Wednesday, September 30, 2009

Feared Romanian Securitate chief Plesita dies

By ALISON MUTLER (AP)

BUCHAREST, Romania — Gen. Nicolae Plesita, a die-hard Communist and ruthless chief of the Securitate secret police who arranged shelter in Romania for terrorist "Carlos the Jackal," and was tried for the bombing of Radio Free Europe has died, news reports said Wednesday.

He was 80.Plesita died on Monday in Bucharest at a hospital of the Romanian Intelligence Service where he was being treated for various illnesses including diabetes, Agerpres and mediafax news agencies reported, citing family members. Radu Chirca, a city hall official in Plesita's home town of Curtea de Arges said he would be buried there later Wednesday.Plesita commanded the Securitate's foreign intelligence service from 1980 to 1984.

He gained notoriety for his contacts with Venezuelan-born terrorist Ilich Ramirez Sanchez, known as "Carlos the Jackal," who was hired by the Securitate on the orders of ex-dictator Nicolae Ceausescu to assassinate Romanian dissidents in France and bomb the Radio Free Europe offices in Munich in 1981. Nine people were injured in the attack on the Munich-based radio that broadcast into communist Eastern Europe.

In 1998, Plesita told court prosecutors said that Ceausescu had ordered him to find temporary shelter for Sanchez in Romania in after the bombing. Ceausescu sold arms and explosives to Sanchez and enabled him to produce counterfeit passports and driver's licenses, Romanian media reported.After the 1989 anti-communist revolt, Plesita faced a military trial in Romania for being an accomplice in the Radio Free Europe attack, in which nine people were injured. The trial was interrupted several times and he was eventually found innocent earlier this year.

In post-communist Romania, Plesita continued to attract attention with his revelations from the Communist period, and showed no remorse for crushing Romanian anti-communist dissent.In an interview in 1999, he said Ceausescu had enjoyed "special relations" with late French President Francois Mitterrand and gave him at least $400,000 for his presidential campaign in 1981.

Plesita's public appearances and relaxed manner were accepted in post-communist Romania partly because many former high-ranking Securitate officers still have key positions in politics and business.

Born April 16, 1929, Plesita was recruited to the Securitate as a teenager and rose in the ranks after he helped eradicate the last vestiges of anti-communist resistance in the Transylvanian mountains in the late 1950s. In 1977 he helped stifle striking coal miners in the Jiu Valley whose unrest posed a threat to Ceausescu.It was after this that he was promoted to head foreign intelligence. A committed communist, Plesita was a harsh critic of Gen. Ion Pacepa, a top ranking Securitate officer who defected to the United States in 1978. Ceausescu hired Sanchez to assassinate Pacepa but he failed.

Govt party chief says Romania needs independent PM

BUCHAREST, Sept 29 (Reuters) - Romania should have a prime minister not affiliated with any political party to tackle the global crisis more effectively, the head of the ruling coalition's leftist grouping, Mircea Geoana, said on Tuesday.

Geoana spoke after meeting Prime Minister Emil Boc for emergency talks with President Traian Basescu to discuss a standoff over the sacking of the interior minister, which now threatens to break up the ruling coalition.

'The whole crisis, the lives of millions of Romanians depend on (political) stability. So this is why the best solution would be to have a government led by an independent prime minister,' Geoana told reporters. His party has threatened to quit the government this week if Basescu endorses the sacking.

Boc removed the minister, a member of Geoana's party, on Monday, and on Tuesday proposed a replacement from his own party.A collapse of the coalition could put in question Romania's ability to meet conditions for aid from the International Monetary Fund, economists say, threatening to damage investor sentiment.

Romania c.bank head nominated for new 5-yr term

BUCHAREST, Sept 29 (Reuters) - Romanian political parties have agreed to nominate central bank governor Mugur Isarescu for a new five-year term, a senior parliament official said on Tuesday.
Economists said his reappointment would likely strengthen the support for policies vital for Bucharest to retain aid from the International Monetary Fund.

"Parties have agreed to endorse governor Isarescu for a new mandate. There has been no questions on this point," Ion Ariton, Senate budget commission head and member of the coalition's centre Democrat Liberals, told Reuters.

Ariton said first deputy governor Florin Georgescu and deputy governor Cristian Popa are also on the list. Board members due to face hearings in parliament later in the day.

Romanian cbank cuts rates 50 bps, govt rifts weigh

By Marius Zaharia
BUCHAREST, Sept 29 (Reuters) - Romania's central bank cut its key interest rate by 50 basis points to 8 percent on Tuesday but domestic political uncertainties may temper future cuts, analysts said.

Many economists predict further easing in Romania as it struggles with scarce credit, plummeting consumption and lower investment, mirroring cuts elsewhere in eastern Europe as central banks combat recessions.

