No one can say exactly what the end of the war in Ukraine will look like, writes Radu Krachun in his personal blog. But perhaps the only consensus that exists is that Ukraine will be rebuilt with an internationally funded program estimated at more than $400 billion.

As a neighbor and supporter of Ukraine, Romania has every right to aspire to become part of this large-scale international activity. However, it is necessary to fulfill an important condition that cannot be underestimated. The only chance for Romania to be a strong and reliable participant in such a large-scale program is the successful completion of the PNRR. I will explain this dependence, which will seem incomprehensible to many.

The mistake of those who have governed Romania in the last three decades has been an obsession with stimulating economic growth based on encouraging local consumption rather than local production. Increases in wages and pensions in the public sector were not achieved as a result of economic growth, but were implemented independently of it, in the hope of a transmission effect that was quite limited. The expression of this discrepancy between what Romania produces and what it consumes is constantly reflected in the correlation between economic growth and the size of the external deficit. In practice, the stimulation of consumption, which could not be satisfied by domestic production, led to an increase in imports.

The consequence was that the increase in domestic demand, in the absence of a country plan that would lead to orderly development, led to a spontaneous, natural increase in potential GDP, but only up to a certain point. Exceeding this limit is not possible without a country plan that receives sufficient funding. And considering the structure and size of Romania’s budget, such financing can only come from outside.

What does the growth of potential GDP depend on? The development of transport, energy and logistics infrastructure, the number and qualifications of the workforce, technological development and entrepreneurial spirit. In a word, by increasing labor productivity.

But what is the relationship between potential GDP and recovery of Ukraine?

From the moment Romania decides to become part of this project, it will be obliged to provide a much larger volume of goods and services, given that the current potential GDP is not high enough even for the current demand for goods and services. The more limited the supply potential of Romania, the greater the probability that the reconstruction project of Ukraine will pass through us (in imports) or through us to countries that have the necessary economic strength.

The PNRR with its €29 billion represents a huge opportunity to increase potential GDP and thus become an important player in the reconstruction project of Ukraine. This is a chance we cannot miss, especially since it will most likely be the last.

I say that the PNRR is probably the last window of opportunity that Romania has, because once the Ukraine reconstruction project starts, EU funding is expected to be redirected almost exclusively to that country. At that point, the countries of Central and Eastern Europe will have the opportunity to access funds from the PNRR, and their possible total or partial rejection is unlikely to be met with leniency by the European Commission. After the end of hostilities, priorities will be completely different. And Romania’s problem may not be only economic.

With pro-Western Ukraine and NATO-member Turkey, the geopolitical importance of Romania, caught between two major countries, risks diminishing. Who could attack NATO through Romania, which passed through the Black Sea sector, surrounded on the north and south by two large countries with respectable armed forces?

So we have a very important choice to make. While the PNRR window is still open, will we look at it for all the opportunities it offers us, or turn our heads away from seeing it closed?

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