Romania president appoints prosecutors picked by PM

(Reuters) - Romania's president appointed six chief prosecutors and deputies on Wednesday who had been handpicked by the prime minister, defying the European Union, which had called for a transparent application process.

The EU, which Romania joined in 2007, has already put its justice system under special monitoring and was critical last year over attempts by the ruling coalition to impeach President Traian Basescu.

It has been especially keen that prosecutors in one of the bloc's most corrupt states should not be political appointees, but analysts said the appointments had ended up the result of a compromise between Romania's fractious powerbrokers.

Prime Minister Victor Ponta chose the candidates for the prosecutor general's office, the anti-corruption department and the organised crime unit last month without applications or interviews.

The Commission has widely praised previous prosecutors' work, which has led to the conviction of several high level public officials including former prime minister Adrian Nastase.

But critics said some of the new appointees had political connections that would make it difficult for them to pursue the anti-corruption drive.

They have also expressed concerns that Tiberiu Nitu, the new head of Romania's prosecution office, is insufficiently prepared after Basescu initially rejected him late last year.

"I am convinced he can handle the position and that the judiciary will not collapse, nor will it be controlled politically," Basescu said. "Those who believe we could have delayed the appointments further ... are mistaken."

Meanwhile, the choice to appoint Brussels-praised former prosecutor-general Laura Codruta Kovesi to head the anti-corruption unit was criticised by a faction of Ponta's alliance.

At the time Ponta picked the team, an analyst said the nominations appeared to be aimed at easing tensions between and within political parties.

Ponta's coalition is loose alliance of liberals and leftists, who have long been at loggerheads with the rightist president, and the names would have had to have mostly satisfy the demands of all sides.

"The appointments are the result of a political consensus, which was needed for anything to get done," said Sergiu Miscoiu, an analyst with the CESPRI political think tank.

"The changes at the anti-corruption unit are such that could keep up the standards. The general prosecution appointments are the other side of the compromise, where there are ... some legitimate concerns over management abilities."

Under Romanian law, the president appoints chief prosecutors nominated by the justice minister. Ponta was acting as interim justice chief at the time of the nominations.

(Editing by Alison Williams)

Romanian Economy Expanded More Than Estimated in First Quarter

Romania’s economy grew more than economists estimated in the first quarter of this year, probably boosted by an increase in industrial output and consumption.

Gross domestic product advanced 2.1 percent from a year earlier, compared with 1.1 percent in the fourth quarter, according to a flash estimate by the National Statistics Institute in Bucharest, released today by e-mail. That exceeds the 1 percent median estimate of 13 economists surveyed by Bloomberg. GDP rose a seasonally adjusted 1.4 percent from the first quarter of 2012 and 0.5 percent from the previous three months.

Romania, which is counting mainly on European Union demand for its goods, such as Renault SA (RNO)’s Dacia cars, to support exports and growth, avoided a recession in the fourth quarter of last year. GDP advanced a seasonally adjusted 0.4 percent from the previous quarter as domestic consumption and industry offset a poor harvest and a 25 percent agricultural slump.

“Growth is expected to gradually improve this year, particularly when the agricultural crop enters the picture,” analysts at Barclays Plc, including Eldar Vakhitov and Vladimir Pantyushin, wrote in a note before the data were released. “We expect growth to rise to a 1.4 percent year on year, with further improvement likely in second half.”

Industrial production increased a seasonally adjusted 4.8 percent from a year earlier in the first quarter, the institute said yesterday. Retail sales increased 0.8 percent, while exports expanded 4.6 percent, according to data released this month.

The statistics institute will release a breakdown of first-quarter GDP on June 5, according to a calendar on its website.

-- With assistance from Irina Savu in Bucharest and Barbara Sladkowska in Warsaw. Editors: Balazs Penz, Andrew Langley

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

In Romania, Congolese refugee does as the Romanians do

BUCHAREST, Romania, May 10 (UNHCR) - Jean-Louis Kialoungou's love affair with Romania began before he even arrived here in the mid-1990s, and over the years the Congolese refugee has become more Romanian than most Romanians.

As Romania prepared for general elections last December, for example, he seemed more concerned than many voters about the fate of his adoptive country. "I asked my colleagues and friends: what do you think about the candidates? Most have no clue!" said Jean Louis, complaining in fluent Romanian about local apathy when it comes to politics.

