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Books on Romania
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Update No: 119 - (30/04/07)
Political crisis
The Romanian Parliament suspended President Traian Basescu on April 19th, based
on accusations that he breached the Constitution. The Constitutional Court had
previously rejected a parliamentary commission's findings in this regard. An
interim president is in place before new presidential elections. On May 19th the
embattled president takes his case to the electorate in a national referendum
over his impeachment, which is widely expected to fail. Since the constitutional
court has already pronounced that it has found no evidence of him acting
unconstitutionally, it is unclear whether the government would then resign in
such circumstances as a failure to carry the impeachment allegations.
Earlier in April the prime minister, Calin Popescu Tariceanu, reshuffled his
cabinet. He fired ministers from the Democratic Party, which is close to Basescu.
His own party, the Liberal Party, and the Democratic Union of Hungarians can
probably soldier on alone, since the opposition Social democratic Party has
promised its support.
The most significant sacking in the reshuffle was undoubtedly that of Monica
Macovei, the Justice Minister, who was making the fight against corruption her
mission and had appointed tough investigators and prosecutors to carry it out.
She was showing distinct signs of meaning real business. She and her assistants
were investigating and indicting lawmakers, ministers and even a former prime
minister.
Clearly this sort of thing cannot be allowed to go on. Where might it end?
The premier's opponents regard his party as the Liberal Kleptocratic Party. He
has replaced Macovei with a stalwart of his own, the head of the anti-fraud
squad in his own office. Now things can be brought under proper control.
Brussels' big mistake
Five months into its EU membership, along with Bulgaria, it may be doubted
whether the EU was wise to let Romania in so soon. They should have both been
obliged to clean up their act first as a precondition of entry. For, as
everybody knows, their elites are thoroughly corrupt and their capitalists often
criminalized, as in Russia and other former communists countries, incalculated
with the idea that capitalism is crime per se, as depicted in Das Kapital.
Brussels has lost most of its leverage here. It is elementary psychology to put
the redress of failings before the grant of favours in any walk of life. The EU
taxpayers are paying the penalty here, as their money ends up in dodgy Balkan
bank accounts.
Premature entry was a bad thing for the two countries in question too. They
remain in the hands of venal leaders and crooked businessmen. Macovei said in an
interview a few days before she was dismissed: "Many politicians care about
their personal situation and assets, and those of their friends, and not what
Brussels says." She then put her finger on it: "We are in, and they
know Romania cannot be expelled."
Meanwhile there are signs of overheating in their economies as a direct result
of entry, as we shall see.
European Commissioner Frattini concerned about Romania's anti-graft
prosecutor Morar
Another anti-graft official's career is in jeopardy. European Justice
Commissioner Franco Frattini told Reuters on April 20th that he would be
extremely worried if the head of Romania's National Anti-Corruption Department,
Daniel Morar, is dismissed. He told Reuters that he insisted that the
implementation of practical inquiries on important judicial cases should move on
despite the political difficulties Romania is facing.
Frattini's statement came a day after European Commission sources
confirmed for HotNews.ro that EU commissioners have been worried about the
political evolution in Romania and how it affects the fight against corruption
and the reform of justice.
But overheating is a problem
Standard & Poor's single out Romania, along with Latvia, as having a
grave risk of overheating.
"The continued trend of upgrades outnumbering downgrades since 2000 for
(emerging European) sovereign countries reflects the sustained improvements in
their economies," said Ana Mates, Standard & Poor's credit analyst and
one of the authors of a new report released on April 18th. "For some of
these sovereigns, however, the prospect of increased investment flows and
buoyant domestic demand brings with it the possibility of economic
overheating," Mates said.
Five countries are at most risk: the Baltic states Estonia, Latvia and
Lithuania, as well as the European Union's newest members Bulgaria and Romania.
All five countries are ranked investment grade. Latvia and Romania, however,
will likely experience the hardest landing, Standard and Poor's said.
Romania's predicament exemplifies a common problem in emerging Europe, where
membership in the European Union has boosted domestic demand close to
unsustainable levels. The five "overheaters" have to rein in large
current account deficits and credit booms. The need to finance large external
imbalances makes the balance of payments vulnerable to fluctuations in investor
confidence and international liquidity conditions.