Hungary cut rates by 50 basis points to 7.5 percent on Monday and last week the Czech Republic left interest rates unchanged at a record low of 1.25 percent. Poland is expected to leave rates flat at 3.5 percent on Wednesday.Some analysts said concerns over the stability of Bucharest's coalition government and its ability to meet targets set by the International Monetary Fund in return for aid would make the central bank more cautious.'The central bank will have to slow down with its monetary easing given the political uncertainties in the background,' said Raffaella Tenconi of Wood&Co in Prague.'I think the bank will remain on hold for a few months. However, I still see a 100 basis points reduction over a 12-month period.'

Government party leaders held an emergency meeting with President Traian Basescu on Tuesday to discuss a standoff over the sacking of the interior minister which now threatens to break up the ruling coalition.The leftist grouping in Romania's uneasy coalition threatened on Monday to leave the nine-month-old government if the country's president endorsed the prime minister's decision to sack the minister.

The central bank said in a statement after the rate decision that firm implementation of economic policies and IMF-mandated reforms was 'essential' to ensuring the Romanian economy returns to sustainable growth.But it made no comment on the political situation or its implication for policy-making.

Meanwhile, parliament postponed a hearing of central bank Governor Mugur Isarescu, who was due to answer questions ahead of a vote to reappoint him after his mandate expires next month.Isarescu, one of the world's longest-serving central bankers, is widely expected to win a new mandate, seen as positive for policy stability on the market.

Tuesday, September 29, 2009

Romanian Central Bank Cuts Key Interest Rate to 8%

By Irina Savu
Sept. 29 (Bloomberg) -- Romania’s central bank cut the benchmark interest rate by half a percentage point to the lowest level in 19 months as a deepening recession saps price pressures in the east European country.

The Banca Nationala a Romaniei lowered the monetary policy rate to 8 percent, the Bucharest-based bank said in an e-mail today, matching the expectations of all 13 economists surveyed by Bloomberg. The rate remains the highest in the European Union after Hungary cut its rate to 7.5 percent yesterday.

The bank has lowered the rate five times since February as austerity measures required by Romania’s international bailout made room for monetary easing needed to soften the impact of the recession. The latest cut comes two months before presidential elections on Nov. 22 that pit the two governing parties against each other and threaten to break up the governing coalition.“The decision is as expected, so no real surprise at this stage,” Raffaella Tenconi, chief economist at Wood & Co. in Prague, said in an e-mail today. “Clearly the political situation is an important factor going forward and I expect a temporary pause of the monetary easing cycle for a few months.”

Twenty of the 53 central banks tracked by Bloomberg eased monetary policy in the past three months to fight the recession, including eastern European countries such as Russia, Hungary and the Czech Republic.International BailoutRomania’s economy contracted an annual 8.7 percent in the second quarter, the most on record, and inflation slowed to a two-year low in August as consumption dropped.

The central bank left the minimum reserve requirements on foreign-currency commercial deposits at 30 percent and 15 percent on deposits in lei. The bank has cut the foreign currency rate from 40 percent and 18 percent on lei deposits so far this year.“They were loosening requirements too fast, so generally I think this is welcome news,” Tenconi said. “I think it’s possible they will cut requirements further in November, but leave interest rates unchanged in order to support lending.”Romania’s leu was higher against the euro after the interest rate announcement, advancing as much as 0.6 percent to 4.18743 versus Europe’s common currency.

The Bucharest Stock Exchange’s benchmark BET Index rose 0.2 percent to 4,401.36.‘Sustainable’“A firm and consistent implementation of the macroeconomic policy mix -- monetary, fiscal and income -- and structural reforms are essential for achieving a further sustainable disinflation and for a lasting and sustainable relaunch of economic activity,” the central bank said in a statement explaining today’s move. “The monetary policy stance stayed prudent.”Romania got a 20 billion-euro ($29 billion) international loan led by theInternational Monetary Fund and the EU this year to finance its budget and current-account gaps.

The government predicts the economy will shrink about 8.5 percent this year, after growing 7.1 percent last year, the fastest pace in the EU. It predicts an emergence from a recession in the fourth quarter and growth of about 0.5 percent next year.

As a condition for receiving the loan, the government froze state wages this year and pledged to cut spending to meet a budget target of 7.3 percent of gross domestic product in 2009.Hungary, Ukraine, Belarus, Latvia and Serbia have also sought bailouts to prevent defaults and aid banks.The bank, which will hold its next rate-setting meeting on Nov. 3, said it will “closely monitor domestic and global economic developments so that, by using its available instruments, to ensure the fulfillment of its objectives of achieving and maintaining price stability in the medium-term.”