"For how long are we Romanians going to be treated as inferior to other European nations? What have they got that we haven't?" he asked with a passion that belied not only his African roots but also the fact that, as a refugee, he has no right to vote. He says he is too busy to apply.

Jean-Louis came to Romania from the Republic of Congo 16 years ago, when he was 34. Now - as well as strong views on Romanian politics - he has a stable job, a family and a house, and he has retained the sparkle in his eye and youthful and energetic manner that have helped him overcome adversity.

"I live here, I have a child and I want to see changes for the better," said Jean-Louis, who in 1996 fled a country that was wracked by political turmoil and sliding toward a brief civil war, which erupted in 1997.

He landed at Bucharest airport in October 1996 with his Romanian girlfriend Daniela, whom he met in his homeland and would later marry. They had tickets to fly on to Paris, but planned to first spend a couple of months with Daniela's mother in Romania.

"I don't know what happened. I fell in love with this place and can't really explain it to this day," said Jean-Louis, who now lives in a house with a big garden in Chitila - a satellite town of Bucharest - together with his wife and their 14-year-old daughter, Letitzia.

He works at the BRD Bank in Bucharest, administering money transfers. At home he loves to spend time in his garden, where he cultivates vegetables and grows fruit trees and grapes.

The neighbours in Chitila all know Jean-Louis for being the only "black guy" in the neighbourhood and for his friendly manner; they have even introduced him to tzuica, a traditional home-made Romanian brandy.

"It was easy for me to integrate in Romanian society and I'm proud of that," said Jean-Louis. "When you go somewhere you are the one who has to adapt, you must fight to be accepted, not the other way around."

But a recent episode in central Bucharest, in which a workman shouted racist abuse as Jean-Louis walked past while speaking on his mobile phone, was a reminder that life is still not always easy in overwhelmingly white Romania.

"He thought I was scared of him because he was in a group, but I interrupted my call and stopped to asked him: 'Excuse me, sir. Have I bothered you in any way? Why would you address me that way? You are here doing your job and I'm on my way to mine'," Jean-Louis recalled.

Courage and a strong will have helped Jean-Louis make a home from home in Romania. He also believes that his education in French literature and communication studies in the Republic of Congo helps him relate well to other people.

"You also have to know what you want to do with your life," he noted, claiming that being a refugee in Romania was not necessarily harder than in other countries where there are more opportunities and work is better paid.

"People are good here and the country has potential," he said, "But there are moments, like [the racial abuse] yesterday for instance, when I really miss Africa."

The homesickness struck him while listening to Congolese music sent to him by a friend. "Yesterday, I felt like I was in Congo. If someone had said to me, come on, let's go back there, then I would have left just like that."

In the 21 years since Romania acceded to the UN Refugee Convention, more than 3,550 people have been granted international protection. While Romanian law protects refugees, many struggle to access their rights and rebuild a life in Romania. Last year, received some 2,500 asylum-seekers.

By Andreea Anca in Bucharest, Romania

Is Danube Romania's 'blue motorway' to prosperity?

Constanta, Romania (CNN) -- There was once a time when Romania's president Traian Basescu made a living steering huge oil tankers through the bustling waters of Constanta harbor on the country's western coast.

Now the ship captain-turned-statesman aims to navigate the Black Sea port towards a new age of prosperity -- as a strategic trading hub between East and Western Europe.

"Until December 1989, the Constanta harbor was mainly used to export the goods produced by the Romanian economy and to import raw materials," Basescu told CNN.
Crucial canal for landlocked countries

"(Today) it is more of a gate, first of all for Romania connecting (the country) with the world, and in same time it is a gate for central and Eastern Europe," he added.

Ensuring Constanta and the hinterland rail, road and canal services beyond the port fulfill their true potential, however, will prove a demanding logistical challenge.

The port currently operates at just 50% of its 100 million ton annual handling capacity.

Much of Romania's creaking inland freight infrastructure is in need of modernization, having been built and designed during the Soviet era.

The Romanian section of the Danube canal catered for 31 million tons of goods in 2012, a steady increase on previous years but still only a third of its full capacity.

Despite these less than fully productive figures, Basescu remains optimistic.

He says Constanta is the gateway at the end of a giant "blue motorway" stretching more than 1,500 miles from the North Sea port of Rotterdam via waterways in Holland, Germany, Austria, Hungary and Serbia.