Lars Christensen, senior analyst at Denmark's Danske Bank, agrees that there is
a clear regional trend of overheating.
"Domestic demand has accelerated all across Central and Eastern Europe and
the overheating 'zone' is not far off in many of the new EU countries,"
Christensen said in a recent note.
"The situation is worst in the Baltic States, where recent inflation
numbers have surprised strongly on the upside and in southeastern Europe, where
the current account situation has deteriorated further in recent months."
Because economic growth is becoming less sustainable in emerging Europe, there
is a higher risk of increased volatility in regional stock markets, Christensen
said.
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AUTOMOBILES
Tariceanu stresses importance of auto industry
On a working visit recently to Dacia Renault car maker, Romanian Prime Minister,
Calin Popescu Tariceanu, stressed that the auto industry forms the spine of the
Romanian economy, a government press release said. Tariceanu said that Pitesti
investment is a successful one, taking into account the results achieved so far,
as well as the business plans for the next period, New Europe reported.
The finished products made at Dacia Renault are exported and the parts made in
Romania are assembled in other five countries, from India to South America.
"The production capacities, both for the domestic market and export will be
developed. About 1,300 vehicles will be made daily, compared with 800-900 units
made now," the premier was quoted as saying in the government release.
This investment aimed first at "supplying the Romanian market with a
performing car at affordable prices for the Romanian consumer who does not have
the same purchasing power as the Western consumer," he said, adding that
the project has not only been a success on the Romanian market, but also on the
foreign market as well.
Tariceanu also showed his aim at achieving a project in Craiova, like that in
Pitesti, through association with important investors. "I will not hesitate
in any moment to declare myself in favour of a profitable economic activity able
to generate jobs, and funds to the budget. We need these funds in order to carry
out programmes in the education and infrastructure field. I cannot listen to
those who plead for the Romanian car market to gather all the old cars of
Western Europe," the premier was quoted as saying in the release.
The "first registration tax, 'leaving aside that it is an unfortunate
definition,' is destined to protect Romania's environment, to also secure an
industry equipped with non-polluting vehicles and, secondly, to secure the jobs
in this field and in horizontal industries," he stated, adding: "Only
those directly involved in this industry are over 150,000."
He also said that there are other EU countries, with such taxes, which have also
sought for ways not to infringe the European legislation. "There are many
countries in the EU as well that try to protect their economy, industry and
jobs. We share the same interest. We have an issue with the European Commission
which we must solve in the framework of our status of EU member state. We must
find a technical and realistic solution that would allow national interests'
defence and observance of EU norms at the same time," he was quoted as
saying in the release.
Renault centre to boost job market
Romanian Prime Minister, Calin Popescu Tariceanu recently addressed a conference
for the presentation of the new Renault Design Centre in Romania, while praising
Romanian workers, and emphasising the economic progress his country may achieve
in the future from such projects. "We want Romania to develop and (the)
Renault project can be considered as one of the projects which help Romania
achieve progress," he said, according to a government press release on
March 19th, New Europe reported.
The premier spoke about the importance of Romania's work force. "We have to
carefully think of ways to capitalise on our capacity, talent and intelligence -
the worthiest values of today's world," he said, adding: "In Europe
and today's world, the wealthiest countries are not those rich in natural
resources, but those rich in human resources."
Pointing out the project's importance for the EU newcomer, the premier
explained: "The Dacia-Renault project was initiated in 1997, reached
maturity and in my view, the perspective is extraordinary. Out of the total
output, 350,000 automobiles will be built on the Logan platform in Pitesti,
under many models and 650,000 will be Renault models to be exported to India,
Iran, Tunisia, Morocco and Colombia. These data seem important to me because,
the output of Dacia Renault Pitesti factory is expected to reach one million
units in 2008, which will translate into an important number of jobs in this
plant."
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BANKING
Bancpost posts 7.2m Euro profit in 2006
Romanian bank Bancpost, majority owned by Greece's EFG Eurobank, said on
April 5th that it obtained a net profit of 7.2 million Euro in 2006 from a loss
of 1.2 million Euro in 2005, based on the success of the restructuring plans,
the bank said in an e-mailed statement, New Europe reported.
