Tuesday, March 31, 2009

EBRD backs Romania's Petrom with loan

BUCHAREST, March 31 (Reuters) - The European Bank for Reconstruction and Development granted a 150 million euro ($199 million) loan to Romania's top oil and gas firm Petrom SNPP.BX in support of the company's restructuring plans.

The funds, earmarked for investments in environmental projects, are part of a 300 million euro loan package and the EBRD will back the firm, majority-controlled by Austria's OMV (OMVV.VI), in obtaining the remainder from a group of commercial banks.

The EBRD said its loan has a 7-year maturity.

Economists' concerns about Romania centre on the country's reliance on external borrowing and that the region's largely foreign-owned banks could shut off lending due to the global credit crunch, leaving private firms starved for cash.

"We will continue to invest in Romania, although not at the same level as in 2008, given the unfavourable economic conditions," Petrom CEO Mariana Gheorghe said in a statement.

In October, the company said it arranged a 3-year credit line worth roughly 375 million euros from a consortium of five banks.

The EBRD will also increase its investments plans in Romania by 500 million euros to 1 billion euros over the next two years as part of an IMF-led 20 billion euros aid package for the Black Sea state, aimed as a cure for the country's large private debt.

The EBRD holds a 2 percent stake in Petrom.

On Tuesday, Petrom shares on the Bucharest bourse traded at 0.1530 lei ($0.047) per share, up 3.4 percent on the day, compared to a year low of 0.1120 hit on Feb. 25. (Reporting by Ioana Patran; Editing by John Stonestreet)

Monday, March 30, 2009

Romanian FM calls on Moldova to halt abuses against Romanians

30 March 2009 | 14:35 | FOCUS News AgencyBucharest. 

Over 200 Romanians were banned from entering the Republic of Moldova in the last few days, the Romanian Nine o'clockreports.

The Romanian Ministry of Foreign Affairs is calling on Chisinau authorities to halt abuses against Romanian citizens, FM Cristian Diaconescu told a press conference yesterday.
 
Minister Diaconescu said the Foreign Ministry had received a series of complaints from official delegations that represent county structures and from citizens, NGOs and artists who were denied access to the Republic of Moldova, for various reasons. 

The Minister said he had asked Chisinau authorities to explain the action, but that he received no answer or explanation. 

"Restrictions on the free circulation of citizens in the European area prove the lack of a real engagement in R. of Moldova's European process, which is strongly backed by Romania in Brussels and in Bucharest," FM Diaconescu also said. 

He underlined that what happened in the last few days shows that Moldova is ignoring EU requirements as regards democracy and the rule of law. The FM argued that Bucharest continues to support R. of Moldova's efforts to join the EU and will continue to plead in favour of an association agreement which would enforce a free trade area and the lifting of visas for Moldovan citizens. 

Diaconescu also said that the incidents at the border will be taken into consideration when the upcoming Moldovan elections will be analyzed.

Michelin Romania Plant To Resume Production

The Michelin Romania factory at Zalau, Romania, will resume production after an 18-day stoppage.The reason for the stoppage was given as an adjustment in tyre orders, due to the state of the market. 

The factory's 1,300 employees participated in training programmes during the shutdown. A spokesperson for the company said that the April work programme had not been finalised, but there are press reports that production could be halted for a week, most likely round the Easter holidays.

Michelin Romania's marketing manager, Alina Ghica, is quoted as saying that Michelin's sales for last year were up on 2007's figures, but she cannot make estimates for 2009, although sales for the first two months are believed to have increased, but at a lower rate of growth. Estimates are that the Romanian replacement tyre market increased by a minimum of 8% last year, rising to 2.2 million units. (Tyres & Accessories/Staffordshire, U.K.)

Romanian Overdue Debt Soars on Weaker Leu, Rates

By Adam Brown

March 30 (Bloomberg) -- Overdue private debt in Romania more than tripled on the year in February as a weaker leu made foreign debt harder to repay and the highest interest rates in the European Union increase domestic debt loads.

Loan payments more than 30 days overdue debt rose to a record 4.3 billion lei ($1.3 billion) in February from 1.3 billion lei a year earlier, the Banca Nationala a Romaniei said on its Web site today. Overdue debt rose from 3.5 billion lei in January and 2.9 billion lei at the end of last year, an increase of 48 percent.

Overdue debt is soaring in Romania as the leu has weakened about 14 percent against the euro in the past year after years of a lending boom in the European common currency. The central bank’s main interest rate, at 10 percent, is the highest in the EU even as economic growth falters, making domestic loans more expensive to repay.

Private debt jumped for the past four years, rising as much as an annual 64 percent, as economic growth fuelled wage gains, higher foreign investment strengthened the leu and foreign banks including Erste Bank AG and Societe Generale SA lowered fees and rates as they fought over market share in Romania. Now, slowing wage gains, rising unemployment and a drop in investment are making it harder to continue paying for the homes, cars and foreign holidays Romanians bought on credit.

IMF Bailout

Romania agreed last week on a 20 billion-euro ($27 billion) international financing package led by the International Monetary Fund. President Traian Basescu has predicted the loan will help strengthen the leu and central bank Governor Mugur Isarescu has said it may prevent the country from slipping into a recession.

Overall growth in private debt is now slowing and was an annual 30.7 percent in February, from 34 percent in January, according to central bank data. Overdue debt, as measured by payments more than 30 days late, counted for about 2 percent of the total private debt load of 207 billion lei in February.

The central bank said on March 20 that it will allow commercial banks to include guarantees from borrowers when calculating how much money they must set aside to allow for doubtful debt. They can include 25 percent of the value of borrowers’ guarantees when making provisions. For provisions, the central bank calculates bad debt as payments that are at least 90 days overdue.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net

EIB to invest 1.5 bln euros in Romania in 2009

BUCHAREST - The European Investment Bank (EIB) said Monday it will inject 1.5 billion euros in Romania this year, with a third of the money going to small and medium-sized enterprises hit by the crisis.