"From a strategic point of view, it's (of) extraordinary importance having such a harbor which is connected with all of Europe," Basescu said.

"It's the single harbor which is connected with Danube, with the Rhine-Main-Danube canal and with Rotterdam," he added.

This enthusiasm for Romania's maritime and logistical development is shared by the country's continental partners keen to facilitate the smooth passage of goods across Europe's frontiers and beyond.

But not all are as content as Basescu as to the progress currently being made in this endeavor.

The EU commissioner for regional development, Johannes Hahn, recently stated that the 14 countries (including Romania) involved in strengthening trade in the Danube region still had to "step up a gear" after making a promising start.

Basescu rejects such analysis as hypercritical, believing it is not fully representative of the commitment and progress his country has made towards improving its infrastructure since joining the EU in 2007.

"I don't know why the commissioner is so pessimistic," he said.

"We have already invested more than 300 million (euros) on the Danube using the European money for the period 2007-2013 and it will continue."
Basescu sees the benefits of increased trade these projects will likely bring as a key component of Romania's development strategy in the coming years.

The country remains one of the poorest in the European Union -- only Bulgaria has a lower GDP per head of population, according to Eurostat.

"It is vital not only for the EU, but for Romania," he said. "We have to develop the capacities for large vessels in Constanta harbor (but) there are a lot of other things to be done."

Ensuring the Danube is a solution to move goods and commodities through Romania to central Europe is "a key element for us in our development strategy," he added.

Analysis: From the fringe of Europe, Romania and Bulgaria seek EU acceptance

(Reuters) - Addressing an audience of dignitaries in Luxembourg in 2005, Bulgaria's then prime minister extolled the virtues of European Union membership, declaring his nation ready to take its place at the heart of the continent.

"Bulgaria is returning politically to the family of European nations to which it has always belonged," Simeon Saxe-Coburg announced as Bulgaria and Romania signed the documents that would bring them into the EU two years later, in 2007.

The rhetoric was full, matching the occasion, and heartfelt, with the memories of Soviet influence fresh in the minds of most Bulgarians and particularly Saxe-Coburg, the country's child tsar before the monarchy was overthrown in 1946.

But eight years on from that upbeat spring day in Luxembourg, and as a divided Bulgaria prepares for parliamentary elections on May 12, the gap between the one-time aspirations of EU membership and the everyday reality of belonging grows wider.

Rather than feeling pulled into the heart of Europe, Bulgaria and Romania find themselves on the edge of the debate, with questions frequently raised by their EU partners about their commitment to the rule of law and willingness to crack down on corruption, organized crime and illegal migration.

Membership has not delivered a one-way ticket to democratic stability, economic growth and greater opportunity for all. Diplomats from other member states often quietly question the wisdom of allowing them in.

"The European Union was seen as some sort of golden rainbow on the horizon," Amanda Paul, an east Europe expert at the European Policy Centre, a think tank, said of the image many Romanians and Bulgarians had in their minds before joining.

"As a whole I think both Romanian and Bulgaria have benefited from membership, but they still have significant democratic deficits," she said, explaining that if citizens wanted to understand the gap between expectation and reality, they should look first to home, not to Brussels.

"They should be more disappointed in their own leaders and politicians rather than in the EU institutions and what the EU has been able to do for them."

FROM AFAR

Whether living in their home countries on the southeastern periphery of Europe or working in Brussels, Romanians and Bulgarians increasingly have a sense of isolation.

While per capita incomes have risen steadily since joining the EU - by around 30 percent between 2006-2011 for both, according to IMF data - and opportunities to move and work across Europe have increased, there is still not a feeling of being fully integrated into the union of European states.

Romania and Bulgaria remain outside Schengen, the agreement that allows for the free movement of citizens across 26 European countries, and plans to join the euro currency are on hold for the immediate future.

When either country pops up for discussion in EU debates, it is all too often about whether they are meeting targets for bolstering their judicial systems or doing enough to combat smuggling and limit the influx of migrants from further east.

"We are second-class citizens of the union and we are being left out of major decisions taken in Brussels," said Ion Miciu, a 64-year-old engineer living in Bucharest.

"Our politicians are incompetent and have not fought in the last six years for Romania to have a more important voice."

At EU summits, the leaders of Romania and Bulgaria have just the same opportunity as any other head of state or government to speak up, and often do. But when it comes to decision-making, especially during the last three years of economic crisis, Sofia and Bucharest barely figure.