Bancpost, which is the sixth bank in the Romania market from assets perspective,
said earlier that it expected a net profit of some 21-22 million Euro for 2007.
The bank said in the statement its loan portfolio doubled last year. Bancpost's
market share on the domestic lending segment rose to 4.9 per cent at the end of
December from 4.1 per cent a year earlier. Its deposit portfolio grew by 50.3
per cent in 2006. The bank had said it would invest 10 million Euro to expand
its branch network by 60 units this year, bringing their total number to
280-290. Bancpost has 200 outlets throughout the country of 21.6 million people.
At the end of December 2006 Bancpost has total assets of 2.3 billion Euro,
according to central bank's figures.
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CREDIT RATINGS
S&P's outlook of stable not to affect ratings on state firms
Standard & Poor's said on April 12th that its outlook revision to stable
from positive on Romania will not affect its ratings and outlooks on the
state-owned infrastructure companies, the rating agency said in a report posted
on its website. The ratings on power grid operator Transelectrica, freight
railway company CFR Marfa, hydropower generator Hidroelectrica and gas
transmission operator Transgaz are based on a bottom-up approach and are not
linked to those on the sovereign, the agency said in a statement, New Europe
reported.
Although the rating on Romania's railway company CFR is based on a top-down
approach, the outlook does not reflect the outlook on the sovereign, due to
S&P's concern that continued weak reporting standards will increase
information risk and may ultimately put pressure on the rating. S&P's
reduced its outlook on Romania a week before last to stable from positive to
reflect political instability in the EU newcomer state, and it also affirmed
Romania's BBB-/A-3 foreign currency and BBB/A-3 local currency sovereign credit
ratings. "We will monitor and evaluate any potential implications of the
political environment underlying the sovereign outlook revision for the
creditworthiness of Romanian infrastructure companies," S&P's said.
Moody's gives a stable outlook
Moody's Investors Service has assigned investment-grade ratings and a stable
outlook for Romania, reflecting low government debt and significant economic
restructuring from the past few years, the rating agency said on March 29th in
an e-mailed report, New Europe reported.
Moody's said Romania also benefits from moderate inflation, ample external
liquidity and strong gross domestic product growth. The foreign currency country
ceiling for bonds is A1, based on the foreign currency government bond rating of
Baa3 and assessment of a very low risk of a payments moratorium in the event of
a government bond default, Moody's said. The stable rating outlook balances the
benefits of European Union accession against the possible risk of overheating,
it said. However, the rapid credit growth to the private sector, related sharp
increases in asset prices and weakening of the current account deficit are a
cause of concern, Moody's warned.
CFR Marfa gets Ba2 corporate family rating from Moody's
Moody's Investors Service said on March 22nd that it has assigned a Ba2
corporate family rating to Romanian state-owned freight railway company CFR
Marfa and that the outlook remains negative, the rating agency said, New Europe
reported.
Moody's affirmed the Ba2 Senior Unsecured Debt rating, currently assigned to the
company's 120 million Euro bond issue, which will mature in December 2007, the
rating agency said. The corporate family rating of CFR Marfa reflects the
combination of the company's baseline credit assessment of 17, its high
dependence and support and the Baa3 local currency rating of the Romanian
government, Moody's added.
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ENERGY
Conef Energy SRL inks gas deal with Gazprom
Romania's Conef Energy SRL, shareholder in aluminium smelter Alro, signed a
contract for natural gas deliveries to Romania in 2010-2030 with Gazprom, the
Russia's energy giant reported on its website on April 4th.
Romania will receive up to two billion cubic meters of Russian gas annually,
with an aggregate supply volume due to reach 42 billion cubic meters, said
Gazprom. Russia has supplied natural gas to Romania since 1979, and some 110
billion cubic meters of Russian gas was exported to the country as of April 1st,
2007, it was reported. Conef Energy SRL is a subsidiary of Conef SA and part of
the Marco Investment and Industries Group, an international company that
controls a vertically oriented aluminium holding, a number of financial and
investment companies, developers and other companies around the world. Conef SA
has cooperated with Gazprom Export, Gazprom's export arm, since 2002.
Constanta-Pancevo-Trieste pipeline deal signed
Officials from countries in southern Europe on April 2nd signed an agreement
they hope will lead to the construction of an oil and gas pipeline linking the
Black Sea to Western European markets, New Europe reported.
