Books on Romania
% of GDP
Update No: 088 - (27/08/04)
The Romanians are sizing up their situation with great
realism. They have been left out of the recent wave of expansion of the EU. They
know that they are regarded as backward, in Western terms.
But then so they are. At least on certain terms. Clearly Romania has had a
succession of first fascist and then communist dictators, Antonescu and
Ceaucescu, the case resolved. Not quite. The vast bulk of Romanians detested
Why this predicament for totalitarianism?
Romania is a remarkable country. It has a splendid climate by most standards,
cold in winter, but excellent the rest of the year round. It has magnificent
buildings and monuments to its Roman past and a remarkably romantic countryside
It is difficult to imagine a better place to be. It was the favoured spot of
many a Roman Emperor.
Why did it have it those awful regimes? This is a big question.
Let us leave that to history. But something to do with its vulnerable geography
is likely to be involved.
Where is Romania now?
One thing is for certain; Romania is in better hands than ever before. Premier
Adrian Nastase is susceptible to Western pressure and wants a Western outcome
for his country, there is no doubt of that. His main goal is that Romania should
join Europe by 2007.
The Romanians are going to quote their currency, the lei, entirely against the
Euro, as of next year. It will, take a 5-6 year transition period before full
conversion: but it will happen. Indeed so will EU membership; and why not by
The country is still struggling to meet criteria for EU accession
According to the European Council's roadmap for Bulgaria and Romania, EU
accession negotiations will be concluded in 2004. Provided that the two
countries stick to their commitments, the accession treaty will be signed in
If so, the EU will be welcoming the two countries as new members as early as
Jan. 2007 in what will be the fifth EU enlargement. The EU has, nonetheless,
introduced a so-called "safeguard clause", which gives it the
possibility of delaying entry for a year, as part of a stringent new monitoring
system. It may well end up citing this clause.
A long way to go
While Bulgaria concluded pre-accession talks in Luxembourg in June and wasted no
time accepting the terms, Romania appeared to drag its feet.
To many, the time-frame is just too ambitious. Romanian Foreign Minister Mircea
Geoana said he was surprised by the speed with which Bulgaria accepted the
safeguard clause, telling the press it seemed to happen "over the
EU enlargement commissioner Günter Verheugen has made clear he would be making
the same proposal for Romania, a country whose most pressing problem is still
the struggle against widespread corruption, which, he has said, "has
curtailed economic reforms and developments."
Other EU officials said it was up to Romania to make accession happen." The
ball is in Romania's court," Roxana Morea from the EU delegation in Romania
told DW-WORLD. "Basically, it's on the right path, and if it manages to
successfully implement the new legislation across every sector, it will be
Corruption -- the biggest hurdle
But many feel that three years doesn't give Romania enough time to clean up its
"Bribery is apparent on a daily basis -- simply nothing works without
it," said Günter W. Dill, the director of the Bucharest office of the
Konrad Adenauer Foundation, a research and education institute connected with
Germany's conservative Christian Democratic Union.
He told DW-WORLD that Romania won't be ready to join the EU "until there's
been a complete transformation of the prevailing mentality." For now, the
population simply lacks trust in its public institutions, Dill said.
"Transparency is everything," he added. "We need to see
recognizable measures taken to combat corruption."
The political situation ramifies
A simple look at the agenda of the political parties in Romania shows that they
are in a similar predicament. A swing against the governing social democrats in
local elections has precipitated a crisis. The Romanian parties are reorganising
for the final battle, coming parliamentary and presidential elctions.
The first signal was given by the ruling Social Democrat Party (PSD), with the
scandal at the Cotroceni presidential palace, after which local barons and party
senior members were ousted, as well as vice-presidents responsible for the
defeat in the local elections.
Premier Adrian Nastase dissolved the Permanent Delegation and set up a Leading
Bureau, with people from the second and third echelon of the party. The changes
have only one purpose: to persuade the electorate that the PSD has learned
something from the result of local elections. That they promote young people,
they they go rid of barons and life-long senators. That there is another PSD
that deserves confidence!
The Liberals also met to decide who will be on the lists. Keeping Viorel
Catarama on the list for MPs or removing him really has a symbolic value. Who
rules in the National Liberal Party (PNL), Theodor Stolojan or Dinu Patriciu?