“In 2008, EIB investments in Romania amounted to 1.1 billion euros. In 2009, our objective is to reach 1.5 billion (2.0 billion dollars),” EIB’s Vice-President Matthias Kollatz-Ahnen told a press conference.

A third of these funds will go to SMEs, a third to industry and a third to infrastructure, he added.

Among the industry projects, 400 million euros will go as requested to US carmaker Ford, which bought Daewoo’s manufacturing plant in Craiova, in southern Romania, in 2008.

Ford had requested state guarantees from Romania for this loan, which should cover a large part of the 675 million euros needed to modernise the plant.

Kollatz-Ahnen also called on Romanian banks to use the funds at their disposal to finance small and medium-sized enterprises. These funds were available “long-term and at a very reasonable rate,” he noted.

According to the president of the National Union of Romanian Employers (UNPR), Petre Milut, some 25 percent of Romanian SMEs might have to shut down in 2009 due to the crisis, which has severely hit their ability to get credit.

EBRD grants Romania's BCR 100 mln euro loan

BUCHAREST, March 30 (Reuters) - The European Bank for Reconstruction and Development granted a 100 million euro ($132.3 million) loan to Romania's largest bank BCR on Monday to finance small and medium companies, the banks said. 

The loan is part of a two-year, 24.5 billion euro joint programme announced last month by the World Bank, the EBRD and the European Investment Bank to help banks and firms in eastern Europe to cope with the global cash squeeze.

"BCR is also in discussions with the other international financial institutions on additional possibilities to support its lending to the real economy, particularly to the small- and medium-enterprises sector," the banks said in a joint statement. 

Economists' concerns centre around Romania's reliance on external borrowing and that the region's largely foreign-owned banks could shut off lending due to the global credit crunch and their need for money at home.

BCR is controlled by Austria's Erste Bank , which has pledged along with eight other foreign banks in Romania to continue doing business in the junk-rated country and promised to provide additional capital if needed.

EBRD will also increase its investments plans in Romania by 500 million euros to 1 billion euros over the next two years as part of an IMF-led 20 billion euros aid package for the Black Sea state, aimed as a cure for the country's large private debt.

Romania: Reform Credit

Oxford Business Group Latest Briefing

Following a hard winter, which saw a credit squeeze, sharp falls in exports and a slowing of investment, there is a spring feeling to the Romanian economy, with the government having brokered a $27bn funding package with international lenders. 

Under agreements reached on March 25, the IMF is to provide $17.4bn, with the EU contributing $6.75bn, the
World Bank $1.34bn and other lenders, including theEuropean Bank for Reconstruction and Development, a further $1.34bn. 

According to the IMF predictions, the Romanian economy will contract by 4% this year, a turnaround from the 7.2% GDP growth in 2008, and well off the 2.5% expansion the government forecast in its draft budget, released in January. 

News that the deal has been sealed had an immediate effect, with the local currency, the leu, gaining almost 1% on the euro by March 26. Having dropped some 18% against the euro in the past six months, the leu was in need of support, according to 
President Traian Basescu, who said he expected the leu to appreciate and liquidity to flow back into the economy. 

"I believe that Romania's national currency will strengthen a bit, at least in the upcoming period," he said. "The best moment for the leu is May, when the IMF will transfer €5bn into the accounts of the central bank." 

Basescu added that when the first 
tranche of the IMF loan will be transferred to the National Bank of Romania, this would free up funds of commercial banks held by the central bank, allowing private lenders to free up more capital for credit. 

Currently, banks are required to have 40% of their
foreign currency holdings and 18% of their leu deposits held in reserve with the central bank, limiting liquidity availability in the market. 

Though the package will bring some respite to the economic climate, it also comes at a cost. In return for the IMF's assistance, the government will have to implement reforms to state spending, the financial sector and monetary policy, said the fund's mission chief in Romania, Jeffrey Franks. 

"There will be specific reforms in the fiscal area to make sure the deficit stays low over time - restructuring
wage policies, recalibrating the pension system to make it sustainable, and improving the control and monitoring of public enterprises. The government will also introduce a fiscal responsibility law that will improve the budget process, by limiting the number of budget revisions in one year," he told local media on March 25. 

According to a 
World Bank statement, key to these reforms will be improving transparency and accountability of public financial management, while also strengthening social assistance and pensions to mitigate the effects of the crisis on the vulnerable. 

While there is no question the Romanian economy is under pressure, the government's move to seek assistance was aimed more at heading off a potential crash, rather than having to revive an economy that had already hit a tough patch. 

On March 20, Moody's Investment Service said it expected the Romanian economy to contract by 2-4% this year, with the country's debt-to-GDP ratio reaching almost 30% by the end of 2010, up from 16% in 2008. However, 
Moody's stressed that Romania's debt levels would still be well below those of other EU members. This, and the impending IMF agreement, were the reasons cited by Moody's for leaving the local andforeign currency ratings of the government and the country's local and foreign currency bond ceilings unchanged. 

"Romania's status as an investment-grade country is supported by the government's moderate debt burden," the vice-president and senior analyst with Moody's sovereign risk group, Kenneth Orchard, stated. "Its gradually deepening institutional strength, derived in large part from EU accession two years ago, is also important." 

Above all, by reaching agreement with the IMF, the World Bank and the EU, the government has sought to restore confidence domestically and among foreign investors and lenders. 

And a boost to confidence will be required, with the
central bank governorMugur Isarescu, telling a press conference on March 26 that foreign direct investment (FDI) in Romania is expected to drop from the $10.8bn of 2008 to around $5.4bn-6bn this year. 