The agreement, signed by ministers from Italy, Croatia, Slovenia, Serbia and
Romania, envisions a 1,400-kilometre pipeline from the port of Constanta in
Romania to Trieste in Italy, transporting up to 90 million tonnes of oil
annually by 2012. EU Commissioner for Energy Andris Piebalgs also signed the
ministerial declaration on the construction of the Constanta-Pancevo-Trieste
pipeline. The project is worth nearly US$2.6 billion. The signing of this
declaration has been postponed several times in the past year. The pipeline will
reduce tanker transportation in the Bosporus and Dardanelles Straits and the
Adriatic Sea, and as such it is a competitor to the Bourgas-Alexandroupolis
project already being implemented by Russia, Bulgaria and Greece.
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FOREIGN LOANS
World Bank loans to help country improvement
Bulgaria's Finance Minister, Plamen Oresharski, and World Bank country director
for Bulgaria, Romania and Croatia, Anand Seth, signed agreements on March 23rd
allotting 155m Euro to assist reforms in several economic spheres, Sofia News
Agency reported.
Oresharski and Seth also signed an agreement to finance transport and trade
projects. The contracts term of acquittal is 17 years, including a five year
gratis period.
The first loan to be signed is the Development Policy Loan 1 (DPL-1) and will be
first of three Development Policy Loans for the total sum of 450 million Euro.
These loans will be extended in the equivalent Euro sums. DPL I aims at
improving the institutional framework of the labour and social sector and
improving the efficiency of the health, education and social protection systems,
in view of supporting a stable financial framework of costs and improving the
access to basic social services.
Development policy loans aim at aiding the government in the accomplishment of
its medium-term plan for political and institutional reforms. The loan will also
help Bulgaria within its EU integration, Sofia news agency reported. The loan is
worth 114 million Euro and is intended to aid Bulgaria in the first months of
its EU membership. The investment loan for the Second Trade and Transport
Facilitation in Southeast Europe Project stands at 40.9 million Euro.
Bulgaria is providing a co-funding of 13.7 million Euro from the national
budget. The loan should help improve the physical capacity and working
conditions at selected EU external border crossings, with particular focus on
the Trans-European Transport Network; constructing the access road linking the
Kapitan Andreevo border crossing point to the Maritsa motorway; enhancing the
sharing of relevant border crossing data, and streamlining operational
procedures of border crossing agencies, and strengthening institutional
capacity.
Seth and Bulgarian Economy and Energy Minister Roumen Ovcharov signed a
US$708,000 grant provided by the Japanese government and administered by World
Bank. The grant comes from the Japan Policy and Human Resources Development Fund
(PHRD) Fund, which was established in 1990 as a partnership between the
government of Japan and the World Bank. It will be used for preparation of the
second Development Policy Loan (DPL II) project.
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TELECOMMUNICATIONS
Nokia to invest 60m Euro in a plant in Cluj
Finnish IT giant Nokia signed a deal on March 26th with the Romanian government
to open a cell phone production facility in Transylvania in which it will invest
60 million Euro to meet the increasing demand for mobile phones in Europe,
Middle East and Africa, the company said in a statement. Nokia's new facility in
Cluj is located about 400 kilometres northwest of Romania's capital Bucharest,
New Europe reported.
The construction work at Cluj will start in spring 2007 and production is
expected to begin in the first half of 2008. Nokia foresees ramping up the
factory gradually and will recruit approximately 500 employees by the end of
2007. As part of the plans, Nokia is looking to establish an industrial village
in the area, enabling a number of key suppliers and partners to locate their
operations there, the company added.
The plant will be the company's 11th cell phone production facility globally.
Nokia said it selected Cluj County for the plant because of its pool of skilled
labour, its good logistics' connections and its industrial tradition. Romanian
authorities will spend 33 million Euro on improving roads and on utilities for
the plant.
Eventually, the project is estimated to create 15,000 jobs, the government said.
Romanian Prime Minister Calin Popescu Tariceanu said the Cluj airport may also
need an expansion to cope with the increase in traffic. Ericsson, Microsoft and
Renault earlier announced plans to open research, support or design facilities
in Romania.
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