EU macro-financial aid for Moldova: objective rewarding or political stimulation?, OP-ED

“The allocation of European money is a financial exercise, but also a deeply political one, which implies a full commitment by the EU in the evaluation of the performance, as well as explicit communication of the assessment’s results. Indeed, by increasing the assistance the pro-democratic and anti-corruption rhetoric can be encouraged. But any financial gesture that concerns macro-financial assistance, due to (pre)conditionality principle, implies more "objective rewarding" than (only) "a political stimulation"…”
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The reforms started by the Moldovan government, almost completely associated with the performance of the cabinet of Prime Minister Maia Sandu, leave deep imprints in the perception of Brussels. The EU’s approval tone is producing though financial results. One by one, European budget aid was resumed in July and later on in October - EUR 14.54 million and EUR 14.35 million respectively. The re-launched financing for the time being comprises six distinct areas: free trade, vocational education, visa liberalization, justice, energy system and public finance reform. At the same time, the EU has unfrozen the credit line. Thus, macro-financial assistance became accessible in October, offering the first tranche of EUR 30 million out of a total of EUR 100 million (EU, October 10, 2019).

Meanwhile, several signs of political instability make take shape towards the end of 2019. Thus, the coalition partners of ACUM bloc - the Socialists - seek political pretexts to take over the subordination of at least two other ministries, additionally to the Ministry of Defense, from the whole of 9 ministries. The turning point for the government’s recession is to be determined by outcome of the local elections on October 20, 2019. As a result, the Socialists can harden their demands (Deschide.md, September, 28 2019). Simultaneously, the pressure on Maia Sandu is also increasing because of the Democrats, who are still seen as a major risk for the sustainability of the reforms. In an attempt to influence the results of the local elections, distract public opinion from the issue of fugitive oligarch Vladimir Plahotniuc, but also to act as the only opposition force, the Democratic Party (PDM) tests the first censor motion against the government of Maia Sandu (Parlament.md, October, 17 2019). Any such motion of no confidence proposed by the faction of Democrats (29 deputies) will be neutralized immediately in the absence of a majority (Art. 106, Constitution of Moldova), which is currently dominated by ACUM-Socialists tandem.

The opposition expressed by Democrats is active, accusing the parliamentary majority of marginalization (10 critical press releases from June 2019), but not effective in influencing the power. The epicenter of political competition lies within the governing coalition. The disproportionate distribution of power within the coalition predisposes to tensions that afterwards can lead to early elections. The outline of such a denomination depends on the decision of the Constitutional Court, recently re-politicized (3DCFTs, September 17, 2019), vis-à-vis the conditions under which the early elections should take place. Both the ACUM bloc and the Socialists are seeking legal ways to materialize the proportional vote for any future electoral exercise, because the implosion of the ruling coalition is both possible and probable. Political inconsistencies regarding the reform of justice and the dubious character of President Igor Dodon's relations with Russia are the major causes of a possible break-up of the ruling coalition.

How does the EU justify giving money to Moldova?

There are some key issues that European officials highlight in order to justify unlocking the financial support needed to strengthen the budgetary capacities of the Moldovan authorities. Namely, these nuances explain the rapid speed of the resumption of financing compared to the 2015 suspension, caused by the massive fraud in the banking system (IPN, July 29, 2019).

In the first phase of unfreezing European funding, EU Commissioner Johannes Hahn appreciated the pro-reform intentions in the field of justice and anti-corruption policies, including preparations for the return to the proportional voting system (EU, 23 July 2019). Then, in July, the government of Maia Sandu was tapping the ground in domestic politics and dedicated to external visibility.

The second positive financial episode in the renewed EU-Moldova relationship came with the macro-financial aid. EU Commissioner Pierre Moscovici qualified it as "support for the implementation of key reforms" aimed at achieving the rule of law and democratic standards. In other words, at the beginning of October, the representative of the European Commission acknowledged that Moldova fulfills the political preconditions to benefit from the first tranche of macro-financial assistance. The EU also emphasized that, "now", the eligibility criteria are also met due to the execution of the sectoral conditions (EU, October 10, 2019), without presenting the exact fulfilled conditions.

In the third case, amid the transfer of another budgetary aid, the same Commissioner Hahn already referred to the intensification of the fight against corruption and to the corrections made to the electoral legislation (EEAS, October 18, 2019). Moreover, Hahn pointed out that the ACUM-PSRM government has addressed "many" of the concerns raised by the EU in 2018 (EU Council Conclusions, February 26, 2018). The EU is focused on how the judiciary and prosecutor's office reform is undertaken, in which the legal expertise of the Council of Europe plays also a role. The reform initiatives have entered Venice Commission’s radar. First concerns concerning these reforming attempts were expressed. The main objections relate to the proportionality of the judge evaluation mechanism, the integrity of the judicial system and the continuity of the judicial independence, regardless of the cyclicality of the political changes (Venice Commission, October 14, 2019).