Inflation slowed to a two-year low of 5 percent in August compared with 5.1 percent in July. The central bank forecasts the inflation rate will fall to 4.3 percent by the end of this year and 2.6 percent in 2010.

To contact the reporter on this story: Irina Savu in Bucharestisavu@bloomberg.net.

AP: Romania PM urges rivals to name new minister

Romania's Prime Minister Emil Boc is pressing his coalition partner to name a new minister to replace the one he fired, as the government appeared close to collapse.

The Social Democratic Party had so far refused Tuesday to name another interior minister and threatened to withdraw all its ministers from the two-party government over the firing.Boc, a Democratic Liberal, fired Social Democrat Dan Nica on Monday after Nica's comments last week about potential fraud in November elections were widely interpreted as an accusation that Boc's party might try to cheat to get President Traian Basescu re-elected.

Nica's ministry organizes and oversees the poll, and his party will back a rival candidate.

Logan’s run: success of Dacia has attracted Ford to invest in the country

By Thomas Escritt
Published: September 28 2009
The Financial Times

In the run-up to Christmas, the production lines at Dacia’s car factory in Pitesti were shut down for periods totalling a month, as demand collapsed in Romania and abroad.In 1999, when France’s Renault bought Dacia, the then-ailing state car company, the outlook looked bleak for Romania’s manufacturing sector, which had not attracted western investment on the scale of nearby countries such as Hungary or the Czech Republic.

Starting from the premise that there was a need for a car tailored for developing countries that was easily user-serviceable and had raised suspension needed for dealing with rough roads, Renault set about manufacturing the Logan, a car that would sell for as little as €5,000.The Renault subsidiary saved the Romanian auto industry and was producing 1,340 vehicles a day at its peak last year; but when the downturn came, and domestic demand fell 60 per cent year on year in the final quarter, production was suspended for weeks on end to adjust stock levels to the grimmer circumstances.

Salvation came in the form of west European car scrapping schemes. When the German government introduced a €2,500 rebate to bolster flagging car demand during the downturn, its aim was to support the German car industry. But Dacia proved an unexpected beneficiary when consumers realised the rebate could spare them as much as half the price of a new Logan. Export demand soared and, after spending much of the winter at home on 80 per cent pay, the company’s workers are now back in the factory, which is once again running at full capacity.

Whereas before, Dacia was producing the Logan primarily for the domestic market, it can now be seen driving on the streets of western Europe.“Some 85 per cent of our production is for export now,” says Francois Foumont, the company’s general manager. Germany accounted for 40,000 sales in the first six months of this year, France for 25,000, while only 23,000 were bought in Romania. Last year, Dacia had revenues of €2.8bn, accounting for some 2 per cent of the country’s gross domestic product.

Over the past two years, Romania has come a long way in catching up on the investment it lost to richer central European neighbours in the 1990s. In September, another milestone was passed with the arrival of Ford, the US carmaker, which bought a state-owned plant in the southern city of Craiova, where it plans to manufacture a new Transit van and, eventually, a new budget car, details of which are still under wraps.

Romania’s emergence as a manufacturing centre, however, has not been without problems. The western city of Cluj was confident of being chosen as the site for a new Daimler plant last year – before being pipped at the post by Hungary. In the end, analysts reckoned the neighbouring country’s better-developed motorway network made the difference.The core western European markets are still as much as 20 hours away from Romania by road. And this shortage of infrastructure is the biggest complaint of the two car manufacturers.

“It’s a problem wherever we go,” concedes Nadia Crisan, of Ford in Romania. “[But] in Romania, roads are the number one priority at this point.”But Dacia’s and Ford’s wishlist – which includes new roads linking Craiova, Pitesti and the capital, as well as improved rail links and upgrades to the port of Constanta – may take a while to be fulfilled.With an eight-year boom behind it, the country still has only two motorways and little progress has been made on the Transylvania Highway, which would bring Bucharest to within eight hours of Vienna, after five years of construction.

At a time of recession and IMF-imposed cuts, little progress is expected in the next few years.But if an underdeveloped infrastructure remains a deterrent to some investors, the two existing foreign investors remain confident enough to invest further. Dacia plans to launch a four-wheel-drive version of its Logan in 2010, and is investing €160m in a new research and development site in Romania that will allow it to move its vehicle testing from France to Romania, and Mr Foumont remains optimistic about the sector’s future.”Ford’s arrival proves what Dacia has being showing: that Romania is a real industrial country.”Together, he hopes, the two manufacturers will be able to press for improvements to the country’s infrastructure.

