FREE GEOPOLITICAL NEWSLETTER

romania  

For current reports go to EASY FINDER

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

 


Update No: 133 - (30/06/08)

Romania in the EC dock
The big event in Romania is the coming publication of an EC report that highlights corruption as the most serious threat it faces. The public has long known that former premier Adrian Nastase and his cronies were thoroughly corrupt. When a brave woman justice minister began to point the finger two years ago, she was promptly sacked.

But she did, indeed, leave behind her an anti-corruption prosecutor's office (DNA) that, as we shall see, has had considerable success of late. It has had success at any rate in unearthing some revealing facts, even if prosecution does not follow if the Constitutional Court and parliament do not approve, a condition that of course promotes corruption right at the top of the judiciary and the legislature. 

As in Bulgaria, where a highly critical report appeared on the same subject on June 23, the president of the country, a man above suspicion in this regard, is castigating the government of Calin Popesu-Taricaenu for its sins. The whole political culture is saturated by corruption, which a story we relate at the end substantiates. 

The EU pinpoints all-pervasive corruption 
There is no doubt what is the number one problem, therefore, in Romania – tackling corruption that goes right to the top of government and in every reach of the state, as in Bulgaria. It is poisoning relations with the EU.

Bulgaria and Romania joined the EU in January 2007 under precise conditions. Brussels was well aware of the perils of disbursing EU funds in the Balkans. European Commission officials visited Sofia and Bucharest to assess judicial reforms on May 18-23. The visit took place amid mounting pressure in Brussels to invoke so-called "safeguard clauses" against the two countries, which could result in EU funds being slashed.

There are three areas where safeguard measures can be invoked under Bulgaria and Romania's EU Accession Treaties: economic, internal market and judicial reforms. The safeguard clause can be invoked up to three years after accession and could result for example in food export bans or cuts to EU funds in areas such as agriculture and "structural" policies.

The two EU newcomers are struggling hard to avoid a "worst-case scenario" ahead of a Commission monitoring report expected on July 16. According to reports in the Romanian press, the mission has taken place at a time when some officials in Brussels are wondering whether taking the two countries onboard as early as January 2007 was "a mistake" and are applying pressure to activate the safeguard clause on justice.

Both countries could lose EU funds or have their national court decisions annulled if a safeguard clause is triggered against them.

Evidence mounts that corruption is still rife
Prosecutors have gathered substantial evidence on corruption cases against Prime Minister Adrian Nastase, former transport minister Miron Mitrea, current Labour Minister Paul Pacuraru and five other senior officials, the Romanian media have reported.

Although this could be an important test case for the country, the Romanian constitutional court ruled that the Parliament must give its approval to investigate high-ranking politicians. This prompted Romanian President Traian Basescu to call the constitutional court "a shield for corruption."

A telling image of what corruption can represent in Romania was provided by the discovery of €1.7 million in cash in the boot of a car belonging to oligarch, football club owner and populist politician Gigi Becali. He said the money was intended "to buy chocolate and candy". Strange as it may seem, the courts often consider such explanations to be valid.

The high-profile cases may remain taboo, but at least statistics from the anti-corruption prosecutors' office (DNA) show that hundreds of people have been indicted in recent months and dozens convicted. What remains to be seen is whether the Commission will find these developments satisfying.

Justice is not the only problem area. According to reports in the Romanian press, the country could lose a large part of its EU agricultural funds due to poor management of the programmes.

Romanian Justice Minister Catalin Predoiu admitted there is resistance to strong reforms in his country in an interview for Reuters. "I wouldn't believe in reform measures that do not face the tendency to preserve the status quo. However, I am happy to see that both the government and parliament showed commitment to fighting corruption," Predoiu said.

The internet site, Hotnews.ro, quotes sources from the Romanian government, who consider that Brussels will not trigger the Justice safeguard clause. The officials expected however the monitoring procedure to continue for another year.

Basescu berates the politicians
Romanian President Traian Basescu, as we have seen, has called the country's Constitutional Court "a shield" for corruption, a stinging rebuke. The comment earned him reprimands from politicians across the spectrum. Combined with the Becali affair, it shows how corruption is a day-to-day concern in Romania. 

Basescu also said that various politicians had asked him to intercede on their behalf with the judiciary when under investigation. His comments touched a raw nerve in the Black Sea state, which many observers say has regressed in reforms against high-level graft since joining the European Union last year.

As Romania heads into local government elections on June 1 with the ballots rife with candidates tainted by corruption accusations, the worry is that reforms have not been sufficient to keep corrupt officials from office.

Basescu was referring to a ruling by the Constitutional Court in March requiring prosecutors to seek parliament's approval for checks on some senior politicians. That decision opened doors to new delays in investigations of corruption, adding to accusations that the establishment is not serious about tackling fraud.

A handful of probes into allegations of abuse among former and current cabinet ministers, including ex-prime minister Adrian Nastase, are already stalled by other delays in courts and changes in legislation.

"Other than with prosecutions, there is no progress since 2005," said Laura Stefan of the Romanian Academic Society, a think-tank. "The message to the people is that to have a nice life you have to be rich and powerful. "There is no law but power." 

Far-reaching problems
Bucharest's struggle to clean up is raising concerns in the European Union as diplomats say Romania may have joined the bloc too early. Brussels monitors the reform progress but its ability to enforce the new members' commitments wanes after accession.

Such disappointment in Brussels may make it harder for other countries in the Balkans to join the wealthy bloc, analysts say. They argue the EU will be more cautious in setting entry targets and much tougher in demanding reform results.

"The lesson is that if there are things you don't seem able to resolve in the run-up to accession, then we are not confident you will able to achieve them afterwards," said Katinka Barysch from the Centre for European Reform in London.

For Romania, the foot-dragging means slower transformation from the brutal pre-1989 regime of Nicolae Ceausescu towards democracy as Romanians are reluctant to trust state institutions. According to Transparency International, Romania is the most graft-prone EU member.

Its ruling centrists argue they are doing what they can to combat widespread abuse and reform the judiciary.

They point to statistics from the anti-corruption prosecutors' office (DNA) showing hundreds of people have been indicted in recent months and dozens convicted.

"Of course there is resistance to strong reforms," Justice Minister Catalin Predoiu told Reuters. "I wouldn't believe in reform measures that do not face the tendency to preserve the status quo. However ... I am happy to see that both the government and parliament showed commitment to fighting corruption."

Despite the tough rhetoric, results in the war on top-level crime are scant. The Romania Libera daily newspaper said its research showed almost every county is fielding a candidate for the local election who is either being investigated for graft or has faced accusations of abuse.

One of the highest-ranking officials to be sentenced to jail on graft charges, Nicolae Mischie, is now running for office again, after switching allegiances from the ex-communist PSD to the nationalist New Generation Party of soccer tycoon Becali. Mischie was sentenced to four years for abusing power while he headed a county council in southwestern Romania. 

Deep Roots 
Civil society observers and diplomats say too many Romanian politicians are entangled in powerful interest groups that oppose reforms, while others simply protect their own practices.

An example, they say, is a protracted parliamentary debate over Romania's new criminal procedure code, which some observers have said could effectively prevent prosecution of graft if introduced in its full form.

Romania's Senate has improved the draft, including removing a ban on wire-tapping phones before pressing criminal charges against a suspect. But resistance is strong.

"The system is far more powerful than we thought," said Stefan. "People are defending themselves like crazy."

In coming weeks, parliament is also due to decide whether to approve prosecutors' request to investigate former Prime Minister Nastase, former Transport Minister Miron Mitrea and current Labor Minister Paul Pacuraru. All three face corruption charges which they deny and label as politically motivated.

"Nobody believes the deputies will hand them (the politicians) over to the Justice Hall," wrote Mircea Marian, a columnist for Evenimentul Zilei daily. "Their files of corruption will be lost forever."

                                         ******

The following is self-explanatory:-

Renault's Romanian Fairyland Suspended 
The Bucharest press didn’t approve of the workers’ vote to strike at the Dacia car plant in March, nor its implications for industrial relations. “Doctor Union: the anti-investment cure” was the headline in the daily Jurnalul on March 22; “Dacia and ArcelorMittal, strikes are at the limit of the law” was the headline in Cotidianul on March 26; Evenimentul Zilei, the Ringier group daily, reckoned on March 27 that the strike at the Renault subsidiary could put up the Dacia Logan’s price by $78 to $125.
By STÉPHANE LUÇON

That reaction from Romanian journalists is symptomatic of a trauma still gripping the country following the dictatorship of Nicolae Ceausescu, and after the political manipulation of the miners’ strikes in 1990 and 1991. (Democratically elected but unable to stabilise the political situation after the fall of Nicolae Ceausescu, President Ion Iliescu approved the miners who, in June 1990, descended on Bucharest and ransacked the offices of local authorities and of opposition parties. In September 1991 Iliescu used a new march by the miners as an excuse to dispose of prime minister Petre Roman. Four died and over a hundred were injured in riots.)

During the transition years, the media described wage claims as a form of nostalgia for totalitarian communism, a pretext to treat activists as pariahs. Romania in transition was divided. Workers saw their jobs disappearing east via factory relocation; investors saw a land of gold where people worked happily for under $150 a month. But this economic and social scene has started to evolve. In the autumn of 2007, after weeks of negotiation, the unions concluded a deal with the neo-liberal prime minister, Calin Popescu-Tariceanu, to increase the monthly minimum wage from $167 to $214, despite monetarist criticism from President Trajan Basescu, the finance minister, the head of the national bank, and the press. And 2008 will be even more decisive for union action.

What changed was Romania’s accession on January 1, 2007 to the European Union. This, according to Petru Dandea, vice-president of Cartel Alfa, the union federation, created “price alignment around European market tariffs which worked through as steep rises in the cost of living. That’s what’s causing the current round of wage claims.” Just a few months after the minimum salary deal, strikes broke out at Dacia and ArcelorMittal. First they were criticized by all sides. The atmosphere was tense.

The strike at the Dacia production line in Pitesti, home of the Logan, helps explain what happened. It had just begun when the plant’s management filed a complaint against the Union of Dacia Workers (UDW). On April 9 a court at Arges judged the strike lawful, which didn’t prevent Renault’s group head of legal affairs taking advice on whether the decision breached Romanian law. 

The unions still saw the court decision as an unexpected blessing. But then the strike at ArcelorMittal (the Solidaritatea union called for a re-evaluation of salaries at the Galati plant even though almost 4,000 job losses had been announced by the factory management) was suspended on April 15 after a decision by the court at Galati. Romanian law on the right to strike empowers individual judges: it stipulates that action “must not endanger people’s health or safety”. Factory managers hinted at industrial accident risks even when workers followed the correct safety procedures.

“We can’t make precise accusations, but there is so much corruption within the Romanian justice system that it would hardly be surprising if a number of the orders suspending strike action were obtained in this way,” said Dandea. Romania’s accession to the EU had been threatened by a clause penalizing slowness in reform of the justice system, reactivated in the spring of 2007 after pressure from Brussels. The judgment of the Arges court, applauded by the unions, endorsed the whole trade union movement. Then, in an open letter to the workforce on March 21, François Fourmont, Dacia’s chairman, warned employees that production of the Logan might, in the long term, be switched to Morocco or Ukraine.

Adrian Ursu, anchorman of a eurosceptical TV programme saw this threat “as a piece of bluff, or perhaps a gaffe, but in any case a badly judged initiative at a moment when the dispute might have been resolved”.

The workforce didn’t take the letter seriously. “It was ridiculous,” said Dandea. “Renault has invested over a billion euros in Romania and can’t leave just like that. Besides the write-down cost of the plant there would be heavy salary payoffs. Leaving Romania would prove far too expensive.”

Relocation is a credible threat for industry sectors like textiles, which rely on unskilled labor, but with Dacia it seems highly unlikely. Anyway, such a threat bonds otherwise disparate groups. Never in the history of Romanian labor struggles has a single union benefited in the way the UDW did from Fourmont’s letter: the post office union promised $17,160 to compensate for salary losses, the Universul federation came up with $3,440; in France CFDT-Renault collected almost $15,600 for the cause, while shop floor workers at Renault-Cléon collected more than $3,120. Cartel Alfa pledged solidarity, as did the federation of petroleum industry unions Petrom. Even the Social Democrats, whose ideology is extremely variable, as is their championship of privatisation and flirtation with the markets, pledged to support the movement, dragging the European Socialist Party in their wake.

A globalisation dream
In recent years Renault’s 1999 acquisition of Dacia has been described as a fairytale of globalisation. The story was of a major western industrial business arriving in Romania to bond with the workforce more closely than any local business had ever done.

Renault’s trouble-free reconstruction of Dacia was viewed as a textbook demonstration of management. This was partly the work of Bernard Brunhes Consultants, hired to manage the transition. The boast was that the unions had accepted a reduction in workforce from 27,000 to 16,000. Many commented that things had changed for the better since the arrival of the French.

The company’s human resources director, François Blanc, quoted Heraclitus: “Harmony is best born among those who differ”. Christian Estève, managing director at the time, congratulated himself for negotiating a start-up process phased over several years although Romanian law would have granted the necessary licences in two months. Among anticipated plus points were the establishment of a trust to nurture progress and mutual understanding, a staff retraining program and help with new businesses. Dacia wanted to be seen as a model privatisation of a former eastern bloc factory.

Success also brought exceptional commercial returns. Renault’s chairman, Carlos Ghosn, said this March that the operating margin on the Logan was the best throughout the group, 8 per cent compared with an average 2 per cent. Fourmont announced record profits of $156m. Renault and Fourmont planned to increase production to 400,000 vehicles a year .

But the workforce remembered of unkept promises. Constantin Stroe, who had been the Romanian manager of Dacia since 1989 and stayed on after the Renault acquisition, had given assurances that under the new regime workers would earn a salary which met the needs of a family. By this year the workers were still waiting, while inflation rose because of oil and food prices.

To curb inflationary pressures industrialists and government emphasised a need for wage control, and this was echoed at the Ecofin (EU finance ministers) meeting in Ljubljana on April 5. “It was unacceptable,” said Dandea. “Inflation is caused by factors which have nothing to do with the employees: the US financial crisis and the rising cost of food. I just don’t understand why Europe’s finance ministers seek to make workers pay for the bankers’ follies.” If, further west, “targeted” inflation has hit household finances, it has had a catastrophic impact on Romania. In 2007 the weekly food bill was 41 per cent of the family budget , because, although the minimum salary in Romania is 10 times less than that in France, food often sells at much the same price.

The manager of a French business explains the wage claims as “a classic case of supply and demand”. Officially, Romania’s unemployment fell from 10.5 per cent in 2000 to 4.3 per cent in February 2008. The departure of two million Romanians to live abroad since 1990 has drained workforce reserves. In a market economy, the scarcer the commodity, the greater its value - and that applies in the workplace, to the pool of skilled labour for Ford, newly installed in Romania.

“We’ve yet to experience a wave of outward investment,” said journalist Adrian Ursu. “Nokia’s decision to swap the German town of Bochum for the Cluj-Napoca region, benefiting from the public grants available locally towards set-up costs, is much more representative of the Romanian situation than the Dacia strike.”

José Manuel Barroso, president of the European Commission, calls relocation from the heart of the EU a deadly disease, but that does not seem to reflect a strong European social policy. The columnist Ioana Lupea unusually enquired after the medium-term economic and social costs of Nokia’s possible eventual departure, which would provoke the same upsets in Cluj as in Bochum, where local people protested by destroying Nokia phones.

Some 85 of Dacia workers voted on April 9 to continue their strike, since they had been reinforced by the problems of relocation and the Arges court’s favourable judgment. They snubbed union leaders who thought acceptable the management offer of a further $128. On 10 April 5,000 people took to the streets of Pitesti and by 11 April the protest had secured an average increase of $154, 65% of the original demand. Work began next day.

Could the Dacia strike be a step forward in European social justice? We will know soon. European trades unions and leftwing parties will be monitoring conflicts for positive developments. On May 6 there was a strike at the Leoni wiring factory, a Dacia supplier in Mioveni. On May 9 workers at Silcotub, a subsidiary of the multinational Tenaris, struck at Zalau. On May 15 workers at ArcelorMittal Galati struck again after the legal cooling-off period ended. While the battle to save the factory at Gandrange (Lorraine) continues, will ArcelorMittal’s French and other EU workers support their Romanian colleagues and open the way for community-wide union negotiations.

« Top