While FDI may fall by 50%, Isarescu said there were some positives on the horizon, with the 
current account deficit predicted to fall to around 8-9% of GDP from last year's 12% and the possibility of a return to moderate growth, of around 1%, in GDP for 2010, as long as the terms of the agreement with the IMF are adhered to. 

"Thanks to this agreement, Romania will stay on the safe side in terms of economic evolution this year," he said. "The 
loan agreement will give us more time to do what we need to do, that is to attract structural funds and go ahead with the reforms." 

Having been given some breathing space, the government now has to ensure it meets its part of the bargain with its creditors, enacting reforms that have often been promised but never delivered.

AP: Hundreds of Romanians refused entry to Moldova

Border officials say some 240 Romanians have been denied entry to Moldova in the past three days and Romania's foreign ministry has complained to its neighbor.

Romanian singer Anda Adam said she was turned back from a border point late Saturday with her band members.

Other Romanians were reportedly told they could not prove they do not have AIDS.

Some two thirds of Moldova's 4.1 million people are ethnic Romanian and there are tensions between the countries over fears that Romania is seeking more influence.

Since Romania joined the European Union in 2007, thousands of Moldovans have received Romanian passports.

Romania's Foreign Ministry said Friday it sent a letter of protest to its Moldovan counterpart asking for an explanation.

Sunday, March 29, 2009

Romania: living at the municipal dump

CLUJ, Romania (AFP) — Face blackened by 35 years spent on a rubbish dump on the outskirts of Cluj, Marin Varga waits for a local recycling company to peruse the few valuable objects he found that morning in the trash.

"Things couldn't be worse," says this 47-year-old man, who looks at least 10 years older, with a sigh.

In his cart, attached to an emaciated horse, are his day's finds: a few broken computers, springs from an old couch and tangled cables, all thrown into a pile.

"We live one day at a time," says Varga, who shares a rundown shack with three generations of his family -- 13 people in total -- in the middle of the Pata-Rat dump in this northwestern Romanian town.

His children do not go to school.

"They have to help us dig in the rubbish," he says.

Varga dreams of one day leaving this wasteland, but another lady in her 60s loudly opposes any plans of a move.

She owns the largest "property" at the dump, a prefabricated concrete house complete with satellite dish, which gives her a certain importance among her neighbours.

"If journalists start writing that we live at the dump, we'll be kicked out and then where will we go?" she asks.

Just a few hundred metres (yards) away however, the authorities themselves installed containers to house the homeless, mostly Roma or gypsies, about 10 years ago.

And little by little, other families settled on the deserted piece of land next to the rail tracks.

Now about a hundred shacks made of wood, cardboard or metal sheeting and neatly arranged in three rows, crowd "the county with no number", as the area has become known.

The inhabitants of this small community -- authorities estimate they number about 370, including many children -- are mostly unemployed and make a living by doing small jobs and recycling waste. The only source of water is a single pump in the street.

But the homes are well maintained, with curtains in the windows and flower pots on show, and the children go to school.

Two families are legally connected to the power grid and the others plug into their supply for 25 euros (33.7 dollars) per month, to light their homes or watch television.

"I have been living here for seven years," says Elixenia Borban, 67, embarrassed as she explains she is "forced to dig in rubbish bins."

"At least I don't have to beg," she adds, revealing a pile of old newspapers, which she probably sells for recycling, and a few slices of bread in her plastic bag.

According to the World Bank, about 13.8 percent of Romania's population of 21.55 million lived below the poverty line in 2007, the year Romania joined the European Union.

But dump resident Agustin Coroj, 35, who has a four-year-old daughter and a stable job, is angry.

"The authorities built public housing but it was wrongly distributed, either to people who had money or to those who knew somebody who worked in city hall," he says.

The mayor of Cluj, Sorin Apostu, says he is looking into ways to improve the living conditions of the community, but the plan is still vague.

"By the end of the year, with help from several businessmen and NGOs, a number of these people will be relocated," he simply told AFP.

The authorities meanwhile plan to set up a new environmental waste site and close Pata-Rat as they promised to do in 2002 under pressure from Brussels.

But according to resident Marin Varga, this will not change anything.

Roma like him "will just go to the new site, because that's the only way they can survive."

The Posthuman Dada Guide: Tzara and Lenin Play Chess' by Andrei Codrescu

Andrei Codrescu

Princeton University Press: 238 pp., $16.95 paper

The job is gone, the 401(k) is gutted, college tuition is due, and "Grey's Anatomy" is a shadow of its former self. Can't decide whether to cry or laugh? Laugh at absurdity, laugh at hardship, laugh at poverty, says Andrei Codrescu in his maddening, enlightening, self-contradictory, highly amusing new book, "The Posthuman Dada Guide: Tzara & Lenin Play Chess." It's what dada -- the manic, prankish art-cult of wartime and depression -- advises.

Codrescu, the NPR commentator and author, has rolled into one slim guide a postmodern self-help manual, a history lesson, a love letter to dissident poets, a hard jab at communism and a veiled autobiography. Dada was the name given to the collection of unholy noises, obscene poems and Picasso etchings displayed in Zurich's Cabaret Voltaire in1916 by a motley assembly of war refugees, among them Frenchpoet Tristan Tzara, Hugo Ball and his wife, Emmy Hennings. Marcel Duchamp, with his rotated urinal, became the most famous Dadaist, although he eventually renounced everything except chess -- a very Dada gesture itself.

Dadaists were anti-everything, including art, so it wasn't much of a coherent aesthetic, and that was the point. Ideologies were out, flexibility, irony and free love were in. They were ur-bohemians, whose predecessors and heirs include Walt Whitman, Allen Ginsberg, yippies, hippies and punks. Dada, says Codrescu, still has much important nonsense to impart.

