Books on Romania
% of GDP
Update No: 093 - (28/01/05)
Romania has a new president and prime minister, leading a new
government, as a result of elections at the end of last year. A major political
revolution is under way, no less momentous than that in neighbouring Ukraine,
which clearly partly inspired it.
The mayor wins; Trajan recidivus
The presidential election in Romania on December 12th was won by the mayor of
Bucharest, Traian Basescu, by a slim, but decisive, margin, 51% to 49%. He
represents, indeed, a decisive break with the communist past, with which his
defeated rival, the then premier Adrian Nastase, is indelibly associated. He has
had the support of the educated population and the middle class, who fervently
want to see Romania part of Europe.
His very name is suggestive of Romania's European past and now future. Trajan
was the Roman emperor who incorporated Dacia, as it then was, into the Roman
Empire in 117 AD. The language and culture of Romania have remained Latinate
ever since, although its history between the third century AD and the thirteenth
is shrouded in mystery.
Nastase had the support of the small farmers, who fear, not without reason, that
they have most to lose from EU regulations. But Nastase, like Basescu, is a firm
advocate of EU membership, as are virtually all Romanians, highly conscious of
their Latin origins.
The surprise victory of Basescu, therefore, will produce no great change of
policy on Europe. Nor is it likely to engender any great change in the approach
to Romania's paralysing problems. The fact is that it is afflicted with
pervasive corruption and an absence of a proper rule of law. There is no
independent judiciary or protection for the media.
The deadlines to improve these criteria of democratic adequacy were relaxed by
the European Commission, given the need to have a reasonably-held election.
Justice and Truth
The victor's party, Justice and Truth Alliance, is deemed less venal than the
former communists. But during the opposition's brief spell in power in the late
1990s it made little inroads into the major problem of corruption. A corrupt
culture of party barons and millionaire oligarchs continues to dominate
political life. It will take decades to resolve this conundrum and the EU
commissioners are well aware of that.
Mr Basescu asked his own centre-right Justice and Truth Alliance to nominate a
cabinet, which was then approved by parliament. However, Mr Nastase's Social
Democrats(PSD) won 189 seats in the 469 parliament in December, while the
alliance won 161, needing allies among the smaller parties to prevail. Mr
Basescu proposed his running mate, Calin Tariceanu, of the National Liberal
Party, as the next premier.
Millionaire businessman Calin Tariceanu - Romania's new prime minister
Tariceanu was voted in as Romania's new prime minister in parliament on December
28th. He is a right-wing, millionaire businessman who is pushing economic
reforms to modernize the former communist state and get it into the European
A trained engineer, Tariceanu, 52, was industry and trade minister beforehand.
He proposed a restructuring of the mining industry in line with demands made by
international financial organizations, despite concern that it would impose
hardships on miners.
As prime minister, Tariceanu, who reportedly has a personal fortune of US$15m,
wants to better the business climate in Romania in order to bring in more
foreign investment. Since 1993, he has been Citroen's import agent in Romania.
He also told parliament in presenting his three-party, centre-right government
coalition that the time has come for "fighting corruption, guaranteeing
freedom of expression and the independence of the judiciary." He added:
"Today ends the transition to a market economy and begins the process of
modernizing the country, a process closely linked to joining the European
Romania is seeking to join the EU in 2007 but must carry out major reforms to
fight corruption and guarantee fair trials if it is to succeed.
Tariceanu said another priority "will be lowering taxes and increasing
pensions, with a rise of 30 percent by 2008." Tariceanu is seeking to
institute a flat income tax of 16 percent, instead of the current system of
three bands rising to 40 percent, and a reduction of the rate of profits tax
from 25 percent to 16 percent, taking effect from January 1, 2005.
Otherwise the reform would have to wait another year, until January 1, 2006.
Such a delay carried the risk "of disillusion for the people who want to
see taxes cut quickly", he said.
Tariceanu was appointed after Bucharest Mayor Traian Basescu, like him from the
centre-right Justice and Truth alliance (DA), won presidential elections
December 12, defeating Ion Iliescu who had ruled Romania as a Social Democrat
for 11 of the 15 years since the fall of communism in 1989 with the execution of
dictator Nicolae Ceausescu.