Foreign investors are bullish about pigs

By Thomas Escritt
Published: September 28 2009
The Financial Times

Everybody is talking about farming, with bankers, politicians and businessmen extolling the virtues of a homespun sector that should be an area where the country has a genuine competitive advantage.

Mircea Geoana, leader of the Social Democratic Party and its candidate for president in elections to be held in November, says: “We have enormous potential in agriculture and yet we are importing 70 per cent of our agricultural products.”“Our agricultural land could feed 80m people,” his adviser chimes in, reinforcing the new pride Romanians are taking in a sector that looked stodgy and unexciting during the boom that ended with the onset of the financial crisis last autumn.

The government, a coalition between the Social Democrats and the right-leaning Democrat-Liberal Party, has taken up the chorus, with Cristian Diaconescu, the foreign minister, recently announcing that Romania should seek to win the agriculture portfolio when the new European Commission is appointed this autumn.

Part of the enthusiasm stems from an increasingly desperate hunt for returns in a tougher economic environment. Last summer saw the end of an eight-year asset price boom that began with the millennium and lasted through accession to the European Union in 2007.

At its peak, land and property prices in Bucharest hit levels not far off those to be found in wealthier western European capitals.Meanwhile, other sectors, from automotive components to banking, were attracting investment on an ever greater scale. In 2007, Erste Group, the Austrian bank, paid almost €7bn for BCR, a leading Romanian commercial and corporate bank, while manufacturers such as Dacia, a Renault subsidiary, were fostering a growing list of component suppliers.

Against this backdrop, Romania’s rickety agricultural sector, with only 35,000 farms large enough to be run as agribusinesses and attract EU subsidies and a further 4m near subsistence-level smallholdings looked distinctly unappealing during the good years, for investors, lenders and employees alike.

But this year, with an austerity programme in place as part of the country’s bail-out deal with the International Monetary Fund, the real estate market frozen, and many employers struggling, investors and lenders are taking another look at the neglected sector.Increasingly, banks are showing an interest in agriculture. Unicredit Tiriac, the Italian bank’s Romanian subsidiary, has moved from lending little to agricultural producers last year to setting up a department targeting agribusiness this year.

Dan Pascariu, a banker and entrepreneur, is clear that the hunt for better returns is driving this enthusiasm. “Agriculture wasn’t sexy. The yields weren’t good enough, but today agriculture is a competitive advantage [for Romania].”He adds: “Though the sector has a very atomised ownership structure, all banks are taking a fresh look at it because of the tremendous potential and the flow of EU structural funds.”Mr Pascariu has put his own money where his mouth is.

The business case for his pig farming business is straightforward: “Romania imports 4m pigs a year, and yet pork is a staple,” he says. “We have 70 farms, producing entirely to meet domestic demand, and there is enough demand for another 80.”Despite the high interest rates they are paying on loans, the farms are profitable. But it will take more than capital to build a secure future for Romanian agriculture.

Gabriel Popescu, an agricultural economist at Bucharest’s Academy of Economic Sciences, points out that capital investment is only relevant to producers with a connection to the market.“The 4m subsistence farms are closed systems,” he says. “They produce for their own consumption. These smallholdings produce only for their own subsistence, meaning nobody has any interest in their efficiency.Capitalisation is only relevant for the 35,000 farms large enough to count as agribusinesses.

The challenge for public policy is not to make the smallholdings more efficient, but to open the system and make them market participants.”The 4m smallholdings are cut off from the market and too small to be eligible for EU funding, making them a challenge for social, not economic policy, he adds.

But, whatever the current political enthusiasm for the sector, the government should tread carefully, he says: “We’ve had three agricultural reforms in the past 20 years, when co- operative farms were created in 1991, when state farms were privatised in 2000, and when we joined the EU in 2007.“Each reform is like surgery and it takes 15 years to recover.”Meanwhile, large forces, such as the US livestock farmer Smithfield, remain bullish about the country.“

Once, Romania was known as the breadbasket of Europe,” the company says. Smithfield, which has annual sales of $145m, has invested $600m since arriving in the country in 2004, and has just announced a further $35m greenfield investment in pig farming.

State has few options in face of judges’ strike

By Thomas Escritt
Published: September 28 2009
The Financial Times

When Romania’s government announced a package of pay reforms to cut public sector wages, nobody was surprised when employees threatened industrial action.But it still came as a shock when the Supreme Council of the Magistracy, the professional organisation and regulatory body that represents Romania’s judges actually followed up on its threat after securing for themselves legal rulings that they were entitled to a pay rise.

Most experts regard the strike, which began on September 1, as illegal, but with the courts not sitting, there is little chance of a ruling.Laura Stefan, a legal affairs expert at the Romanian Academic Society, a thinktank, says: “If the police strike, then the courts can rule that it’s illegal. There’s nobody to rule on the illegality of the judges’ strike.”Since the strike began, most judges have refused to preside over low-priority cases that do not involve minors or arrests.The judges are striking over the effects of a public sector pay law introduced to deal with the hole in Romania’s public sector finances.