Tzara meets Lenin

Codrescu writes in the Dada spirit of self-contradiction. "It is and it was always foolish and self-destructive to lead a Dada life. . . . On the other hand, the accidental production of novel objects results occasionally from the practice of Dada." Not every passage makes that much sense.

The guide is filled with random-seeming entries: "dada, bucharest" is here but not "dada, paris" or "dada, new york," although the entry on Americanization lauds the transformation of European intellectuals who came here into open, self-actualizing, bold scavengers of high and low culture. Dada was against sentimentality, but Codrescu has a tendency to romanticize Tzara, Dada and America, in that order.

There is an actual plot embedded within the entries: Tzara and communist Russian exile Vladimir Lenin meet at another Zurich cafe in 1916 and take up a game of chess: At stake is the global state-of-mind for the next 100 years. During the game, Lenin strokes his pawns absent-mindedly, straight out of central casting for evil: His brain is a "basin full of maddened snakes furiously eating each other."

The meeting and other fascinating facts are inventions, although much of Codrescu's information is actually corroborated by history. Tzara was born Samuel Rosenstock in Moinesti, Romania, to a Jewish family in "an anti-Semitic town that to this day . . . does not list on its website the founder of Dada among notables born here."

This leads to the emotional center of the book, an indictment of totalitarianism and anti-Semitism. The guide is, beneath it all, a mournful celebration of the achievements of pre-communist Romanian Jews, such as Tzara and modernist painter and architect (and Dadaist) Marcel Janco.

Romanian émigré

Codrescu himself immigrated to the United States from communist Romania in 1966. Within the curious entry for "jews," he departs into autobiography, noting dryly that while 300,000 Romanian Jews, including his mother, lived throughthe Holocaust, 300,000 others were deported and killed.

Codrescu does not talk much about Hitler: He is battling the madness of all rigid philosophies through the embalmed body of Lenin. It's giving away nothing to say that Lenin's final move is easily countered by Tzara. And it's infinitely entertaining to see how and with the aid of whom Tzara triumphs.

Berwick writes about art and books for ARTnews, New York magazine and Bloomberg News.

Saturday, March 28, 2009

Romania's Oltchim to invest 500 mln euros by 2012

BUCHAREST, March 27 (Reuters) - Romanian state-owned chemical plant Oltchim will invest roughly 500 million euros ($670 million) by 2012, mainly on acquisitions, upgrades and boosting production, the economy ministry said on Friday.

The company, which plans to borrow the cash, has asked the government to guarantee 80 percent of the loans. European Union state Romania will wait for EU approval before issuing guarantees, the ministry said.

Oltchim had long-term debt of 637 million lei ($201 million) at the end of 2008.
Its investment plans includes buying the Arpechim petrochemical refinery from the country's top oil and gas group Petrom, owned by Austria's OMV.

On Friday, Oltchim shares traded 2.4 percent up on the day at 0.1720 lei, compared with a year low of 0.1090 hit on March 2.

Romania Minister Sounds Alarm on Moldova

BalkanInsight.com

Romanian Foreign Minister, Cristian Diaconescu, on Friday said he is “concerned and worried” due to the situation of Romanian nationals, who are “systematically” denied access to neighboring Moldova. “I have requested an explanation from the Moldovan Foreign Ministry regarding the reasons why Romanian nationals are systematically denied access to Moldova. We have expressed our concern and worry about the way in which these citizens have been treated,” Diaconescu said during a press conference.

Minister's reaction came soon after sixteen Romanian tourists on Thursday were denied access to the Republic of Moldova without any explanation from the custom officers.

Moldova was part of Romania from 1918 to 1940 until it was annexed by the Soviet Union. Moldova became independent in 1991 and the two countries share the same ethnic and linguistic background.

But relations often have been marred by suspicion and have sunk to a new low under the presidency of Vladimir Voronin, with the Moldovan leader accusing Romania of trying to seize his country.

In 2007 Moldova stopped Romania from opening two consulates in the country claiming Bucharest was trying to lure Moldovan citizens, and late last year, Moldova’s government presented the Romanian ambassador with a document calling on Bucharest to refrain from making ‘provocative statements’ against Moldova's statehood, sovereignty and territorial integrity.

Friday, March 27, 2009

Romania braces for IMF-linked spending cuts

BUCHAREST (AFP) — Romania now has a buffer against the global crisis with a 20-billion-euro international loan agreed this week but the reforms that come with it could impose a heavy burden, analysts said.

"This agreement is important but it comes at a price -- an austerity programme," Doru Lionachescu, an analyst at Romanian investment bank Capital Partners, told AFP, saying the deal would "without a doubt lead to cuts."

The people who will be most affected by the spending cuts are believed to be civil servants and pensioners -- the same people who were promised more money ahead of parliamentary elections last November while Romania was still booming.

Romania's gross domestic product grew by 7.1 percent last year, making the former communist country one of the fastest-growing European Union economies.

In 2009, experts forecast the economy could shrink by up to 4.0 percent.

And, following a collapse in revenues due to the global downturn, Romania's government has said it will freeze civil service salaries and drastically reduce the bonuses that sometimes doubled or even tripled wages.

On Wednesday, Romania was given a loan totalling 20 billion euros (27 billion dollars) by the International Monetary Fund (IMF), the European Union, the World Bank and the European Bank for Reconstruction and Development (EBRD).

Trade unions warn there could be protests if the loan leads to major cuts.

"We are the ones who will have to pay the price for this loan, that's why we want to know what to prepare ourselves for," Marius Petcu, leader of the trade union federation CNSRL, said at a recent meeting with President Traian Basescu.

Dumitru Costin, head of the National Trade Union Bloc BNS, said: "Our fear is over the policies that the government will propose to respond to the demands of the IMF," adding there could be "job cuts" instead of public sector reforms.