Tariceanu turned out to be a good negotiator, forming a coalition with the
ethnic Hungarian party and another, smaller grouping in order to forge a
Elected vice-president of Europe's Liberal-Democrat Party in 2003, Tariceanu
speaks fluent French and English.
Profile of the winner
The president, nevertheless, remains the key figure. Basescu campaigned on a
tough anti-corruption platform and has a reputation for being outspoken and
In the course of the campaign Mr Basescu promised to crack down on graft. He
denounced his rivals as villains and gangsters. "This is a dirty system
that destroys political opponents...but I tell them now: 'Boys, you cannot
destroy me!' " Time will surely tell!
Born near Romania's main sea port of Constanta, Basescu pursued a career as a
sailor and commanded the biggest ship in the Romanian fleet for six years. He
was a rank-and-file communist party member.
After the bloody 1989 Romanian revolution which toppled communist dictator
Nicolae Ceausescu, Basescu got involved in politics and served as transport
minister in the 1990s.
In 2000 he became the mayor of Romania's capital, Bucharest, where he embarked
on a programme of rapid renovation in the decaying city. His can-do image is
reflected in a record of improvements for Bucharest, some of them achieved in
unorthodox ways. He led a crackdown on stray dogs and urban eyesores. "I am
elected by the people of Bucharest, not the dogs," he said, scornfully
dismissing the complaints of Western animal rights activists.
When the government blocked his plans for a new overpass and better central
heating for the city, he went over their heads and asked citizens to sign a
petition, shaming the officials into caving in.
He is one of the few Romanian politicians bold enough to speak up for gay rights
- an issue his opponents tried to use against him in the run-up to the election.
Mr Basescu's campaign had echoes of that of Viktor Yushchenko - the opposition
presidential candidate in neighbouring Ukraine, who brought thousands of people
onto the streets to protest against alleged election abuses. As in Ukraine, the
Romanian opposition made orange their main colour and the Ukrainian "Tak!"
("Yes") became the Romanian "Da!" as their main slogan.
Although the ruling ex-communist Social Democratic Party (PSD) took Romania into
Nato and prepared the ground for the country to join the EU in 2007, Mr Basescu
is seen as a more pro-Western candidate.
Unlike his opponents, whom he accuses of widespread corruption, Mr Basescu is
not associated with the old communist regime. His victory is likely to be
applauded in most Western capitals.
He has long been seen as the main challenger to the dominant PSD.
Improving relations with Hungary
Bilateral relations between Romania and its northern neighbour, Hungary,
have long been strained. This is not least due to the fact that Hungary lost
land to Romania after the First World War at the Treaty of Trianon, namely the
largely mountainous territory of Transylvannia (of Dracula notoriety), which has
a Hungarian minority of approximately two million.
The Hungarian prime minister, Ferenc Gyurcsány, has announced a historic
departure that his government will hold joint cabinet meetings annually with
Romania in order to help its neighbour join the European Union and "ease
the historic burden" of the two countries' relations. On January 17th, the
premier met with his Romanian counterpart, Tariceanu, in Budapest where they
held a joint press conference. The two said the first joint cabinet meeting will
take place in the fall of this year.
"It is not only an opportunity, but also a duty of Hungary in the upcoming
years to support Romania's European Union entry," Gyurcsány said.
"All debates must be kept within that framework." On January 17th,
speaking to Hungary's international press, Tariceanu said, "My meeting with
Hungarian officials is symbolic of the special partnership between Hungary and
Romania, two countries now reaching a new period - the end of transition from
communism. This period is now characterized not by the problems of the past, but
by our future common projects, such as bilateral political and economic
Tariceanu, who formed his coalition cabinet just only a month ago, chose Hungary
as his first foreign visit since taking office - itself seen as a symbolic
gesture. "I have to underline that we highly appreciate the input Hungary
has given in the recent past to help Romania join the EU and engage in the
negotiation process," he added. Romania is hoping to join the EU in 2007.
