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ROMANIA


 

 

In-depth Business Intelligence

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: 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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