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Books on Romania
REPUBLICAN REFERENCE
Area (sq.km)
237,500
Population
22,355,551
Capital
Bucharest
Currency
Leu
President
Traian Basescu
Private sector
% of GDP
40%
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Update No: 109 - (29/06/06)
It is eighteen months since parliamentary elections, lost by
the Social Democrats under then Premier, Adrian Nastase. He has been replaced as
leader and the Social Democrats are now a renewed and recharged force in
politics.
Problems abound in Romania, where the public services are in disarray and
teachers and others are threatening strike action. Floods and outbreaks of bird
flu are taking place. Strong suspicion that constituents of the ruling coalition
are corrupt is undermining its authority. There is an air of crisis in the land.
Opposition no-confidence vote proposed
The Social Democrats attacked the government on June 22nd by presenting the
Parliament with a motion of no confidence, full of harsh language and direct
attacks against the ruling coalition.
The text supporting the no-confidence motion was called "The Tariceanu
government - facts and lies." The session was attended by 361 lawmakers, as
well as Prime Minister, Calin Popescu Tariceanu. The document was presented by
PSD Deputy, Mihai Tanasescu.
"Incompetence, mediocrity, lack of responsibility and greed are the
characteristics of a government that endangers the European future of all
Romanians," were the words with which Tanasescu launched the attacks
against the government, adding that the Social Democrats are forced to say that
the only solution to ending the crisis is to organize early elections.
According to the Social Democrats, the Liberal-Democratic Alliance won the
election through "historical electoral fraud."
"The alliance told only lies as it promised to bring justice and well-being
and brought instead poverty and scandals. After a year and a half, a thick layer
of dust is covering electoral promises," stressed Tanasescu.
According to the PSD, the Liberals' only concern is to weaken the political
power of the Democratic Party "at any cost and though all means."
"The Democrats have the same priority. None of these parties care about the
future of the people," asserted the vote of no confidence.
The PSD also pointed out that the government is comprised of various interest
groups, whose only goal is to increase the profits of their personal businesses.
"As it has been a year and half since the orange government took power, we
must draw the line and analyse its achievements: hundreds of bird flu outbreaks
threaten people all over the country, and agriculture lacks subventions,"
said the text of the no-confidence vote.
Tanasescu also criticized the health system, arguing that "the
bookkeeper-minister (Eugen Nicolaescu, the minister of health)" has made
mistakes when making calculations. "The doctors are tired of the health
minister's incompetence and patients have ended up begging for medicine and
dying while waiting in line," said Tanasescu, adding the new health laws
completed by Nicolaescu are "the climax of stupidity."
The vote of no confidence also attacked the education system and the minister in
charge, Mihail Haradu, pointing out that "he is from another planet"
and that teachers are again on the verge of a strike because "they are sick
of lies."
Agriculture Minister Gheorghe Flutur was also unable to escape the Social
Democrats' harsh criticism, as he was described as "the minister whose only
achievement is having placed Romania on the bird flu map."
The main opposition party also denounced the lack of infrastructural
improvements, the "chaotic" business climate "affected by
incoherent fiscal measures," the bad management of the budget and European
funds, as well as Environment Minister Sulfina Barbu's "incapacity" to
manage the flood crisis.
PM: The no-confidence vote stands no chance
Immediately after the end of the Social Democrats' presentation, the prime
minister said the motion of no confidence is just "a way to waste some
time" and labelled the text as being "demagogic and populist."
Tariceanu also said there is not even the slightest chance for Parliament to
approve the motion of no confidence. When asked if it is possible for a party
within the coalition to betray the government and vote in favour of the
no-confidence initiative, Tariceanu asserted "the parties in the coalition
do not betray each other."
In addition, Tariceanu said that the government does not need the help of some
Social Democratic lawmakers in order for the no-confidence presentation to be
rejected in Parliament. A vice president of the Liberal Party, Teodor Melescanu,
also said the government has no reason to worry about the effects of the
no-confidence motion, arguing the Social Democrats are also to blame for the
problems which still affect the country.
Vote of no confidence rejected
The vote of no confidence was debated and voted on during a joint session of
the Senate and the Chamber of Deputies on June 28th. The political analysts who
had said all along that the Social Democrats would not succeed in triggering the
dissolution of the government were vindicated by the result. The key factor was
that the other opposition faction - The Greater Romania Party - had already
announced that it would not support the Social Democrats' initiative.