But most analysts believe the risk of social unrest or political instability in Romania is lower than in Hungary or Latvia, two other ex-communist states that are now members of the European Union and have received IMF loans.

"Judging by economic indicators, Romania is in a better position than Latvia or Hungary," said economics analyst Aurelian Dochia.

"Its trade deficit has already started going down, while the government is taking measures to reduce the public deficit," he added.

But Dochia said Romania was still distrusted by international ratings agencies, which gave Hungary a better image despite its higher deficits.

Lionachescu added that Romania would however get better treatment by the IMF than other debtors since it had advantages such as "a healthy banking sector."

"The agreement with the IMF is the price we have to pay for the past few years in which we have spent in an irresponsible way, showing that we're not capable of managing the economy on our own," he concluded.

Romania gets largest EU bailout to date

EurActiv.com

Details emerged of the parameters of a bailout package solicited by Romania to counter the ongoing financial crisis, EurActiv Romania reported yesterday (25 March). It is the largest IMF-wrapped bailout package to date in favour of an East European EU country in difficulty.

Background:

At the spring summit held on 19-20 March in Brussels, EU leaders decided to increase from 25 billion to 50 billion euro an emergency facility to bail out EU countries that are not members of the euro zone (EurActiv 20/03/09).

Created in 1988, the EU facility was used for Hungary in October 2008, when it suffered the full blow of the financial turmoil (Budapest received a bail-out to the tune of 6.5 billion euro). The facility has since been increased from 12 to 25 billion euro.

The funding comes from the money markets. The Commission in fact borrows money from the markets using EU-denominated bonds.

Latvia was the next country to make use of the facility, as the country had to take out a 7.5 billion euro, IMF-led rescue loan. The package included financing from the EU, the Nordic countries, the Czech Republic, Poland, fellow Baltic state Estonia and the World Bank.

In early March, it became known that Romania too was holding talks with the European Commission and the International Monetary Fund to secure a similar rescue package (EurActiv 05/03/09).

An IMF delegation announced in Bucharest on Wednesday (March 25) it had concluded negotiations for a financial assistance package solicited by Romania.

Out of the overall 20-billion loan, the IMF will provide 12.9 billion, the European Commission five billion and the World Bank 1.5 billion. About one billion will be raised by other financial institutions.

Romania will not pay any interest in the first two years, after which a payback period of three to five years will follow.

Jeffrey Franks, head of the IMF negotiating team, explained that the accord signed with the Romanian government would be analysed in Washington by the Fund's management. The first instalment of the loan could be available for Romania as early as May. Franks told the HotNews.ro website that the interest on the loan would be around 3.6%.

Filip Keereman, the European Commission's representative at the Bucharest talks, said the process of obtaining money from the EU could yet take longer. The Commission has to make a proposal to the EU's Council of Ministers, which is expected to adopt the decision at the beginning of May. The loan could become effective at the beginning of July, he said.

Asked to elaborate on the conditions attached to the loan, Keereman said: "The condition referring to the budget is important. This would mean having a deficit inferior to the one last year. By 2011, we would like Romania to come out of the excessive deficit zone."

Mihai Tanasescu, Romania's representative at the IMF, told HotNews.ro that the Commission could ask for interest of 2.3% on the first instalment.

Emil Boc, Romania's prime minister, said on Tuesday: "In 10 to 14 days, we are going to receive an official answer from the Commission and the IMF. Then, we'll be able to sign a loan accord, after which, at the beginning of May, the loans will enter the working boards of EC and the IMF, and from then on the loan accord will be operable and the first instalments could be delivered to Romania."

Thursday, March 26, 2009

Foreign banks pledge to shore up Romanian units

WASHINGTON, March 26 (Reuters) - Nine foreign-owned banks operating in Romania on Thursday pledged their commitment to doing business in the country and promised to provide additional capital to their subsidiaries if needed.

'We also acknowledge that our subsidiaries in Romania will have to adjust to the current challenging economic environment,' the banks said in a joint statement issued by the International Monetary Fund. 'A need for additional capital cannot be excluded, and will be provided as necessary.'

The banks include Erste Bank, Raiffeisen International, Eurobank, National Bank of Greece NBG - news - people ), Unicredit, Societe Generale, Alpha Bank, Volksbank and Piraeus Bank. (nyse:

IMF-led aid could rescue Romania 2009 growth -c.bank

By Marius Zaharia
BUCHAREST, March 26 (Reuters) - Romania may recover to record economic growth in 2009, central bank governor Mugur Isarescu said on Thursday, a day after it sealed an IMF-led rescue to pump fresh cash into its battered economy.

The 20 billion euro package made Romania the bloc's third member to be bailed out after eastern European contemporaries Hungary and Latvia, as world turmoil wipes out sources of funding for an economy heavily reliant on foreign cash.

The two-year programme assumes an economic contraction of 4 percent this year, Isarescu said: "The minus 4 figure is the assumption of the (loan) programme and the worst case scenario."
"My belief is that with the help of this programme, Romania will have positive growth," he told a news conference.

Analysts have said that while the loan leaves scope for public spending to bolster the economy, it cannot prevent Romania from slipping into recession as the global woes choke off manufacturing and consumption.

But they say the package, in the works for weeks, will underpin markets and ease pressure on the leu currency, up half a percent to 4.254 against the euro on Thursday after trading near record lows since the start of the year.

"With these comments, the central bank would like to avoid boosting pessimistic expectations concerning the Romanian economy," said Nicolaie Alexandru-Chidesciuc, ING Bank senior economist in Bucharest.

"It is true that the aid offers some support for economic growth through the large budget deficit it allows, but we cannot avoid recession this year."

