Europe's very own Puerto Rico

Romania, now set for EU membership, has no proper democracy or market economy. It will be the exploi

At the height of the Kosovo crisis in May 1999, Tony Blair was on his way to Bucharest, the Romanian capital, to drum up local support for Nato's high-risk confrontation with Serbia. The Prime Minister astonished his advisers by suddenly announcing on the aeroplane that he was going to promise Romania early membership of the European Union in return for its continued backing.

Until then, Romania's membership had seemed a distant dream. The foreign ministries of the main EU states had viewed the country as a basket case, permanently maimed by a brutal communist dictatorship. Nicolae Ceausescu had been executed by his underlings in 1989, but this had merely resulted in them distributing the most lucrative state assets among themselves, with reluctant gestures being made in the direction of democracy. Goodbye communism, hello capitalism, but the most nimble and ruthless members of the pre-1989 elite continued to call the shots.

Ion Iliescu, Romania's president, has been the avuncular PR man, distracting attention from this grand theft. He was briefly out of office when Blair's gaze suddenly alighted on the country. By the time he was re-elected in 2000, his country had been invited to open negotiations to become a full member of the EU. Brussels hoped that, in return, the ruling Social Democratic Party (PSD) would be converted into a political organisation, moderate in outlook and appetites, that was fit to join the Socialist International. But no make-over took place. The PSD still bears an uncanny resemblance to the parties in various parts of the former Soviet Union that have dumped the communist ideology while retaining a monopolistic approach to power and property.

An administrative class whose primary task is to advance the interests of the ruling party has had huge difficulties in complying with the road map for entry to the EU. Up until this month, when it will avert its eyes and probably grant Romania the status of a functioning market economy, Brussels has been unable to find enough evidence that capitalism as applied in the west exists at all in Romania. The rule of law and human rights are often violated, as the European Parliament admitted in a candid report released in January. Its author, Emma Nicholson, the Liberal Democrat MEP who is the parliament's watchdog on Romania, criticised runaway corruption, the savage harassment of journalists and the sale of children in state care to foreigners, supervised by top-level political figures.

It is difficult to imagine how the criteria for EU membership, such as maintaining the rule of law, guaranteeing democracy and coping with the competitive challenges of the Union, can be met. Nevertheless, Romania inches closer to full membership by 2007. As with Kosovo in 1999, security matters have been the salvation of Romania's feckless elite. The west has looked with fresh eyes on the country since the 9/11 attacks.

Romania has offered more concrete backing for Britain and the United States in their invasion and occupation of Iraq than any other European state. While Greece and Turkey, the only long-standing Nato states adjacent to the Middle East, have refused to get involved, an unsavoury regime has enjoyed a change of image by helping Britain and the US in a part of the world where they enjoy few allies. France and Germany may be appalled and angered by Blair's Mephistophelean pact with George Bush, but they depend on Middle Eastern oil supplies for their economic viability: the Romanian prime minister, Adrian Nastase, has not been punished for his extravagant Atlanticism.

In addition, Romania represents an important economic prize for France, Italy and Germany, all of which have stagnant economies. The lowering of tariff barriers in line with EU requirements has allowed a flood of imports into a country with 22 million consumers. Some of Europe's best arable land has been bought up at bargain prices (the Italians are busily planting genetically modified maize and wheat). Hypermarkets such as Carrefour and Selgros dominate shopping locally. Romanian producers find it impossible to compete. It is hard to see how Romania will become a functioning market economy in the face of this tide of cheaper and better-produced goods. Instead, it looks as if its fate will be that of a Puerto Rico - an exploited dependency of a neighbouring Goliath.

Romania was pillaged before, by the Soviet Union in the 1950s, when much of its transportable wealth was loaded on to railway wagons and shipped east. Unlike the Soviets, the EU is giving as well as taking away. Many officials, including Jonathan Scheele, the Briton who is head of the European Commission delegation in the country, seem to wish to see Romania benefit from EU membership. The intention is that more than 6bn (£4.1bn) worth of funding will modernise the country's infrastructure and economy so that it can compete with existing members in the economic market place. But the allocation of funding is often in the hands of local politicians who dominate regional development agencies and are concerned with profiting personally. Some would say that directing such a large sum in order to prepare the country for entry, and with the proviso that it be spent quickly, is a huge stimulus for corruption in an underperforming state.

Indeed, in its report for the period from July 2002 to June 2003, the European Anti-Fraud Office (Olaf) reported that of the 125 dossiers investigated from 13 candi-date countries, no fewer than 49 involved Romania. However, Olaf cannot bring fraudsters to justice. That is a decision for the law-making authorities, which are firmly under the government's thumb. In much of the country, the legal system is little more than a PSD family affair, and the party has refused to introduce measures that will free the judiciary and prosecuting service from rampant political interference. That ought to have been enough for Brussels to threaten to suspend negotiations on EU membership. After all, there are implications for safety on our own streets if a compliant judge can set free a top official involved in issuing passports to women who are sent, under coercion, to join the western European sex industry.

Yet thanks to the strong lobby that Nastase has built up in Brussels, Romania is not confronted about its cosmetic approach to reform in such a vital area. Instead, some EU officials comfort themselves that a transformation in standards can occur by bypassing the government. The magic word is "twinning": Romanian officials go to the justice departments, prosecutors' offices and courts of EU states, learn good practice and return to Romania to implement it. Usually in larger numbers, civil servants and consultants are seconded from EU states to work in institutions such as the Romanian justice ministry.

By early 2002, there were no fewer than 503 twinning projects in the 13 candidate countries. They ran on average for 18 months and cost 1m each. In 2003, the European Court of Auditors produced a damning assessment of the twinning programme, finding that it had produced scant progress in the implementation and enforcement of EU laws and practices.

Rapid EU entry under the current machinery was designed for urbanised countries with large service sectors. Romania has the smallest service sector and the highest proportion of the labour force (46 per cent) employed in agriculture of any candidate country. It would have been far better if the EU had focused on rebuilding government departments and regulatory agencies from the ground up, with the help of the skilled and dedicated professionals who are being forced abroad because of their refusal to adopt the PSD's low standards in public life.

Romania is a classic example of Blair's Napoleonic approach to foreign policy. He issues a bold policy departure and spurns the accepted wisdom, but then his attention switches to other matters and the policy unravels. In front of the complacent gaze of the EU's power-brokers, opposition leaders in Romania are being harassed and there are real fears that the national elections due in November will be rigged. For the PSD, there is too much at stake: shadow companies have already been set up to rake off the millions of euros due to be channelled to Romania from 2005 onwards. It has been argued that the strong involvement of the EU in a country's internal affairs invariably helps to reinforce a fragile democracy. Romania might be about to prove that axiom of our age very wrong indeed.

Tom Gallagher's book Theft of a Nation: Romania since communism is published by Hurst & Company in November (paperback, £17.50)