation of very big public debt, even though they have contributed to the adjustments of the convergence process. The economist wondered whether the European funds helped conceal structural imbalances, inducing the illusion of a false prosperity. The imbalances have allowed the suboptimal allocation of resources over a long period of time, as the expenses of the European governments account for about 35 to 50% of the GDP, he said. Also, these imbalances restrict the operation of markets and of private investments, since the existence of functional markets requires private investments, and private investments in turn involve the making of structural reforms, according to Cătălin Păuna.

The economist of the World Bank said that it is important for public investments to generate positive returns, because otherwise they can lead to losses. According to him, in the case of countries which were heavily affected by the crisis, public spending has led to high budget rigidity, capping the possibility of economic growth.

Cătălin Păuna considers that the accession to the new fiscal European pact will be difficult in the absence of some rigorous systems for the allocation of resources. He said that it is important to avoid ad-hoc adjustments because, if the public allocated resources and the expected results, it is hard to tell which areas to cut funding from and which ones to increase it for.