"You see two countries that have to spend quite a lot of negotiating capital and goodwill on key issues for them, like Schengen membership," said one EU diplomat familiar with dealing with both and who has seen the limits of their influence.

"While they are certainly working hard, it just gives them less room to maneuver."

Another hurdle they face is getting experienced staff to drive their diplomatic efforts. As the newest of the EU's 27 member states - at least until Croatia joins in July - it takes time to generate critical mass and influence in meetings, not just at the ambassadorial table, but across all levels of the bureaucracy and the myriad policy files diplomats handle.

"When it comes to major decisions, it's a big boy's game in being aggressive to steer the little circle that makes decisions," said another diplomat from an older European power.

By way of example, they pointed to negotiations earlier this year over the EU's 1 trillion euro long-term budget, a large portion of which is spent on development funds for poorer EU countries, making it critical for Romania and Bulgaria.

"When it comes to the budget, Romania and Bulgaria only got scraps," the diplomat said, lamenting their lack of influence.

For their part, officials from both countries said their voice was always present in EU discussions, and questioned why the two were being treated like second-class citizens when it came to Schengen, probably their biggest frustration.

"WILD WEST"

In Sunday's election in Bulgaria, the centre-right party lead by former prime minister Boiko Borisov is expected to come out on top, although it may not have sufficient votes to form a government on its own and has said it won't join a coalition.

That raises the prospect of further political uncertainty in the country, and raises doubts about its economic program too, both of which will muffle its voice in Brussels.

"We're effectively dealing with a Wild West country," said an EU official who handles east Europe, voicing doubts about Bulgaria's ability to enforce the law and live by democratic norms.

With a "what can you do?" shrug of the shoulders, the official said it wasn't possible to turn back history, that Romania and Bulgaria were members of the European Union. Other states had to accept that reality and make it work, however challenging it may be.

For Carmen Pop, the 32-year-old owner of a small Romanian restaurant in Brussels, EU membership is a double-edged sword. It has allowed her to work in the capital of Europe and send money home to her parents. But it is far from a perfect world.

"The advantages of the EU community are not for Romanians," she said with frustration. "You are part of the community but you can't work like other Europeans. We always carry the label of being Romanian or Bulgarian."

(Additional reporting by Ioana Patran in Bucharest and Justyna Pawlak and Luke Baker in Brussels; writing by Luke Baker; editing by Janet McBride)

AFP: Unicef, EU call for further progress on Roma inclusion in Romania

Romania has made progress towards bringing its Roma citizens into mainstream society but more efforts are needed to improve their access to education and jobs, Unicef and EU representatives said Monday in Bucharest.

"Some progress has been made in Romania in recent years, and a national strategy for Roma inclusion was adopted" in 2011, Unicef (The United Nations Children's Fund) representative in Bucharest Sandie Blanchet told an international conference.

"But we are concerned that progress has been too little, too slow," she added, regretting "the high level of inequality" between Roma and non-Roma.

Eight percent of Romanian children live in absolute poverty, compared to 35 percent among Roma children.

Blanchet also underlined that 75 percent of Roma children do not complete the 8th grade.

The present situation of Roma in Romania, 619,000 according to the last census but up to two million according to NGOs, is the "image of the failure of the inclusion politics led for the past decencies", Gelu Duminica, president of the Impreuna (Together) association, stressed.

"The road out of poverty is to get the Roma on the labour market", social affairs Europeancommissioner Laszlo Andor said.

"Social investment in Roma integration can bring high returns", he added, insisting that "developing kindergartens is the best policy Romania can have, the next generation will grow in decent conditions and have better training".

According to him, Bucharest should use more European funds to improve the Romas' situation. Some 33,000 have taken part in social programmes financed by Brussels, far from the objective of 65,000 people to which authorities had committed.

Research conducted in 2012 regarding the living conditions of Roma people reported on some positive trends despite the persistence of important differences on housing, jobs and access to education and health.

It also showed that the migration rate among Roma and non-Roma is, unlike the general perception, identical. Nineteen percent of the families questioned have at least one member that left abroad "to escape poverty" and "find a job".

WSJ: After China, Romania is Biggest Source of Data Theft Says Report

By Anna Leach

After China, the world’s biggest source of global data theft comes from inside the European Union, said a report published Tuesday.

Verizon Communications Inc.’s Data Breach Report 2013 found that more than a quarter of the world’s data thieves operated in Romania.