Gyurcsány said the Hungarian government would not blackmail Romania by holding
out the prospect of vetoing its EU entry, as suggested by the opposition.
"I would not like to toy with the idea of vetoing - as the opposition does
- Romania's EU entry, sending a message to the Romanian Government that Hungary
is one of the 25 EU members in a position to say no," Gyurcsány said.
Following the failed dual citizenship referendum in Hungary on December 5, the
topic of citizenship for ethnic Hungarians abroad and Gyurcsány's provisional
plans for a national visa for ethnic Hungarians were also discussed by the two
prime ministers. Tariceanu told press that since this issue of visa plans was
raised the Romania Government has asked for more information and an official
answer has now been given. It is now up to officials from the Romanian ministry
of foreign affairs to examine this and better understand what Hungary is
proposing, he said, indicating that any plans are only in their infancy.
Tariceanu also touched on the subject of autonomy, and said he favoured greater
autonomy, but not on the basis of ethnicity. "We need a new mentality.
Hungarians or Romanians are citizens of equal rights and responsibilities. For
me, there are not two categories of Romanian citizens."
Gold mine or gold dust?
Another topic the Romanian premier was keen to respond to was Hungarian
concerns over the planned gold mine at Rosia Montana. The mine, if built, will
extract over 300 tons of gold and 1,600 tons of silver.
The Hungarian public and environmentalists are anxious not to see another spill
such as the one in 2000, when a Romanian gold mine in Baia Mare spilled cyanide
into rivers and destroyed 30-40% of the flora and fauna in the river Tisza. The
accident created toxic pollution 200 times the maximum safe limit. Romania has
pledged to involve Hungary in the official licensing process of the mining
project. "The project is in an initial stage and a study of the possible
impact of the project has been ordered and we await these results. The ministry
of environmental protection will analyse this project from the perspective of EU
The prime minister acknowledged that the mining project has also been questioned
in Romania, where the media raised questions concerning environmental impact,
archaeological heritage and the "origin of the money invested".
Tariceanu said that these issues were more than enough to warrant an attentive
analysis of the project. When questioned about houses being levelled on the mine
site and the suggestion that the project was in fact already underway, Tariceanu
said, "The project has not in fact started, but the land has been
"At present it is more like a real estate project than a mining one."
The project, he said, cannot continue past this initial land purchase stage
until it receives the "necessary clearance" following results of the
Fitch upgrades Petrom to BB on privatisation
Fitch Ratings said recently it had upgraded the Romania-based oil and gas
company Petrom's senior unsecured rating and 125m Eurobond issue to BB and BB-
(BB minus), to BB from BB- (BB minus) and it removed them from Rating Watch
Positive, maintaining the outlook positive. Petrom's short-term rating is
affirmed at B, Fitch said. The action follows a review of the company's
privatisation transaction, as Austria's OMV became its majority shareholder. The
transaction includes the purchase of 33.34 per cent of the existing shares from
the government (which currently controls 93 per cent) and, importantly, a
simultaneous capital increase, whereby OMV will subscribe to new shares to gain
51 per cent control of Petrom.
The capital increase means a 830m Euro cash injection for Petrom. While there
will be no restrictions on the use of the cash, Fitch understands from its
discussions with the OMV representative at Petrom that it will be used mainly
for capital expenditure, largely in domestic upstream, refining and marketing
activities. Fitch does not expect Petrom's debt to be directly guaranteed by OMV
or its treasury functions to be integrated in the near future. The European Bank
for Reconstruction and Development will exchange a loan of around US$73m
advanced to Petrom for a 2 per cent equity stake under the privatisation.
Over 10bn Euro in forex reserves
Romania's Central Bank (BNR) hard currency reserves excluding some 105.1 tonnes
of gold, surged to 10.84bn Euro at the end of 2004, BNR announced recently, New
BNR's hard currency reserves rose by 916.5m Euro in December from the previous
month, boosted mainly by inflows from privatisation of leading oil company SNP
Petrom, worth 611.1m Euro. In November 2004 Austrian oil and gas firm OMV paid
about 1.5bn Euro to get a majority stake in Petrom in a landmark deal. OMV paid
668.81m Euro for a 33.34 per cent stake in Petrom and 830.59m Euro for the new
shares it acquired to receive a 51 per cent stake. The BNR's hard currency
reserves were 6.39bn Euro at the end of 2003.