The package gives the centre-left government some breathing room by allowing it to run a budget deficit barely below last year's 5.2 percent of gross domestic product (GDP). It also envisages cutting spending by roughly 1 percent of GDP.

Isarescu, who foresees the external shortfall falling to 8-9 percent of GDP this year from around 12 in 2008, said the main factor influencing inflation is the exchange rate, adding that his bank still has money to intervene.

He stressed he expected the leu to remain in "sustainable area" in the near term, while Finance Minister Gheorghe Pogea said earlier in the day the IMF deal will soften downward pressures on the currency.

Thirteen billion euros from the IMF are designed to feed in the next two years the central bank's reserves -- at around 26 billion at the end of February.

"We want for this year to maintain the level of foreign reserves stable. Regaining credibility and the improvement of the rating will depend on these reserves."

Romanians halt elevators to save money in crisis

BUCHAREST, Romania (AP) — Two government offices in Romania have come up with a novel way to cut expenses during the economic downturn: Turn off the elevator for most of the day.

Cristian Roman, the government representative in the northern county of Botosani, has decreed that elevators at the prefect's and county council offices will only be working between 7-9 a.m. and 3-5 p.m.

Roman says the measure will cut the electric bill. Some 200 people work in the five-story building.

Romania has been hard hit by the worldwide financial crisis. The International Monetary Fund said Thursday that Romania would receive a euro20 billion ($27.2 billion) loan from the IMF, the European Union and other financial institutions to boost government finances.

New Scandal Rocks Romania Interior Ministry

BalkanInsight.com

Romanian Interior Minister Dan Nica has appointed Gelu Drajneanu as interim head of the intelligence service within the minister following the detention of former chief, Cornel Serban, for allegedly complicity in crimes. Serban, together with one of his deputies and two local businessmen, is now being investigated for "aiding a criminal, using and allowing access of unauthorised persons to private information", according to a press release from the National Anti-coruption Department, DNA.

Local press reports that Cornel Serban has allegedly helped the businessmen to purchase a huge plot of land near Bucharest capital, in a deal valued at "hundreds of millions of euros."

Minister Dan Nica is reportedly to soon start a radical reorganisation of the Interior Ministry's intelligence service.

Dan Nica is the third Interior Minister this year, with his previous incumbents resigning following disputes between ruling coalition parties over the head of the country's intelligence agency.

Wednesday, March 25, 2009

IMF loan and Romania

By Radu Marinas

BUCHAREST, March 25 (Reuters) - The International Monetary Fund said it would ask top Western banks operating in Romania to affirm support for local subsidiaries and back an IMF-led rescue package by keeping their exposure to the struggling EU member.

The IMF agreed a 20 billion euro ($27 billion) aid package with Bucharest on Wednesday in a bid to thwart a financing crisis in the struggling Black Sea state.

The IMF mission will travel on to Vienna on Thursday to bring western banks on board, officials said. They will meet banks including Erste Group Bank, which owns Romania's biggest lender, and Raiffeisen International.

The IMF and the Romanian central bank will offer to let them reduce the amount of foreign currency reserves they are required to hold at the central bank, Romanian officials said, in a move that will free up liquidity and allow banks to give credit.

In exchange, they expect the banks -- also including Societe Generale and UniCredit -- to pledge to keep open funding lines to Romania and boost their subsidiaries' capital.

"What we are asking the banks for is for them to commit to maintaining a cushion of capital here in case everything turns to worse and for them to maintain their exposure to the country, to not take their money out," IMF mission chief Jeffrey Franks told reporters.

Franks said the size of the envisaged additional capital for Romanian subsidiaries would be based on a stress test that will be conducted jointly with the Fund, in an exercise similar to what the IMF has done with authorities in Ukraine.

BANK SHARES SOAR
In some countries in the region, foreign-owned banks have been left as the only source of loans since the global financial crisis led risk-averse investors to dump emerging market assets.
Romanian President Traian Basescu last month called on western banks to help stabilise their affiliates in former Communist states, weighing into a debate over how best to cushion the impact of the economic crisis on eastern Europe.

Even though banks have repeatedly said they stand by their Romanian units, the IMF and the central bank may expect a renewed public commitment, similar to the one Hungary asked for when it was rescued by the IMF last year.

"I would hope that eventually we would receive from these banks a written expression of their commitment to Romania," IMF's Franks said. "We predict that all invited banks will be involved in this process."

Shares in banks with sizeable Romanian exposure soared on the deal, led by an 11 percent rise in Erste shares to 14.69 euros. Raiffeisen rose 3.5 percent to 24.30 euros.

"If reserve requirements are reduced this is good, because you don't make money with money that is sitting at the central bank," said one analyst. "Also the deal should in general stabilise the currency, which will also help the banks."

Emerging European banks have lobbied regulators in the region for months to lower reserve requirements to free up money for lending. Romanian banks at the moment have to keep 40 percent of hard currency deposits and 18 percent of leu deposits as reserve with the central bank. (Additional reporting by Boris Groendahl and Luiza Ilie; editing by Will Waterman)

PRESS RELEASE:Fitch: IMF Plan Backs Romania,Challenges Remain

Fitch Ratings-London-25 March 2009: Fitch Ratings says today that Romania's proposed IMF facility for a EUR12.95bn, two-year Stand-By Arrangement, backed by a further EUR7bn in money from the EU and multilateral institutions, should shore up the country's external finances and reduce the risk of a damaging financial crisis, provided the authorities keep to their policy commitments. Romania is rated Long-term foreign currency Issuer Default (IDR) 'BB+', local currency IDR 'BBB- (BBB minus)', both with Negative Outlooks, and Short-term foreign currency IDR 'B'. The Country Ceiling is 'BBB'.