The government is seeking to implement this law with the encouragement of the multilateral lenders behind a €20bn bail-out package it signed last year.The unitary public sector pay law will tie all public employees to a wage scale defined in terms of multiples of a base salary of 700 Romanian lei (€165) a month. The scale tops out with the president’s salary, at 12 times the base wage.“It’s a blunt instrument,” admits one official involved in the bail-out package, “but with elections coming up it’s no use just warning the government to cut wages.

If the government makes a soft commitment, then nothing will happen.”But the case of the country’s judges is particularly sensitive. For years, Romania has been under pressure from the European Union to improve the quality of its judicial system in the fight against corruption.Successive governments have strengthened the judiciary, increasing its independence from the justice ministry and raising the pay of judges and prosecutors to the point where they are among the best-paid public employees.

Currently, a starting judge earns some €600 a month – comparable to the pay of a senior emergency doctor, and more than a university professor.Until 2000, judges also participated in a scheme under which public employees received salary top-ups to compensate for burdens specific to their jobs. Under the scheme, officials required to respect confidentiality as part of their work were entitled to a specific bonus, as were those whose job involved particular levels of stress. Until recently, even using a computer as part of a job merited a specific top-up.

The bonuses, which were introduced during the 1990s as private sector pay began to outstrip that of public employees, have contributed to significant public sector wage inflation – the public wage bill grew 86 per cent over the past three years.Since 2000, when top-ups for judges were abolished as their salaries began to outstrip those of the rest of the public sector, individual judges have sought rulings from their colleagues saying that their exclusion from the bonus system amounted to discrimination.

Collectively, the Supreme Council of the Magistracy, with the support of the judges of the country’s Supreme Court, are demanding back-payment of the salaries in full.Catalin Predoiu, the justice minister, has pledged that the back-payment claims will be met, though not immediately.Payment of the judges’ claims in full would cost about €3m, at a time when the government is forecasting a budget deficit of 7.2 per cent for this year against a backdrop of an economy that could shrink by as much as 10 per cent.

Matters are complicated by the fact that the most senior judges, those on the Supreme Court and the Supreme Council of the Magistracy, have already had their claims met, since their budget comes directly from the finance ministry and not from the embattled justice ministry.As Ms Stefan says: “We have a situation where the best-paid judges are getting all they ask for, while the lowest-paid are getting nothing.”Lidia Barbulescu, the president of the supreme court, says that the spectacle of judges ruling on their own compensation levels only creates the “appearance” of a conflict of interest. “Judges didn’t rule on their own situation personally. We tried to solve this misunderstanding in a decent manner.”

She argues that the judiciary needs to be given independent control over its own budget to avoid similar conflicts in the future.The judges’ unique position in society leaves the government with few tools at its disposal to resolve the conflict.Mr Predoiu says: “All we can do at the ministry of justice is talk to them, show them our arguments. All the powers share responsibility for the good functioning of the state. The top of the legal profession has to understand our needs as well as those of the judicial system.”

Bucharest battles against the crisis

By Thomas Escritt
Published: September 28 2009
The Financial Times

There is more elbow-room in the upmarket night clubs of northern Bucharest than this time last year. Flashy bars spent recent years competing to outdo each other in opulence. One installed chandeliers, another hired international DJs, until a third outdid them by installing a swimming pool. They came to symbolise the extravagance of Romania’s boom years.

After decades of oppression under Nicolae Ceausescu, the communist dictator, the 1990s were a time of disorder and wasted opportunities, when the country missed out on the foreign investment that buoyed its central European neighbours.When the boom finally came, young professionals oin Bucharest had more money than ever before.

As newly-arrived banks, manufacturers and property investors sent salaries and real estate prices soaring, people flocked to these self-consciously extravagant places, often spending sums that would make Londoners blush.That was then. The country has suffered badly in the fallout from the credit crunch. Household lending, which had been growing at 60 to 80 per cent a year over the past three years, collapsed as markets lost confidence in the banks’ ability to continue the credit expansion.

Exports fell sharply, and the economy shrank 6.2 per cent year-on-year in the first quarter of 2009 and was down 8.7 per cent in the second, losing all the gains it had made during the final half of 2008.However, while there may be more room, the clubs are far from empty: Romania may have turned to the International Monetary Fund and the European Union for a €20bn bail-out in the spring, but it seems to have escaped the worst effects of the crisis.