The financial opening of the EU towards Moldova is based mainly on supporting the reforms initiated by the government (justice, prosecutor's office), whose final results will turn really visible only later. The European appreciation derives primarily from the high degree of intentionality of the government of Maia Sandu, rather than from evaluating the performance of all branches of power in Chisinau. The return to the proportional vote has the greatest weight in the EU's arguments related to the financial support for Moldova, due to its finite and indisputable character.

Underneath EU’s macro-financial assistance

Granting the first tranche of macro-financial assistance represents a strong recognition of the EU's confidence in the Chisinau government. The European institutions highlighted the fulfillment of political preconditions, and among others they referred to the sectoral conditions too. Actually, none of the 10 mandatory conditions for the first tranche (out of a total of 28 measures) are reflected punctually neither in the parliamentary dimension’s performance (the laws adopted during the period July-October 2019) nor in the government's report on the first "100 days” of governing (Government Report, September 24, 2019).

The 10 conditions required to disburse the first tranche were still fulfilled during the oligarchic regime in 2018, including conditions for tranches II and III (See Table below), but its credibility was shattered by the annulment of the vote in Chisinau in the spring of the same year. The pro-active approach of the new governance in the field of reforms had a decisive influence on EU’s decision, along with the fulfillment of the political preconditions. Therefore, the EU counted the technical steps (carried out since 2018, under the oligarch Vladimir Plahotniuc), as well as the abundance and integrity of the political will, symbolized by the reforming character of Maia Sandu, for the proper execution of the commitments.
 

Table. The List of the 28 sectoral conditions as part of the EU-Moldova Memorandum of Understanding, 23 November 2017

 

Number  of conditionalities

First tranche

30 mil. EUR

(10 conditions)

Second tranche

30 mil. EUR

(8 conditions)

Third tranche

40 mil. EUR

(10 conditions)

1.

The new law on Government.

Banking supervision

Maximizing transparency of governance and shareholders in the banking sector

2.

Functioning of the National Agency for Solving Complaints

Transparency in the insurance sector

Deposit guarantee

3.

Auditul întreprinderilor publice și municipale

Adjustment of the public sector to the provisions of the DCFTA (procurement, public-private partnership, etc.)

Organization of the non-bank lending market

4

Update of the legislation regarding the Court of Accounts

Accessibility of data from the system of verification and declaration of wealth

Implementation of the anti-corruption and integrity strategy (2017-2020)

5

Strengthening capacities to prevent money laundering

Energy efficiency

Recovery of fraudulent assets in the banking sector

 

6

Operational National Integrity Authority Public

Tender for the delegation of responsibility for the construction of the Ungheni-Chisinau gas pipeline

Consolidation of social assistance programs to cover tariffs for services in the energy sector

7

Operational agency for the recovery of criminal assets

Selection of judges based on merits and in a transparent manner

Unbundling in gas sector

8

Strengthening the regulator in the energy sector

Responsabilization of the judges

Extending the competences of the Competition Council

9

Reducing bureaucratic obstacles to business

-

Updating the Customs Code according to European standards

10

Consolidation of the Customs Service

-

Consolidation of the Superior Council of Magistracy

Source: Lex.justice.md

 

So far, neither the European side nor the Chisinau government has publicly disclosed, in what exact sector and in what way, the new leadership has corrected the deviations committed by the previous government. It is certain that the partial renewal of the leadership in the state institutions, targeted in EU’s sectoral conditions (Customs Service), the initiation of investigations in a number of state-owned enterprises (postal service, railway, infrastructure, etc.), but most notably the anti-corruption rhetoric, facilitated the release of European money.

In order to exclude the elements of misinformation and public manipulation, both the EU and the Chisinau government have to ensure full transparency regarding the fulfillment of the sectoral conditions. Of the 28 conditions, many were implemented ahead of time, partially or completely, during the period of the oligarch Vladimir Plahotniuc. The merit and contribution of the bloc ACUM, together with the Socialists, is to guarantee the element of sincerity, dedication and political integrity in order to carry out, with the necessary corrections, the reforms started in the period 2017-2018. At the same time, between the tranches and before the third tranche is granted, a constant and consistent assessment of the developments concerning political preconditions, including how the government transposes the recommendations of the Venice Commission, is mandatory.

Instead of conclusions...

“The allocation of European money is a financial exercise, but also a deeply political one, which implies a full commitment by the EU in the evaluation of the performance, as well as explicit communication of the assessment’s results. Indeed, by increasing the assistance the pro-democratic and anti-corruption rhetoric can be encouraged. But any financial gesture that concerns macro-financial assistance, due to (pre)conditionality principle, implies more "objective rewarding" than (only) "a political stimulation”.

Moldovan political reality is not at all linear, and radical changes of situations can happen at any moment, jeopardizing the progress of reforms. For these reasons, explicit communication on the fulfillment of the set of conditionality is essential to prevent further sequences of EU’s image deteriorating, affecting as well the pro-European agenda of the country. Finally, it does not matter when and how the reforms were initiated, but whether they are subject to correction and produce tangible transformations for Moldovan public interests and the European interest in regional stability.

Dionis Cenușa