STRUCTURAL FUNDS AS THE SOLUTION A TO THE PRESENT CRISIS:ROMANIA – A CASE STUDY

Alexandru Pătruți () and Alina Tătulescu
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Alexandru Pătruți: Bucharest University of Economic Studies
Alina Tătulescu: Bucharest University of Economic Studies
Authors registered in the RePEc Author Service: Alexandru Patruti

Review of Social and Economic Issues, 2015, vol. 1, issue 2, 50-73

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.

Keywords: capital goods; structural funds; structure of production; natural rate of interest; economic crises (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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