“I’m reasonably optimistic about the numbers,” says Dominic Bruyn seels, chief executive of BCR, a subsidiary of Erste Group, the Austrian bank.Industrial production has risen slightly, he notes, and with an IMF package in place to stabilise the currency, a degree of certainty has returned to business planning. But 2009 is still going to be tough.By the government’s own estimate, the economy could shrink 8.8 per cent overall this year and the projected budget deficit, after several revisions, is now expected to hit 7.2 per cent.

Others are more pessimistic.Liviu Voinea, a partner at the Group for Economic Analysis, a think-tank, says: “We had the largest GDP growth in our history last year, and now we are falling from the peak. We could fall 10 per cent this year.”When the crisis passes, the factors that made the country an attractive investment destination will remain. With a population of 22m, Romania has a GDP per capita of 15 per cent of the EU average, compared with 25 per cent in Poland and 35 per cent in Hungary. Its domestic credit levels are also low, at 42 per cent of GDP agaisnt 7 per cent in Poland.It is the second largest of the EU’s new member states and has an underdeveloped market: the country has just 167 passenger cars per 1,000 population, compared to 351 in Poland and 566 in Germany, leaving plenty of room for growth.

The €30bn in funding that the EU intends to provide before 2014 should help.Even if it proves to be a temporary dip, the end of the boom came at a bad time for the man most closely associated with it – Traian Basescu, the president. He will probably stand for re-election in November after completing one five-year term.An impulsive and divisive figure, he made himself popular at home and abroad with his strident talk of getting to grips with corruption. But along with much of the political class, he lost credibility after insisting the country would not be affected by the crisis and would not need to turn to the IMF.

He remains the favourite to win, but many business leaders privately express the hope that a less impetuous successor might produce some stability. Yet even his challenger, the social democrat Mircea Geoana, acknowledges that any successor will have to be as frenetically activist as Mr Basescu.“He changed the character of our republic for good,” says Mr Geoana, who argues that the “pro-cyclical” policies of the past five years have left the country more indebted and in worse shape than is necessary. With elections imminent, the government, a grand coalition of Mr Basescu’s democrat liberals and Mr Geoana’s social democrats, has little room for manoeuvre. Led by Mr Basescu’s ally, Emil Boc, as prime minister, it is struggling to implement the spending cuts demanded by the IMF.Inevitably, this is not a pain-free process.

Although public sector protests have been relatively muted, one group with the power to create trouble has done so. Despite a consensus among legal experts that their action is illegal, judges have laid down their gavels in a court strike that started at the beginning of the month. Lidia Barbulescu, president of the supreme court, says the conditions under which judges have to work are a “humiliation” and that proposed public sector pay cuts will merely make conditions worse.

Mr Voinea worries that without real structural reforms, Romania will emerge limping from the crisis. “Our backs are to the wall,” he says, adding that the public-sector wage bill has to be cut severely.An inefficient public administration has difficulty co-ordinating investment projects, meaning that years of boom- time earnings have been squandered on salaries and consumer spending. The country still has only two motorways, at a time when businessmen say poor infrastructure puts the country at a disadvantage.

There are a number of signs that the government is having trouble paying its bills: Small businessmen complain that tax inspectors are overreaching in their eagerness to raise revenue, while banks report that small business clients are being driven to the brink of bankruptcy by long delays in VAT reimbursement – although the government says a computer system has speeded things up.

Mugur Isarescu, governor of the National Bank of Romania, says: “Economic growth was based in large part on a high level of imports, which created huge VAT revenues. But if imports fall 50 per cent, revenues will fall sharply.”The IMF is satisfied with the progress Romania has made since signing up to a two-year support programme in March, although the ride has been rougher than anticipated.“The government is making progress on the economic programme. The targets had been met at the end of June, but additional budget adjustments are needed because the recession was deeper than most people expected,” says Tonny Lybek, country director for the IMF.

Nonetheless, perhaps bowing to the inevitable, the IMF has agreed to transfer its next tranche of funding directly into the cash-strapped finance ministry’s accounts, rather than channelling it through the central bank, as is customary.Mr Isarescu says: “It doesn’t make much difference, because it ends up in an account at the central bank anyway, but it makes it much easier.”

Dorel Sandor, a public affairs consultant, says the government has performed acceptably, given the financial constraints and the upcoming elections: “Mr Boc is a good caretaker, and that’s not a bad thing in a crisis.”For some, though, the prospect of a few hard years is salutary. Dan Pascariu, chairman of the Romanian subsidiary of Unicredit, the Italian bank, says: “This younger generation, who were children until the revolution [against communism in 1989], have seen only growth in their adult lives.“I see in them a sense that they deserve and know everything. This cold shower is welcome, because we’re learning crisis-management.”

