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ROMANIA


 

 

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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 60,358 44,428 38,700 52
         
GNI per capita
 US $ 2,310 1,850 1,720 100
Ranking is given out of 208 nations - (data from the World Bank)

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%

  

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 Union. 
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 Union." 
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 parliamentary majority. 
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 down-to-earth.
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 issues." 
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 legislation." 
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 purchased. 
"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 commissioned study. 

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CREDIT RATINGS

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.

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FINANCIAL NEWS

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 Europe reported.
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 September 2004.

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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.

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FOREIGN LOANS

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.

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TRANSPORT

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.

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