Some 28% of the hackers behind 47,000 data breaches investigated by Verizon were working from Romania. That was second only to China with 30%. By contrast only 18% of data thieves were acting out of the U.S. said the company.

In a wide-ranging report, Verizon found that the majority of data thieves are not high-tech espionage agents, but rather petty criminals hacking for money and using rudimentary skills.

Three quarters of all data thefts analyzed were financially-motivated and less than 1% used techniques that Verizon classed as high-tech.

The focus on cash not politics meant that private businesses, not government, were the main target, with under 5% of attacks analysed targeting the public sector. Data thieves took all sorts of corporate information, said Verizon’s global investigation manager Dave Ostertag.

“Thieves steal corporate information for a variety of purposes,” he said. “If you steal quarterly earnings statements prior to announcement, that has value to someone. If you have a process that your competitors don’t have — that process makes you more efficient or you have a larger market share because of that process, that has value.”

The theft of intellectual property has become an increasing problem, especially for small business in the technology and science sectors: “Smaller companies used to say ‘we don’t have to worry about a data breach’, that’s not true any more,” said Mr. Ostertag.

“When we look at espionage, it’s not just defense contractors and the government, it’s boutique engineering firms that might specialize in say aerospace, or might specialize in undersea [engineering], with maybe a hundred employees or less. These type of companies are victims too.

“It might be a small firm that’s got a piece of information that might be valuable to a competitor or to a state.”

Even when hacking is state-affiliated — and 19% is according to the report — it may be targeting a private business for commercial purposes rather than state bodies.

Verzion’s Data Breach Report 2013 is based on 47,000 incidents investigated by their security arm Verizon Risk for their clients in 2012. Some 621 breaches were analyzed in more detail. The report also draws in data from Verizon’s 19 partners on the report including the Danish Intelligence Service, Carnegie Mellon University, Deloitte and the U.S. Department of Homeland Security.

Romanian Skeletons Found Buried Holding Hands In Cluj-Napoca

Romanian archeologists excavating a graveyard in Cluj-Napoca have discovered the skeletons of a man and woman buried hand in hand, seemingly bound in a endless embrace of love.

According to the Romanian newspaper Adevarul, the couple was found in the courtyard of a music school, where a team from the Institute of Archaeology and Art History in Cluj-Napoca has been restoring a medieval Dominican convent cemetary.

In an interview with Romanian Insider, excavation leader Adrian Rusu described the team's find of a young couple buried together, "facing each other and holding hands."

"The man appears to have died in an accident, as the sternum was broken by a blow from a blunt object," Rusu explained. The archeologist added that the team had been unable to find a physical explanation for the woman's death, leading them to speculate that she had died of a stroke or heart attack.

"It’s a strange case, a sort of Romeo and Juliet," said Rusu.

Unlike Romeo and Juliet, reports the Daily Mail, the couple is not believed to have committed suicide, as this would have barred them from burial in a religious cemetery. The newspaper adds that double burials of this kind were very rare in medieval times.

According to Adevarul, the star-crossed lovers were believed to have lived between 1450, when the monastery was built, and 1550, when the graveyard was secularized.

Romania finds solution for Bank of Cyprus unit

(Reuters) - Romania and Cyprus authorities have found a solution for the local unit of Bank of Cyprus (BoC), which has been closed for more than two weeks to find a buyer, a central bank official said on Tuesday.

"Thanks to a good cooperation we eventually found a solution. Deposits are protected and will be under Romanian authority," Adrian Vasilescu, an adviser to Governor Mugur Isarescu, told Reuters.

The solution will need two more days "for technical proceedings" before disclosure, Vasilescu said, declining to comment on whether a buyer had been found.

Two of Cyprus's banks operate in Romania: Bank of Cyprus and Marfin, a unit of Popular Bank of Cyprus (BoC), also known as Laiki. Together the two control less than 1.3 percent of assets in the Balkan country's banking system. (Reporting by Radu Marinas; Editing by Sam Cage)

Romania Merges Bourse Supervision With Insurance and Pensions

Romania merged its supervision authorities for the stock exchange, insurance and private pensions markets into a single entity to meet pledges to the International Monetary Fund.

President Traian Basescu signed a law to form the Financial Supervision Authority today in Bucharest, his office said in an e-mailed statement. Dan Radu Rusanu, a lawmaker from the ruling coalition, will probably head the office, while Daniel Daianu, a former finance minister, may serve as vice president, according to Mediafax. Parliament must vote on their appointment.