Old skills needed in tougher times

By Thomas Escritt
Published: September 28 2009
The Financial Times

After three years of breakneck growth, Romania’s bankers are having to relearn old skills to cope with the more difficult environment.In the latter years of its post-millennium boom, Romania – with an economy growing at 8 per cent a year, low levels of banking penetration and a credit-hungry domestic market of 24m people – looked an irresistible target to western European banks. They wanted their share of the profit from Romania’s gradual convergence with the European Union.

Between 2005 and 2008, the banking system grew by about 1,000 branches each year, and the banks hired some 20,000 people each year to work in them. At the peak of the boom, Portugal’s Millennium Bank planned a €300m spending spree to enter the market from scratch with 100 new branches.That optimism may have vanished but many senior bankers are convinced that the bursting of the bubble was for the best.“It’s a good thing when you realise that you have to rationalise and cut costs. It was unhealthy growth and an unhealthy mentality,” says Dan Pascariu, chairman of Unicredit Tiriac, the Italian bank’s Romanian subsidiary. “The approach to risk management in the sector has changed. Sellers have had to turn themselves into restructurers, and they are starting to see the other side of the business. When they sell in future, they’ll know the other side of the coin.”The slowdown also put paid to wage inflation; at one point, competition for staff was so intense that some staff in head offices were earning more than their counterparts in Austria.

Retrenchment followed.Dominic Bruynseels, chief executive of BCR, the largest Romanian bank, owned by the Austrian bank Erste Group, says: “At the end of last year the workforce did announce a strike because of our offer to link Christmas and holiday bonuses to the bank’s performance.” Staff eventually accepted the offer.

This sober assessment stands in sharp contrast to the alarm with which many analysts regarded central and east Europe’s banking systems in the first quarter of this year, when collapsing exchange rates led many to expect borrowers to default in droves on loans made in foreign currencies. Some forecast that mother banks in western Europe would come under strain as they were forced to prop up their eastern subsidiaries as they experienced a sharp rise in non-performing loans.

In the event, only Israel’s Leumi Bank, one of Romania’s smaller banks, chose to withdraw from the market.“None of the established banks will withdraw,” says Mr Pascariu, “although we might see some mergers”.There is still room for consolidation. While the Royal Bank of Scotland was unable to find a buyer for its Romanian subsidiary, bankers privately agree that larger forces are likely to buy up some of the smaller banks when the price is right.Others, however, fear that banks have become too cautious.

Mugur Isarescu, governor of the National Bank of Romania, says: “Some foreign-owned subsidiaries moved in a direction they discovered to be unstable, relying on credit lines from the mother banks, so now they are more focused on extending their deposit bases than on extending credits. It was an over-reaction.“They were too generous before the crisis and today they are too pessimistic, and it will take some time to find a way of addressing the issues properly.”But Mr Pascariu dismisses suggestions banks have cut lending. “There is a myth about the banks not lending, but demand for lending has fallen by 90 per cent for retail and by 50 per cent for corporate customers,” he says.This is in part a reflection of the struggles of the customer base. With small and medium-sized enterprises suffering, few are looking to raise new finance.“The small and medium enterprise base in particular is suffering – there has been a big rise in non-performing loans,” says Mr Bruynseels.

The level of non-performing loans among SMEs has risen steadily this year, hitting 2.9 per cent as a share of lending to non-bank clients in July, according to the central bank, up from 1.4 per cent last December.Mr Pascariu expects this level to continue rising, topping out at 6 per cent.However, both he and Mr Bruynseels insist the sector has the liquidity to cover even that contingency. “We have no issues with liquidity,” says Mr Bruynseels. “Our credit line with Vienna has remained the same.”

A decision by the central bank to cut the minimum reserve requirements for lending in foreign currency from 40 per cent to 30 per cent has created further liquidity – although much of that has been absorbed by a club loan made by Romania’s commercial banks to the government.“The IMF loan restored central bank reserves to a pre-crisis level and allowed us to ease reserve requirements,” says Mr Isarescu. “Part of the money liberated by cutting the reserve requirements led to the club loan.”

Azerbaijan and Romania sign five documents

Baku – APA. Signing ceremony of documents took place with participation of Azerbaijani and Romanian Presidents Ilham Aliyev and Traian Basescu on September 28, Azerbaijani President’s press service told APA.

The heads of states signed “Joint Declaration on agreeing to establish strategic partnership between Azerbaijan and Romania”.

Azerbaijani Interior Minister Ramil Usubov and Secretary of State at Romanian Foreign Ministry Bogdan Mazuru signed the “Agreement on cooperation between Azerbaijani Government and Romanian Government in combating transborder organized crimes and international terrorism”.

