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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)

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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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