The Social Democratic document entitled "The Tariceanu government - Facts
and Lies" was rejected by MPs with 235 ballots from a total of 380, after a
tumultuous debate in Parliament. The war of words and declarations in Parliament
seemed never-ending, as representatives of the current Liberal-Democratic
government argued against the main ideas outlined in the vote of no confidence
submitted by the opposition Social Democratic Party.
The discussions got hotter when Prime Minister Calin Popescu Tariceanu and
Social Democratic leader Mircea Geoana started assailing each other with
venomous accusations. The equally aggressive attacks launched by both parties
turned the whole debate into a real circus.
Tariceanu said calmly that he was not nervous about the result of the vote, as
he was sure the government would keep its position. "The PSD has started to
show more courage now that it has dropped in the polls," said Tariceanu,
adding ironically that Geoana plans to take his seat as prime minister, but he
assured his opponent that there is no chance this will happen. "There are
many people in this room who could become a prime minister one day, but surely
Mr. Geoana is not among them," he said, stirring Geoana's fury.
The Social Democratic leader replied that the government Tariceanu heads is
"an atrophied organism" which does not function at all. Geoana added
that the current prime minister should say goodbye to his seat, leading
Tariceanu to say that the opposition leader has not evolved at all in the past
few years.
The Social Democrat said the Liberal prime minister is becoming
"desperate" as his government has become "numb." Geoana
predicted an inevitable "divorce" inside the governing
Liberal-Democratic coalition, adding that the government would soon be history.
The former minister of finance, Social Democrat Mihai Tanasescu, slammed the
fiscal policies of the government, complaining that the business environment has
been negatively affected by the chaotic decisions of the government.
Greater Romania Party did not vote
The disagreeable fact for the PSD is that the MPs from the Greater Romania
Party abstained from voting on June 28 because they are upset with the Social
Democrats, according to party spokesman Lucian Bolcas.
He said that the Social Democratic leader tricked them and has failed to respect
his word regarding the collaboration protocol the two main opposition parties
agreed to sign.
Greater Romania Party leader Corneliu Vadim Tudor said the party he runs will
not take part in the political game the PSD is preparing.
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BANKING
Erste Bank to pay 3.75bn Euro for BCR takeover
Austrian Erste Bank der Oesterreichischen Sparkassen will deposit 3.75bn Euro in
an escrow account open at Citibank London for the Romanian Commercial Bank (BCR)
takeover, shareholders said recently, New Europe reported.
When selecting the bank, the Romanian party deemed the international bank where
the escrow account would be opened should have a Romanian subsidiary.
The state will cash in 2.2bn Euro from the BCR sale, and some 240m Euro will be
transferred to Proprietatea Fund. Before the actual payment for shares takes
place, the Romanian part committed itself to a series of conditional ties. The
main problems are obtaining the approval of the Competition Council regarding
the covering of Bancorex debts to the state budget at the time of the merger and
changing the status of BCR. The Competition Council initiated the analysis
regarding state aid for the former Bancorex, after receiving the notification
from the Authority for the Recovery of State Assets (AVAS). The privatisation
contract specifies that if the Competition Council's decision indicated
illegality of state budget grants for covering Bancorex debts, these values are
subtracted from the acquisition price paid to AVAS.
The Competition Council has already issued a non-intervention decision in the
case of economic concentration resulted from Erste Bank taking over BCR, since
the Austrian-based bank was not operating any kind of transactions on the
Romanian market.
The return on investment will reach 10 per cent as of 2009, according to Erste
Bank chairman, Andreas Treichl, adding that the acquisition will have a positive
impact on Erste results as of this year. "In the worst scenario, in late
2006 there will be no positive impact on profits," Treichl said.
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CREDIT RATINGS
Moody's upgrades Romania's to A2
Moody's Investors Service said recently it has improved the ceiling of the long
term sovereign rating granted to Romania from "Ba1" to "A2,"
as a result of the methodological revision of the ratings for 70 countries, said
the agency in an e-mailed statement. The rating granted by Moody's to Romania
was one step below the risk level recommended as acceptable for investments,
"BBB minus," before the re-evaluation. The ratings of the governmental
bonds and those of the bank deposits in foreign currency were not influenced.
The countries rated with the maximum Aaa have not recorded changes, and no
rating has been revised downward, said Moody's. The ceiling of the short term
ratings for Romania was revised to P-1, New Europe reported.