"Fitch views Romania's proposed IMF programme as supportive for its ratings as it should help to meet the country's sizeable external financing needs and provide a breathing space to rebalance the economy," said Andrew Colquhoun, Director in Fitch's Sovereigns group. "Nevertheless Romania faces a challenging economic and financial outlook and it will be vital for the authorities to keep to the attached policy conditions."

Previously rapid growth in domestic and external borrowing has left Romania heavily exposed to ongoing global de-leveraging. Credit to the domestic private sector grew at annual rates of around 60% in 2006 and 2007, funded partly by money from foreign parents which own around 90% of Romania's banking system. Credit growth slowed to 34% in 2008 as the credit crunch raised the cost of funds for foreign parents and diminished investor risk appetite. Net external debt rose to a projected 29% of GDP by end-2008 ('BB' range median: 3%), from just 7% at end-2005. The current account deficit was 12.2% of GDP in 2008, as strong credit growth fuelled domestic demand and drew in imports.

Fitch projects Romania's gross external financing requirement, not including short-term debt, at USD27bn for 2009, or USD59bn including short-term debt, against reserves of USD36.4bn by end-January 2009. Pressure on the external finances amid diminished international investor risk appetite has driven a 21% depreciation of the RON since end-August 2008. Currency volatility poses risks for the banking system, as around 50% of system loans are denominated in foreign currency.

The impact of financial market turbulence is being reinforced by a slowdown in Romania's key trade and investment partners in the euro zone. Expectations for euro zone 2009 GDP growth have been revised down sharply since Fitch downgraded Romania to 'BB+' in November 2008. Romania's growth slowed to 2.9% yoy in Q408, from 9.2% in Q308; Fitch expects Romania's economy will contract by 4.5% in 2009. Slowing growth will directly affect the fiscal finances and make it difficult to narrow the fiscal deficit from 4.8% of GDP in 2008. However, the ratings continue to benefit from low general government debt of just 20% of GDP by end-2008, while a lack of sovereign eurobond maturities in 2009 reduces refinancing risk this year.

Even if an IMF programme is agreed, implementation and execution risk will be significant. Romania's politicians may find it difficult to implement tough stability-oriented policies as the economy contracts for the first time in a decade, while presidential elections later in the year could increase pressure for populist policies.

Fitch downgraded Romania's sovereign ratings by two notches on 10 November 2008 and maintained Negative Outlooks on its Long-term IDRs. For more information, please refer to 'Fitch Downgrades Bulgaria, Hungary, Kazakhstan and Romania' on www.fitchratings.com

Contacts: Andrew Colquhoun, London, Tel: +44 (0) 20 7417 4316; Ed Parker, +44 (0) 20 7417 6340.

Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

I.M.F. Approves Romanian Rescue

The New York Times

PARIS -- The International Monetary Fund said Wednesday that it would come to the rescue of Romania as part of a $27 financing package to help the country weather the financial crisis. The fund said in a statement from Washington that agreement had been reached on an economic program supported by a loan of about $17.5 billion under a two-year stand-by arrangement.

Pending the approval of the fund’s executive board, Romania would be able to draw $6.75 billion upon board approval. Another $9.7 billion loan will be forthcoming from the European Union and other bodies.

The Romanian economy has been weakened by a sharp decline in foreign investment, even as the government’s finances and the banking sector have been overwhelmed by the economic crisis. The economy is expected to shrink by as much as 4 percent in 2009.

“The objective of the policy package is to cushion the effects of the sharp drop in private capital inflows,” Dominique Strauss-Kahn, the managing director of the fund, said in the statement. The I.M.F. program will also help to prepare Romania “for eventual entry into the euro zone,” he said.

Romania joins Ukraine, Serbia, Belarus, Hungary and Latvia in seeking help since the global economy went into a tailspin last year, leading investors to sell the currencies of smaller countries in a flight to dollars, euros and yen. International institutions have sought to plug the hole in the countries finances with about $60 billion of emergency lending.

“In addition, the program aims to maintain adequate capitalization of banks and liquidity in domestic financial markets; bring inflation within the central bank’s target and maintain it there; and secure adequate external financing and improving confidence,” Mr. Strauss-Kahn said.

The fund said the Romanian program contains “explicit provisions to increase allocations for social programs, as well as protection under the reforms for the most vulnerable pensioners and public sector employees at the lower end of the wage scale.”

The rescue plan was worked out in close cooperation with other international institutions. Pending the approval of their respective authorities, the E.U. will follow up with a loan of 5 billion euros, the World Bank has agreed to provide 1 billion euros, and the European Bank for Reconstruction and Development “and other multilaterals provide an additional 1 billion euros.” Mr. Strauss-Kahn also said the fund was “actively consulting with banks and other financial institutions operating in the country so that they will continue to provide adequate financing to Romania.”

Decriminalising Incest Sparks Romania Row

BalkanInsight.com

A proposal not to prosecute consenting adults for incest has sparked controversy in Romania, with the Orthodox Church leading public opposition to the move. The Romanian Justice Ministry is considering a change in the law, so that parents, grandparents, brothers and sisters can be exempt from prosecution for incest as long as they are not forced and is based on mutual consent.

Furthermore, there is also the proposed legalisation of prostitution.

"We are proposing a change in the Criminal Code, so Romania's legislation can become closer legally to some other European Union members. Furthermore, incest is more a problem of social pathology than a penal one," said Catalin Predoiu, Romania's Justice Minister.

Not all Romanians accept the Justice's Ministry's arguments.

"Every person with normal behaviour should be against legalising incest and prostitutions. This is an abnominal, sinful act, against any morale. Such people need not only medical help but also to know they should face prison for their acts," says Lucian Apopei, a writer at the Lumina newspaper, edited by Romanian Orthodox Church.

At present, changes in Criminal Code are debated by judicial commissions from Romanian Parliament, and no date has been set yet for a parliament vote on the bill.

