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Structural Funds As The Solution A To The Present Crisis:Romania – A Case Study

Author

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  • Alexandru Pătruți

    (Bucharest University of Economic Studies)

  • Alina Tătulescu

    (Bucharest University of Economic Studies)

Abstract

Numerous economists believe that structural funds provided by the European Union can be the means by which the economy can recover from the present crisis. Popular belief seems to also support this thesis. However, we consider that only economic reasoning can validate such a conclusion and that rational analysis is needed in this sense. By using the monetary theory of the trade cycle, we argue that economic crises consist in misallocations of scarce capital goods, which are triggered by artificial bank credit expansion. Although the EU structural funds represent a way through which additional capital can be attracted into a certain country, there is no a priori reason for which to assume that these new investments can neutralize the effects of the boombust cycle. Moreover, a fairly strong case can be made that structural instruments cause supplementary misallocations of factors of production, aggravating and prolonging the present economic downturn. The essence of our argument lies in the fact that European funding will probably be used to supply investment projects which do not respond to the most urgent needs of the consumers. It is only real capital accumulation that can foster economic growth—the much needed remedy for the current economic situation. By using empirical data available from official sources, we will illustrate these theoretical results on the Romanian economy.

Suggested Citation

  • Alexandru Pătruți & Alina Tătulescu, 2015. "Structural Funds As The Solution A To The Present Crisis:Romania – A Case Study," Review of Social and Economic Issues, Romanian-American University, vol. 1(2), pages 50-73, march.
    • Handle: RePEc:rau:rseijr:v:1:y:2015:i:2:p:50-73
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    References listed on IDEAS

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    4. Sjef Ederveen & Henri L.F. de Groot & Richard Nahuis, 2006. "Fertile Soil for Structural Funds?A Panel Data Analysis of the Conditional Effectiveness of European Cohesion Policy," Kyklos, Wiley Blackwell, vol. 59(1), pages 17-42, February.
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    Cited by:

    1. Cristian PAUN, 2015. "The Role of European Union Funds in Economic Development," Management Dynamics in the Knowledge Economy, College of Management, National University of Political Studies and Public Administration, vol. 3(3), pages 463-481, September.

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