The new methodology eliminates the premise that the authorities of a country in
payment incapacity will automatically set up a moratorium over all the
reimbursements of debts in foreign currency taken by entities on its territory,
said Vincent Truglia, managing director of Moody's sovereign risks division.
He pointed out that the more flexible setting of the country ratings reflect the
deepening of the international capital markets starting with the '90s and the
fact that most of the governments unable to pay the loans in the form of bonds
in foreign currency avoided instituting a generalised moratorium over the
payments related to the foreign debt.
In order to evaluate the probability of such a moratorium, Moody's considers the
degree of integration of the national economy into the global one, and the
perception of the respective government over the costs determined by such a
measure, compared to alternatives.
The increase of the sovereign ceilings could be followed by improvement of the
ratings given to companies and other non-governmental entities. Standard&Poor's
and Fitch Ratings, have already granted to Romania the rating BBB minus for the
long term debts in foreign currency.
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ENERGY
Gazprom to extend gas supplies contracts with Romania
Gazexport, the export arm of Russian energy giant Gazprom and Conef SA, a
Romanian gas supplier, have signed a preliminary agreement on a long-term
contract for supplies of natural gas to Romania, Gazprom said recently, New
Europe reported.
"The sides agreed that the signing of a long-term contract would open up
new possibilities both for Conef SA and other consumers of Russian natural gas
with guaranteed long-term supplies," Gazprom said in a statement. Conef SA
is a subsidiary of the Romanian aluminium smelter, Alro, which is a member of
the Marco Group, an industrial and energy sector investment holding. Russia has
been exporting natural gas to Romania since 1979.
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FOOD & DRINK
InBev to take control of Romanian venture
Belgium-Brazilian brewing giant InBev said it plans to take full control of
its Interbrew Efes Brewery SA joint venture in Romania by buying the 50 per cent
stake owned by Turkey's Efes beermaker for an expected 20.79 million Euro, New
Europe reported.
"This transaction gives InBev full control over its operations in Romania,
hence more freedom to grasp future opportunities in the Romanian beer
market," InBev said in a statement. Breweries International NV and InBev
formed the 50-50 joint venture in Romania in 2000. The Belgium-based company
said the agreement is expected to take effect soon. InBev has two other fully
owned breweries in Romania. In 2005 it held a 16.6 per cent share of the
Romanian beer market with brands including Bergenbier and Noroc.
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PHARMACEUTICALS
Pharmaceutical sales increase 13% in Q1
Romanian pharmaceutical market reached 350 million Euro in Q1 of 2006 in terms
of acquisition prices, that is an increase by 13 per cent over the same period
in 2005, daily Ziarul financiar reported.
The growth rate slowed down in the first quarter of the year, following steady
increases over the past three years in drugs consumption of 30 to 50 per cent
stated in Euro. The Romanian drugs market decreased by 1.44 per cent from the
last quarter of 2005, which is said to be the best ever for drugs makers in
terms of sales. At the end of the first three months of the year, the
pharmaceutical companies followed different trends. Thus, the Cluj-based Terapia
company posted a rise of 13.5 per cent from fourth quarter of 2005, the fastest
advancement among the best ten companies, according to data with Cegedim cited
by the company. Thus, Terapia reported 25 million Euro in sales January through
March 2006. In 2005, the pharmaceutical market reached 4.6 billion Euro (1.27
billion Euro), an increase by 18 per cent over the previous year, according to
data with Cegedim. On the drugs shop segment of the market, drugs consumption
reached 3.47 billion lei (around 950 million Euro), recording the fastest
increasing rate, of approximately 25 per cent, as compared with 2004, while
drugs consumption in hospitals only slightly moved up. The growth rate will
slightly go down in the medium term, with the market value likely to exceed the
2.5-billion-Euro threshold.
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TELECOMMUNICATIONS
Cosmote extends 30m Euro loan to Romania unit
Cosmote extended Cosmote Romanian Mobile Telecommunications SA a loan worth 30
million Euro, said the company, New Europe reported.
The loan contract signed by the two companies is part of the financing programme
of Cosmote Romania, which stipulates a sum up to 400 million Euro for the
2006-2008 period. The financing of Cosmote Romania includes the refinancing of
the 30-million-Euro loan, which will be carried out by Cosmote through loans
from OTE plc, branch of OTE, after receiving approvals from the General
Shareholders' Assembly, due on June 9th 2006.
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