In-depth Business Intelligence
of US $
is given out of 208 nations - (data from the World Bank)
Books on Romania
Update No: 124 - (01/10/07)
Political crisis to come to a head in October
The Romanians have had to live with a grave crisis that has been paralysing
their governance for months, indeed for several years.
A Liberals (PNL) - Democrats (PD) government ruled Romania after the 2004
elections, but collapsed at the height of a major political crisis in spring
this year, when the PM Calin Popescu Tariceanu's Liberals removed all PD
ministers - seen as close to Tariceanu's archrival President Traian Basescu - in
a government reshuffle.
The Liberal Democrats (PLD) are a political group formed of ex-members of the
PNL who abandoned the party and allied with the Democrats over the past year.
The opposition Social Democrats (PSD) have been threatening a motion censure
against the incumbent government for months. The party finally submitted it for
reading in the Parliament as the group has been negotiating a possible accession
to government ranks. The motion is due to be voted in early October. This should
be the crunch.
The president weighs in
But the resolution of the crisis will not depend exclusively on parliament. The
pro-Western president in Romania is no mere figurehead, as recent events have
shown. Despite an attempt by Tariceanu to unseat him, he won a popular
referendum and remains a key player in the political game.
President Basescu said in a TV talk-show on September 27th that should a motion
censure tabled against the current Liberal-dominated government pass in the
Parliament, he would push for the re-creation of the late governing alliance of
Liberals (PNL), Democrats (PD) and Liberal Democrats (PLD).
He said he had already told Mircea Geoana, the leader of the opposition PSD, who
tabled the motion in the Parliament, that he would never name him prime
minister, but would push for a PD head of government.
Basescu said that he saw the organization of European Parliament elections as
the top political priority for the time being.
New labour market predicament
The political crisis is playing out against a dramatic change in the economy.
Romania is now since January a member of the EU. This is having a huge impact,
as Romanian workers can go and work abroad.
The one redeeming feature of the ghastly communist regime was that it educated
people. The Romanian fourteen year-olds are more numerate and literate than
their Western European counterparts, true also of the Bulgarians. The Romanians
have a Latin tongue and as often as not speak excellent French and Italian. They
are now in a position to go and work in France or Italy and many are doing so.
This is naturally imparting an upward tilt to wages at home. Many still have
close domestic ties and prefer if possible to remain in Romania. But the
enterprising youngsters without matrimonial commitments yet, are trying their
Romania has a very dynamic construction market; and most industry forecasts are
for a continued increase in growth for the next three-to-four years. In 2007 the
construction market is estimated to grow 15%.
However, construction inflation is a real worry. When money is finally leveraged
from EU funds for large scale infrastructure projects, such as road, rail and
aviation, there will be even greater pressure on the supply chain than that
currently being experienced.
There are a number of factors driving growth:
· High demand in the private sector, especially in the residential sector from
a growing young population employed in the banking sector, with high levels of
· Demand by multinational corporations for office space in Bucharest
· Massive investment from foreign investors
· A boom in foreign financial programmes
· EU funding on infrastructure investment.
· Increased investment in public budgets for schools, healthcare, and so on.
Rising construction costs
Against the background of an increasing workload there are two issues that will
affect construction costs: shortage of construction materials and lack of
On the materials side demand is high and, despite the fact that imports are more
readily available and the fact that Turkey and other neighbours have positioned
themselves to take advantage of the situation, there is evidence of rising
prices based on growing utilities and raw materials prices. As a result, it is
estimated that construction material costs may rise by 5-15% in 2007.
On the labour side, as we have seen, since Romania joined the EU in January, the
EU has become a very serious magnet for the Romanian skilled labour market. This
lack of manpower has led to growing labour costs for both skilled and unskilled
workers and it is estimated that labour costs could increase by 15-20% in 2007.
· With the current situation on labour and materials, and based on a general
inflation rate in the economy of about 6%, it is expected that general
construction costs will increase by at least 9% and perhaps be as much as 15%
over the coming year.