Romania: State Aid Schemes And EU Funds – Instruments For Financing Projects In Romania

Last Updated: 14 June 2013
Article by Matei V. Florea and Bogdan Ioniţă

Over the past years, banks operating in the Romanian market have been approached with an increasing number of financing projects that aim to benefit from financial support from either state aid schemes or EU financing programmes.

State aid

Since 2007, the Romanian State has opened five state aid schemes, three of which are still active.

Two of the active state aid schemes were introduced in 2008 (approved by Government Resolution [GR] no. 753/2008 [Scheme 753] and by GR no. 1680/2008 [Scheme 1680]). In 2012 beneficiaries of these state aid schemes included SC Bosch Rexroth SRL (sensors manufacturing), SC Clinica Polisano SRL (equipping a new medical clinic), SC DRM Draxlmaier SRL (auto motive cables) and SC Rom cab SA (production of electric cables).

Applications under Scheme 1680 may be processed until 31 December 2013. However, prior to recent amendments to the scheme, projects also had to be fully implemented by the same dead line. As most projects take longer than a year to complete, this meant that in fact applications could no longer be submitted. In what we take to be a sign of the government's continued commitment to this financing option, a government resolution published on 17 October 2012 extended the implementation period for Scheme 1680 until the end of 2018 at the latest (subject to the implementation plan agreed specifically for each project).

Currently, applications under Scheme 753 may be processed only until the end of 2012. But there are rumours in the market that the scheme's calendar for both submission of applications and implementation of the projects may be extended to match the ones under the Scheme 1680: 31 December 2013 and 31 December 2018 respectively.

The third active state aid scheme was approved in 2012 by GR 797/2012 and is aimed at supporting investments (i) based on which products, services and innovative technologies are obtained or (ii) which include an information technology and communication (ITC) component representing at least 20% of the investment plan. The estimated bud get of the scheme is ca EUR 100 mln. Financing approvals (acordurile de finanțare) under this scheme will be issued in 2012 and 2013, with payments to be made during 2013 – 2018.

In order to obtain state aid financing, the applicant must demonstrate, among others, that the project will create and maintain a minimum number of new jobs, financial ratios and results, which over the next years will translate into profit tax, property tax and social security contributions in an aggregate amount at least equal to the state aid received. During the five-year post-implementation, the project will be subject to detailed monitoring period to ensure that these commitments are kept. In addition, state aid will be disbursed only after the beneficiary submits a letter of bank guarantee securing potential state aid repayment requests in case of breach.

The investor applying for state aid must have financing in place to advance all project expenses, as disbursements under the state aid scheme can be requested only after the relevant expenses have been made. Project suppliers are to be contracted and paid following stricter (public procurement type) procedures. If the investment is co-financed with bank financing, the state aid financing approval may be issued only based on a standardised binding letter of comfort (scrisoare de confort angajantă) issued by the prospective lender.

EU funds

As regards EU funds, the current programming period (2007−2013) ends on 31 December 2013, but the implementation of projects can be extended until the end of 2015.

During this first programming period, Romanian authorities have had major difficulties absorbing funds under the EU financing programmes. The European Commission has pre-suspended, suspended or imposed corrections on several, if not most, EU financing programmes for Romania. We are hopeful that, after the December 2012 general elections, the Romanian Government will commit the necessary resources to improving EU funds absorption in 2013 and then, during the programming period 2014 – 2020, improve EU fund management and absorption by out sourcing much of the process to private operators, following the successful lead of Poland and the Czech Republic.

The institutional structure and the regulations are different for each EU financing programme. Similar to the state aid schemes, applicants must prove that they have the financial capacity to implement the project and must advance all expenses under the project. Some EU financing programmes also provide for limitations applicable to the security that can be created in favour of co-financing banks over assets financed by EU funds.

Experience shows that the reimbursement of costs by the authorities may take up to 18 months, which is some times longer than the implementation duration of the project. This issue must also be considered when agreeing on the terms of the bank co-financing for the project. After implementation, authorities monitor the project for three to five years (when no modifications to the project are generally admitted). Any breach of this obligation may trigger reimbursement of the EU funds received; banks co-financing such projects will naturally need to take this aspect into account.


Given the challenges of obtaining debt financing in the wake of the financial crisis, accessing state aid schemes or EU funds could still prove interesting to both investors and lenders looking to finance projects in Romania. This is despite the strict requirements applicable to state aid schemes and EU financing programmes and the systemic risks resulting from the Romanian institutional and budgetary limitations applicable to both state aid and EU funds.

"Experience shows that the reimbursement of costs by the authorities from EU funds may take up to 18 months, which is sometimes longer than the implementation duration of the project."

This article was originally published in the schoenherr roadmap`12 - if you would like to receive a complimentary copy of this publication, please visit:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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