Removing Viorel Catarama from the PNL lists for Vaslui county (where, on the
similar lists of the PSD, there are the big shots in Moldavia) marked the first
great victory of Theodor Stolojan. But it doesn't clarify one thing. Who will
lead the party in case Theodor Stolojan wins the presidential race?
What signal does this removal of Viorel Catarama from the lists give? Both the
Liberals and the Social Democrats (under different circumstances, of course) are
trying to part with controversial people. They also want to tell the electorate
that they aren't the same like in the previous governing. That younger
combatants have joined their ranks.
A similar thing happened recently. The Christian Democrats also met to say
goodbye to Victor Ciorbea and appoint statutorily the new team proposed by
Gheorghe Ciuhandu. Without having a completely new list, the Congress of the
Christian Democrats have brought an important change in the leadership. At last,
Victor Ciorbea has withdrawn!
What is new is also the fact that PNTCD is going back to the anti-communist
attitude of the 1990s and is trying to become a rightist party, claiming that
"the time of the paternalist state is over. The overdimensioned and
omnipresent state is the main source of corruption". To what extent such a
line, coupled with the idea to impose a law of lustration, might lead to the
re-launching of this party one cannot yet know. Only the passage of time will
bring the answer.
These three attempts of cleansing before the electorate look rather like a last
war journal before the hard battles of this autumn. All three of them are trying
to show the same thing. That they aren't like they were in the previous wars.
Those responsible for disasters were expelled, marginalised, punished. And new
guys are now in the lead position.
But if one makes an objective stocktaking, we can indeed see a few major
differences. The Christian Democrats have quite a new leadership. The Liberals,
by abandoning Viorel Catarama and by attracting young people into the party,
wanted to part symbolically with the team led by Mircea Ionescu-Quintus. The PSD
has also replaced most of its staff. But President Ion Iliescu and Adrian
Nastase remained in the same positions, about which no one knows which is more
Inchcape to invest in Toyota unit
The Britain-based Inchcape Plc, the sole shareholder in Toyota Romania, has
unveiled plans to invest €5m in an auto complex in Bucharest by end-2005, New
Europe reported recently.
Toyota Romania GM, Stratos Vakkas, said the 10,000 sqm complex would be
exclusively dedicated to the Toyota and Lexus brands. He added that the company
was also planning to build a 25,000sqm centre for preparing cars for delivery.
This centre will be ready in February 2006 for a cost of approximately €1m,
S&P: New legislation renders LRG system more predictable
Recent legislative changes have rendered Romania's system of local and regional
government (LRG) more predictable, said Standard & Poor's Ratings Services
in a research report, New Europe reported recently.
Revenues and expenditures are well matched, and likely to continue so, while the
equalisation system - under which LRGs receive a share of state taxes - is
likely to remain consistent, S&P noted.
Nevertheless, added the report, there is still a need to both increase financial
transparency and the involvement of LRGs in framing state legislation.
"After years of relative volatility, the structure of Romania's local
budget revenues and expenditures is expected to stabilise, at least for the next
2-3 years," said Standard & Poor's credit analyst Felix Ejgel.
"Now that the new law on public finance has come into effect, the central
government has no further plans to reform the distribution of revenues and
expenditures between levels of administrative system, at least in the short
Under the new law, which came into effect on January 1st, 2004, Romania's state
government retains responsibilities for the potentially heavy burden of health
care and social welfare, while a large part of education has already been
devolved to local governments. More changes are expected in the long term,
however, as Romania adopts EU regulations as part of its accession process.
The state government performs equalisation by allocating shares of state taxes -
personal income tax (PIT) and value-added tax (VAT) - to regional and local
budgets. Equalisation is based mostly on the collected PIT per capita and, to a
lesser extent, on the size of the county. In addition, the funds are not given
as general grants, but rather as subsidies for designated purposes.
"Standard & Poor's expects that the LRGs' share of PIT will be less
volatile in the future and, in particular, is unlikely to be altered
significantly over the next 2-3 years," added Ejgel. The report said the
state's firm control over Romanian local finance is extensive: counties and
cities cannot affect the national parliament's decisions on the composition of
local revenues and expenditures, equalisation mechanisms, or debt limits.
