Facelift for EU’s Worst Infrastructure Eases Hit From Virus

(Bloomberg) -- The European Union state with the bloc’s worst infrastructure is building train lines and roads at the fastest pace since communism collapsed to help counter the economic chaos wrought by Covid-19.

Romania, which has the highest coronavirus death rate in the EU’s east, is finally addressing an issue that’s long been a gripe for companies including Renault and Ford, as well as a reason for citizens to join an exodus to the continent’s richer west. It’s an area where the cash-strapped government, can score victories before December’s general election as development money flows in from Brussels.

“Developing transport infrastructure is the basis for Romania’s economic rebound,” President Klaus Iohannis said last month. “We have a huge chance in the coming years to develop this infrastructure by using the EU funds at our disposal.”

The two most prominent projects are in Bucharest: a train link between the airport and downtown that will start operating in December, and the first new subway line built from scratch in 30 years.

Both had been dragging on for years, and the fresh impetus helped Prime Minister Ludovic Orban win control of the capital in recent local elections. He’s also increased the absorption of EU development funds, drawing down 2.7 billion euros ($3.2 billion) in the first 10 months of 2020 -- twice as much as the same period last year.

Romania’s infrastructure has ranked last since it joined the EU alongside Bulgaria in 2007, with corruption -- where the nation also scores poorly -- a major stumbling block. The country of 20 million people lacks sufficient highways and added just 42km (26 miles) in 2019.

This year, it plans to double that pace -- welcome news for carmakers who’ve long grumbled that the lack of a highway connecting plants in Romania to neighboring Hungary generates huge losses.

“Raising infrastructure investment could have significant macroeconomic benefits,” the International Monetary Fund said in a recent report. “It would provide a much-needed stimulus to activity in the aftermath of the pandemic. Yet with fiscal space limited, maximizing the benefits of such investment has become more necessary than ever.”

There are pitfalls. The airport train is infrequent and demand has been hit by the pandemic; metro passengers complain of aging wagons. But infrastructure improvements are helping an economy that’s forecast to shrink as much as 6% this year.

Placating car producers, Orban has approved the 900 million-euro highway they’ve long been promised. The six-year project could even offer a clue on another Romanian goal -- adopting the EU’s single currency.

Central bank Governor Mugur Isarescu has repeatedly said said the country will be ready for that switch “when we have the first highway that crosses the Carpathian mountains.”

©2020 Bloomberg L.P.