Currently all forms of incest in Romania are punishable by up to seven years in prison.

Romania Gets 20 Billion-Euro Bailout From IMF, EU

March 25 (Bloomberg) -- Romania got a 20 billion-euro ($27 billion) bailout from the International Monetary Fund, European Union and other lenders to finance its budget and current- account deficits as the economy shrinks and revenue dwindles.

About 13 billion euros will come from the IMF and the rest from the EU, World Bank and the European Bank for Reconstruction and Development, the Washington-based lender said in a statement today.

“An IMF staff mission and the Romanian authorities have today reached agreement, subject to approval by IMF management and the executive board, on an economic program,” IMF Managing Director Dominique Strauss-Kahn said in the statement. “The objective of the policy package is to cushion the effects of the sharp drop in private capital inflows.”

The Balkan nation, which had the fastest-growing economy in the EU last year, is plunging into a recession and the central bank has little room to lower interest rates to revive growth. The loan brings to more than $60 billion the total handed out to eastern Europe. Hungary, Ukraine, Belarus, Latvia and Serbia have also sought bailouts to prevent defaults and aid banks.

‘Core Measures’

The loan from the Washington-based lender will be disbursed over the next two years with a 5 billion-euro installment coming after approval by the IMF executive board, the statement said.

Romania requested talks with international organizations this month to discuss financing the shortfalls as exports suffer from waning demand in its key western European trading partners.

“Core measures under the program are designed to strengthen fiscal policy to reduce the government’s financing needs and improve long-term fiscal sustainability, thus preparing Romania for euro zone entry,” the IMF said. The country aims to adopt the European common currency in 2014.

The IMF also said the loan agreement contains “explicit provisions to increase allocations for social programs.” The fund didn’t say what conditions it may place on the Romanian government as part of the package.

Central bank adviser Lucian Croitoru said yesterday the government predicts the economy will contract by as much as 4 percent this year. It expects shrinking state revenue will push the budget gap to as much as 4.6 percent of gross domestic product. The government also predicts a current-account deficit of as much as 9 percent of GDP in 2009.

Moody’s Investors Service, which affirmed Romania’s credit rating at Baa3 on March 20, said it would consider a downgrade if the country didn’t obtain aid.

To contact the reporters on this story: Adam Brown in Bucharest at abrown23@bloomberg.net; Irina Savu in Bucharest isavu@bloomberg.net

Tuesday, March 24, 2009

Romanian President meets IMF delegation

Tuesday, March 24, 2009

BUCHAREST, Romania: Romanian President Traian Basescu met officials from the International Monetary Fund on Tuesday, a day before they wrap up a two-week visit to negotiate a bailout loan for Romania.

Romania is hoping to negotiate an emergency loan for euro18-20 billion ($24-26 billion) from the IMF, the European Union and the World Bank, said Mihai Tanasescu, the country's representative to the IMF last week.

In the Wednesday meeting, Basescu met Jeffrey Franks, the head of the IMF mission, and Juan Jose Fernandez Asolo, the IMF representative for Romania and Bulgaria.

IMF officials, European Union officials and World Bank representatives will hold a news conference Wednesday as they end their visit to discuss the loans.

Romania is the third EU country to request a loan, following Hungary and Latvia. It joined the EU in 2007.

Romania agrees 20 bln euro aid deal with IMF-source

BUCHAREST, March 24 (Reuters) - Romania and the IMF have agreed on a budget deficit target of 4.6 percent of gross domestic product for 2009, in an IMF-led loan package worth 20 billion euros, a source close to talks said on Tuesday.

'Both sides agreed on a deficit goal of 4.6 percent of GDP. This is because of the Fund's estimation of a 4 percent contraction for the Romanian economy,' a senior ruling coalition official who saw the draft letter of intent told Reuters.

The official, speaking on condition of anonymity, said the overall package which will include funds from the IMF, the European Commission and other financial institutions would be worth 20 billion euros.

Romania needs billions of euros to fund its bloated current account deficit, plug a budget shortfall and avoid a financing crisis as the global credit squeeze chokes off funding for an economy reliant on foreign cash.

Prime Minister Emil Boc said his centre-left cabinet will likely approve the official letter requesting the aid package on Wednesday. The letter will be discussed in an IMF board meeting on May 4.

Romania, IMF negotiate 4.6%/GDP budget gap -c.bank advisor

BUCHAREST, March 24 (Reuters) - Romania and the IMF have negotiated a government budget deficit of 4.6 percent of gross domestic product, reflecting an estimated GDP contraction of 4 percent for 2009, a central bank adviser said on Tuesday.

'In December data made plausible an economic growth of some 2 percent and the government wished to follow the right direction approving a deficit goal of 2 percent,' Lucian Croitoru, an adviser to governor Mugur Isarescu told Business Standard.

'But apparently ... the budget deficit negotiated with the IMF is 4.6 percent of GDP.'

New Romania Opposition Chief Vows Victory

BalkanInsight.com

The new leader of Romania's main opposition party, Crin Antonescu, has said his main task is to rally his centre-right Liberal Party (PNL) to take on Traian Basescu who is expected to run in the presidential election later this year. "My mission is to represent liberal values in the future presidential elections. Whoever will be PNL candidate, he or she has to beat the current President, who is a real strong competitor," Crin Antonescu said after he was elected as the new president of Liberal Party.

Antonescu, 50, replaced former Romanian Prime Minister Calin Popescu Tariceanu, who had led the Liberal Party since 2004 and was prime minister for four years until 2008 when the party lost the general elections.

After winning the party leadership during the weekend, Crin Antonescu will be designated as the party’s candidate in the presidential election later this year, reports said.

Traian Basescu, 58, is the current President of Romania, after winning office in the 2004 presidential election.