Utopian Farm Town Offers Solution to Romania’s Deficit Struggles

(Bloomberg) --

Everyone has a job and harvests are so plentiful that trucks jam the streets from early morning waiting to ship tomatoes, cucumbers and peppers around the country.

Welcome to Matca, population 12,600 but supplier of more than a tenth of the vegetables consumed by Romania’s 20 million people.

The town is a rare agricultural bright spot in a nation that imports the bulk of its food from Poland and Greece. Its success could point the way to overcoming some of Romania’s most pressing economic challenges.

“We have a tradition of working hard and loving our land that’s being passed from generation to generation,” Nelu Costea, mayor since 2008, said in an interview in his office. “Many people would be encouraged to invest and work in agriculture if they had the proper support from the government.”

Costea complains that budget policy has focused too heavily on consumption, in the form of tax cuts and increases in public salaries -- a fear the central bank also shares.

It’s left Romania on the brink of violating European Union fiscal rules. The reliance on produce from abroad has contributed to the widest trade gap among the bloc’s eastern members.

“The large trade deficit from food imports is one of Romania’s biggest issues,” Ionut Dumitru, chief economist of Raiffeisen Bank International AG’s Romanian unit, said by phone. Imports “are probably more competitive as their countries of origin have better agricultural policies. Romania has low subsidies and lacks the necessary infrastructure.”

Near what was once Romania’s border with the Soviet Union, Matca is home to more than 3,000 vegetable farms. About 95% of residents are farmers. Every family has plastic greenhouses in their gardens allowing them to harvest three crops a year.

Most people are reluctant to apply for EU funding because of the red taped involved. With government subsidies meager, they rely instead on reinvesting profits.

Romania lags behind most EU countries in terms of direct support to farmers, according to the European Commission, and is last in eastern Europe.

“It would be good to have some support to buy modern machinery and technology,” said Ion Leca, a 40-year-old farmer. “We don’t want to get overburdened with bank debt.”

Government programs have begun in the past two years to help small farmers and boost vegetable production via subsidies to improve crops, hire workers and buy equipment, according to the Agriculture Ministry.

The bulk of the 6.7 billion euros ($8 billion) in subsidies handed out to farmers since 2017 has gone to grain producers, though 94 million euros was alloacted for growing tomatoes. From July, small farmers can request aid of as much as 15,000 euros.

Matca hails from one of Europe’s poorest regions, where most people rely on state handouts or cash sent home by relatives working abroad. Thousands of Romania’s leave the country in search of higher pay in the EU’s richer west.

For Costea, Matca’s mayor, his blueprint could help stem that exodus. The town is “unique in an area and a country where young people prefer to leave and work abroad,” he said.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net;Irina Vilcu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Andrew Langley, Michael Winfrey

©2019 Bloomberg L.P.