Financial transparency is improving, but remains limited. For instance, since
2004 counties and cities have included off-budget funds in their budget
reporting. Accounting, however, remains cash based, limiting the understanding
of LRGs' true financial commitments.
Privatisation blues in energy sector
As of July 20th the Italian firm, EnelL, was the new owner of the first two
companies for electricity distribution in Romania, with the Italian investor
paying the Romanian state €35.1m for a package of 24.6% of the shares as well
as another €76.7m required to become a major shareholder, Evenimentul zilei
Enel will also cover the electricity companies' debts totalling €99m. The
representative of the Economy Ministry and those of the privatisation consultant
said the transaction was remarkable.
"It was very important for the Economy Ministry to negotiate that, after
the process, the impact on price rises be as small as possible," said
minister, Dan Ioan Popescu. Herve Hascoet, the representative of BNP PariBas,
who provided consultancy for the privatisation of the two Romanian firms, said
the price was very good, considering the negotiations started with a €50 price
Italy's giant Enel said it would invest some €1bn over the next 20 years in
modernising the distribution network of the two Romanian electricity
distributors, said Vincenzo Cannatelli, an Enel official. "We are here to
operate the two electricity distribution companies for long term and we want to
improve services," said Cannatelli. ENEL was the sole bidder for the
Electrica Banat and Electrica Dobrogea and held more than 20 rounds of talks
with Romanian authorities over the past 12 months.
The two Romanian power distributors cover some 17% of the country's customers.
The Banat Electrica network covers four western region, including the area of
Timisoara, and serves 850,000 customers (10% of the country's total customers).
The Dobrogea Electrica network covers four eastern regions, including the area
of Constanta on the Black Sea, and serves 590,000 customers (7% of total
The Democrat party's vice-president Radu Berceanu, former Industry Minister,
said recently that the price paid by Enel for electricity distribution companies
Electrica Banat and Electrica Dobrogea is "ridiculously low" compared
to the level registered at the privatisations of the similar companies in the
region, according to Mediafax news service. "These are companies without
financial problems, although some do have collection problems, but this does not
mean they are poor companies and we need to get rid of them under any
circumstances. The price of €112m for the two branches - Banat, with all the
foreign investments in the area, and Dobrogea - with the port, seems to me to be
a joke," Berceanu said.
He mentioned that Bulgaria obtained higher prices at the privatisation of
electricity distribution firms and the Moldovan Republic received comparable
offers, given that the privatised companies were much smaller. The Former
Minister of Industry considers that the accepted price would also affect the
other privatisations in electricity distribution domain.
Stroitransgaz to build gas pipelines in Romania
A consortium containing Russia's OAO Stroitransgaz and the Romanian construction
company Petromservice has won a tender to build 268km of high pressure gas
pipelines and 47 gas distribution stations in the Romanian district of Suceava.
Stroitransgaz said in a press release that the project is being organised by the
Suceava district administration and should be implemented within two years, New
Europe reported recently.
The project is being financed by a credit provided by Deutsche Bank under
guarantees from the Romanian government. The pipelines are to be built in hilly
territory, with some difficult mountainous terrain.
Major Romanian construction companies also participated in the tender, including
TMUCB, Conmag, Petrocons, Amarad, Inspet and Tim. However, the
Stroitransgaz-Petromservice bid was most in line with the client's requirement,
the press service said. According to the statement, the gasification of Suceava
district will involve supplying gas to four towns and 54 villages in the
Mobileway moves into Romania
Mobileway, the global leader in mobile messaging, marketing and
entertainment, announced recently that Romanian GSM operators are connected to
its Global Hub, New Europe reported.
Mobileway's customers will now be able to offer their contents and applications
(ring tones, images, information, marketing campaigns, etc) to seven million
Romanian mobile phone users. Bernadette Lyons, Mobileway UK managing director,
said: "Our strategy is to offer a maximum of direct connections with
premium billing capabilities to mobile operators worldwide. These new
connections add to the 150 Mobileway manages today. The launch of services into
Romania was in response to a strong demand from our customers."
Our analysts and
editorial staff have many years experience in analysing and reporting
events in these nations. This knowledge is available in the form of
geopolitical and/or economic country reports on any individual or grouping
of countries. Such reports may be bespoke to the specification of clients
or by access to one of our existing specialised reports.
For further information email: