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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)

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Update No: 166 - (26/01/12)

The beginning of 2012 has been highly tumultuous for one of Europe's poorest states. Thousands have taken to the streets in protest against the austerity measures introduced under Prime Minister Emil Boc, whose centrist coalition government attempted to slow a crisis-induced economic meltdown, with a series of unpopular money-saving cuts. Whilst these measures were, for some time, borne with remarkable stoicism, it seems that citizens, whose living standards are at about 45% of the EU average, have finally had their fill. The protests seen on the streets this month have been the most serious since President Traian Basescu was elected in 2004.

On January 10, Deputy Health Minister Raed Arafat resigned. The popular politician had voiced major criticisms about a draft healthcare reform and was confronted by President Basescu, who backed the bill. The resignation of Arafat, who has been credited as the architect of a highly-functioning emergency system prompted a protest in the capital in his support. Regarding the bill itself, controversy stemmed from the fact that the government planned to establish a stronger private medical sector, giving way to concerns about how this might be regulated. On January 13, faced with a swelling tide of discontent, President Traian Basescu publicly asked the Prime Minister to withdraw the healthcare reform project. So, for the first time, Prime Minister Boc was obliged to withdraw a piece of legislation due to public pressure.

What became clear, however, was that the protests, whilst catalyzed by the health care bill, were by no means limited to it. The movement has quickly become a platform for discontent regarding the whole host of austerity measures the public has faced as a result of a 20 billion euro IMF/EU bail out agreement brokered in 2009. Banners seen over four days of protests read slogans reflecting a much deeper frustration with the government: "You lied to us and robbed us" being one choice example. On the weekend of January 14-15 around 8,700 people attended rallies in the country's major cities. 59 people were injured in clashes with police at a rally in Bucharest's main University Square, attended by 1000 protestors. The police response, as a number of YouTube videos testify, was heavy handed. Interior Ministry officials claim that football fans were responsible for the outbreak of violence at the protests, though some ralliers have suggested this is a government attempt to underplay the frustration and anger of protestors. Police said they had fined or started criminal investigations against 283 demonstrators involved in the violence. On January 16, Prime Minister Emil Boc called the violence 'unacceptable'. Other government ministers have been more forthcoming in their criticisms of the protestors. The minister of foreign affairs, Teodor Baconschi, referred to them as the product of "inept and violent slums" on his blog. Disgruntlement with living standards has been slowly mounting over past months. In the second half of November, citizens felt the pain of cuts when heating subsidies were reduced. In a show of remarkable solidarity, Florin Cazacu, the mayor of Brad, where temperatures can drop to -22 Fahrenheit in winter, went on a hunger strike to protest the ruling. After six days on strike, the government agreed to give the town of Brad 1 million lei ($300,000) in subsidies which Cazacu lamented as piecemeal.

Unsurprisingly, a poll taken in early December has shown that in an election Boc's Democrat Liberal Party (PDL) would score just 18% of votes. Meanwhile, according to the same poll, the country's main opposition grouping, the centre left alliance, the USL, would win a parliamentary majority. An interesting factor to note was that the opposition did not immediately capitalize upon the protest movement, though it did announce plans to organize more demonstrations. Perhaps this is because the USL has also acknowledged that if it came to power, it would also adhere to the terms of the IMF treaty, which whilst painful, some argue, are ineluctable to ensure long term financial solvency. What some commentators have noted is that the wave of unrest may derive not just from austerity measures implemented last year, but from long-term, latent concerns about corruption and cronyism among the country's political elite, evidence of which is abundant.

Romania has the EU's third highest level of corruption - a fact which continues to cause consternation in Brussels. Court cases bringing those guilty of graft to justice simultaneously highlights the problem whilst showcasing Romania's avowed aim of extirpating it. A recent example was the sentencing, on January 5, of Senator Serban Mihailescu, of small party the UNPR, which is part of the ruling coalition, to a one-year suspended sentence for corruption. In addition to this, in the first week of the New Year Romanian prosecutors said they were in the process of investigating 40 officials involved in the energy sector on allegations of illegal profiteering in the gas sector. The list of suspects apparently include officials from the economy ministry, the national authority for energy ANRE, Romgaz and a Bucharest-based company believed to have purchased the gas. Romania's organized crime prosecuting agency DIICOT apparently believes that the criminal activities of the group robbed state owned company Romgaz, and the consolidated state budget of $126 million. Transparency International recently issued a report which found that only one in five Romanian companies have a code of ethics in place, suggesting that transparency and improving the business environment generally are far from being priorities. One of the main conclusions of the study is that companies in Romania "don't know how to protect themselves against illegal and unethical behaviour, be it staff, suppliers or public administration", says the report's author. In the Heritage Foundation/Wall Street Journal's latest economic freedom index, Romania came 62nd out of 179 states. Whilst ranking higher than Poland or France, the state lagged behind neighboring countries such as Hungary or Bulgaria. It climbed one place on last year, but its score has shrunk by 0.3 percent to 64.4 points, which demonstrates the high impact of corruption, deteriorating management of state expenses, and the problems of the business climate.

However, there are some positive signs in terms of management of the state's coffers. At the behest of the IMF, in December the government presented a scheme to overhaul the management of a strategic selection of more than 700 state firms, by replacing political appointees with tender-selected executives at the behest of the IMF. Private managers will be appointed in a select number of companies which employ more than 1000 people and which earned more than $308 million in turnover in 2010. Among them is the colossal energy producer Hidroelectrica, which consistently underperforms due to inefficient management. This company was subjected to scrutiny when it was revealed that its general director, Constantin Trihenea, wanted to introduce a price hike of 50% for Romanian consumers whilst simultaneously selling to other clients at half the market price. The IMF announced in the first half of January that Romania was making good progress under an IMF-supported economic programme, and it freed up a further $661 million in aid that can be drawn on if needed. Apparently the Prime Minister is confident that Bucharest will not need said funds. Another positive sign is that economic growth of nearly 2% was witnessed in 2011, above the official target of 1.5%, and the country also managed to reach its budget deficit target of 4.4% last year. Equally encouraging is the fact that the average net wage in Romania rose 8.7% on the year in October to 1,457 lei ($450), but fell 0.5 percent from the previous month.

It would seem however, that in comparison with the living standards enjoyed among fellow EU member states, this kind of statistic offers little solace to Romania's citizens. The country remains terminally disadvantaged in comparison with its neighbours. Frustration at this and the cronyism which characterizes political operations are now being translated onto the streets of its cities. For Prime Minister Boc, who faces an election later this year, it may be difficult, if not entirely impossible, to claw back support. Despite promises that there will be no more tax hikes in 2012, the austerity measures feel far reaching and relentless for ordinary citizens. As Europe faces a deluge of debt, many are questioning the viability and worth of full European accession.