BCIT secures 7.5m Euro loan
Ion Tiriac Commercial Bank (BCIT) and Duetsche Investitions und
Entwicklungsgesellschaft (DEG) recently signed a 7.5m Euro long-term loan for
financing the projects developed by the small- and mid-sized enterprises (IMM),
BCIT announced in a recent statement, New Europe reported.
BCIT was established in April 1991 and obtained a 1,144bn lei operational profit
in the first nine months of 2004. It is the biggest private bank established in
Romania after 1989. The bank's assets increased to 24,400bn lei at the end of
FOREIGN ECONOMIC COOPERATION
Romania's new premier to discuss cooperation during Hungarian visit
Prime Minister, Calin Popescu-Tariceanu, will go to Budapest on the first
official visit abroad undertaken by the Romanian head of government after taking
office, Rompres News Agency reported.
On this occasion, Tariceanu will meet Hungarian President, Ferenc Madl, and
Hungarian Parliament Speaker, Katalin Szili. The Romanian prime minister will
hold talks with his Hungarian counterpart Ferenc Gyurcsany. The official visit's
agenda includes talks with representatives of parliamentary parties in Hungary,
the government's press office said.
High-level bilateral talks will focus on topics on the European agenda, with
Tariceanu tackling the issues under the auspices of Romania's future signing of
the accession treaty to the European Union and the deepening of the
Romanian-Hungarian strategic partnership.
Talks will also include initiatives relative to the boost and diversification of
cooperation between the two countries in economy and in developing the
Romanian-Hungarian border checkpoint network within the perspective of the
European Union's internal border. The Romanian delegation will take steps to
promote new joint projects in culture honouring the memory of Emanuil Gojdu and
capitalising on his heritage. The role played by the Romanian and Hungarian
minority respectively in the two countries in keeping boosting bilateral ties
will also be considered.
The official delegation accompanying Tariceanu to Budapest includes Minister of
State for the Coordination of Activities in Culture, Education and European
integration, Bela Marko, Foreign Minister, Mihai-Razvan Ungureanu,
Administration and Interior Minister, Vasile Blaga, Transport, Civil Engineering
and Tourism Minister, Gheorghe Dobre and Environment and Water Management
Minister, Sulphina Barbu.
On the sidelines of the official visit to Budapest, the participating ministers
will hold bilateral talks with their Hungarian counterparts, during which
hallmarks of bilateral cooperation at sectorial level will be discussed.
EBRD deals with HVB Bank
HVB Bank Romania will receive a 10m Euro loan from the European Bank for
Reconstruction and Development (EBRD) that will be used to finance HVB's
mortgage lending programme for retail clients, the bank said recently.
"The bank intends to offer its clients natural persons mortgage loans up to
100,000 Euro, over the next period of time," said HVB Bank Romania
President, Dan Pascariu. This is the fifth such loan offered by the EBRD to a
bank operating in the Romanian system and the first one to be received by HVB.
ABN Amro to finance railway revamp
ABN Amro Bank will act as a manager on behalf of the Romanian Ministry of
Transport, construction and Tourism (MTCT) in order to raise a 45m euro loan for
the financing of the design, manufacturing and installation of inter-connecting
systems in railway stations under a project carried out in partnership with
Germany's Siemens company, the bank said in a statement, New Europe reported.
The loan is long term and fully guaranteed by the government. The bank sees the
ministry of transport, constructions and tourism as a strategic partner. The
Romanian branch of ABN Amro has developed various kinds of loans, supported by
multilateral agreements with international agencies, for financial leasing
operations for aircraft purchasing or rehabilitation as well as medical
equipment and various capital goods, said the bank's local chief, Henk Mulder.