Romania, the European Union’s second-poorest member, is trying to complete a 5 billion-euro ($6.5 billion) precautionary accord with the IMF and the EU in June, after getting a three- month extension to have more time to complete pledged state- asset sales and pass legislation.

“The approval of the financial authority is one of Romania’s pledges to the IMF and needs to be respected,” Rusanu said. “My plan, as head of the institution, is to have a non- banking market, valued at about 15 billion euros, that is compatible with other European markets.”

The government, which hasn’t drawn any money from the bailout so far, plans to start talks on a new accord with the lenders after the current one ends.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

Romanian Film director Mungiu in Cannes Film Festival's jury

BUCHAREST, April 24 (Xinhua) -- Romania's film director Cristian Mungiu was chosen to be part of the jury of the 66th editions of the Cannes Film Festival, the official Agerpres news agency reported according to a Wednesday announcement of the organizers.

The jury, headed by U.S. filmmaker Steven Spielberg, includes big names of the world cinema, such as Australian actress Nicole Kidman, Austrian actor Christoph Waltz and Taiwanese filmmaker Ang Lee, as well as French actor and director Daniel Auteuil, Indian actress Vidya Balan and female directors Lynne Ramsay, from Britain and Naomi Kawase, from Japan.

The new edition of the Cannes Film Festival, organized between May 15 and 26, will open with the screening of "The Great Gatsby" movie, directed by Australian Baz Luhrmann and with a distribution which includes Leonardo DiCaprio, Carey Mulligan and Tobey Maguire.

Mungiu, 45, is a filmmaker close to Cannes Festival. His film "4 Months, 3 Weeks and 2 days" won the Palme d'Or in 2007. He returned last year on the Croisette, where his latest film, "Beyond the hills", earned the Best Screenplay Award, and two actresses in the leading roles, Cosmina Stratan and Cristina Flutur, the Best Actress trophy.

Mungiu worked in earlier years as a teacher and as a journalist, after studying English literature at the University of Iasi in northeastern Romania. He enrolled at the University of Film in Bucharest to study film directing and began his film career after graduating in 1998. He is the first Romanian filmmaker awarded with the coveted Palme d'Or for feature film.

The film "Beyond the hills" was also selected as the Romanian entry for the Best Foreign Language Oscar at the 85th Academy Awards, making the January shortlist.

Romanian film industry almost collapsed at the end of the last century, yet the new millennium saw a reemergence of Romanian cinema, with the appearance of such films as "The Death of Mr. Lazarescu" (Cannes 2005 un certain regard winner), and "12:08 East of Bucharest" (Cannes 2006 the Camera d'Or best-first-feature award). In February this year, the Romanian film "Child's Pose" picked up the coveted Golden Bear prize for best film at the 63rd Berlin film festival.

Daimler Plans $390.6 Million Romania Transmission Factory

Daimler AG (DAI), the third-biggest maker of luxury cars, will invest more than 300 million euros ($390.6 million) adding transmission production in Romania after reaching full capacity at its main German plant.

Daimler will begin assembling five-speed automatic transmissions in mid-2013 at a new plant in the town of Sebes, close to an existing parts factory in Cugir, the Stuttgart-based company said in a statement today. The new site will start production of front dual-clutch transmissions in 2014 and add capacity for the next generation of drivetrains in 2016.

The German company, which has been producing parts for engines and transmissions in Romania at a joint venture since 2001, is adding capacity across eastern Europe as the Mercedes- Benz brand expands its line-up of compact cars. Daimler opened an 800-million-euro car factory last year in Kecskemet, Hungary, where it makes the Mercedes B-Class and CLA compacts.

Chief Executive Officer Dieter Zetsche has vowed to regain the top spot in global luxury-vehicle sales by the end of the decade and plans to boost the operating margin at the carmaking unit to 10 percent of sales. First-quarter earnings before interest and taxes at the Mercedes-Benz Cars division, which also includes the Smart city car brand, dropped 63 percent to 460 million euros, resulting in a 3.3 percent margin, the company said today.

Further development of the Sebes plant is subject to backing from the Romanian government, Daimler said. The carmaker isn’t able to expand transmission production at its Stuttgart site because of space limitations, it said.

To contact the reporter on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net