The two countries also signed the “Agreement on cooperation between Azerbaijani Government and Romanian Government in eliminating, limiting and reducing the consequences of the emergency situations”. The agreement was signed by Azerbaijan’s Minister of Emergency Situations Kamaladdin Heydarov and Secretary of State in Romanian Foreign Ministry Bogdan Mazuru.

Azerbaijan’s Foreign Minister Elmar Mammadyarov and Romanian Minister of Communications and Information Society Gabriel Sandu signed the “Memorandum of Understanding on cooperation in communications and information technologies between Azerbaijan Ministry of Communications and Information Technologies and Romanian Ministry of Communications and Information Society”.

The two countries also signed the “Memorandum of Understanding on cooperation in the protection of environment between Azerbaijani Ministry of Ecology and Naturals Resources and Romanian Ministry of Environment”. The document was signed by Azerbaijani Foreign Minister Elmar Mammadyarov and Secretary of State at Romanian Ministry of Environment Dan Kirlan.

AP: Romania interior minister fired over fraud comment

Romania's Prime Minister Emil Boc on Monday fired the country's interior minister for speculating there could be fraud in upcoming elections.

The move could upend the country's already tense two-party coalition government.Boc, a Democratic Liberal, said he fired Nica because of his allegations last week that there could be fraud in November elections, comments that were widely interpreted as an accusation that Boc's party might try to cheat to get President Traian Basescu re-elected.

Nica's ministry organizes and oversees the poll, and his Social Democratic Party will back a rival candidate.Nica would be the third interior minister to leave the post in less than ten months.

The Social Democrats on Monday threatened to withdraw its ministers in protest against the decision, a move that would cause the coalition government to collapse.

Social Democrat spokesman Bogdan Niculescu-Duvaz gave Boc 24 hours to reconsider Nica's firing, saying Romania did not need political tensions at a time of economic recession."This firing is an attack that throws Romania into an unprecedented political crisis," Nica said.

Relations between the two parties in the coalition have been tense ever since they came to power in December 2008.The interior ministry is one of the country's most powerful because it controls a controversial domestic intelligence agency. It is led by a Social Democrat according to an agreement made when the coalition was formed.The first interior minister to leave the post, Gabriel Oprea, was fired in a dispute with his party over the man he appointed to be head of a domestic intelligence agency. The second minister, Liviu Dragnea, said he resigned over a lack of funding for his ministry.

Monday, September 28, 2009

Romania 8-month budget gap at 4.5 pct/GDP

BUCHAREST, Sept 25 (Reuters) - Romania's consolidated budget deficit rose to 4.5 percent of gross domestic product in the first eight months of the year, as the economic contraction pummelled tax receipts, the finance ministry said on Friday.Earlier this month, ministry officials had said the preliminary 8-month figure was 4.4 percent of GDP.

From January-July, the shortfall widened by roughly one percentage point. Analysts have said the fast pace of expansion could place the centre-left government's end-year target at risk and potentially put downward pressure on the leu currency.

Romania plunged into recession at the start of the year as the global economic crisis slashed domestic consumption, weakened demand for Romanian goods at home and abroad, and dried up lending and foreign investment.To avoid a potential financing crisis, the European Union state turned to the International Monetary Fund for a 20 billion euros aid package. In return for aid, Romania must enforce deep cost-cutting reforms of its public administration.In nominal terms, the 8-month deficit reached 22.3 billion lei ($7.8 billion). During January-July, Romania's deficit reached 3.3 percent of a GDP estimated at 531.2 billion lei.

Since then, Romania revised its budget to reflect a deeper than forecast recession, lowering its GDP expectation to 497.3 billion lei and raising its end-year budget deficit target to 7.3 percent of GDP from 4.6 percent.Finance Minister Gheorghe Pogea said next year's deficit would be built on a gap of 5.9 percent of GDP, in line with IMF requirements.Ministry data showed budget revenues totalled 103.3 billion lei at the end of July, or 21 percent of GDP, a 6.6 percent year-on-year fall. Spending rose 8.3 percent on the year, reaching 125.6 billion lei, or 25.3 percent of GDP.Investment expenditure reached roughly 4 percent of GDP.On Friday, the leu currency hovered near five-week highs after it had gained gradually on the back of the IMF approval of a second loan tranche late on Monday.

Friday, September 25, 2009

Romania gov't wins parliament support for reforms

By Luiza Ilie
BUCHAREST, Sept 24 (Reuters) - Romania's centre-left government survived a no-confidence vote in parliament on Thursday, thereby getting approval for tough spending cuts required by the International Monetary Fund in return for aid.

A parliamentary vote to scuttle the package of reform measures failed, with 137 deputies voting against and 112 deputies voting for it.

Many ruling party deputies boycotted the vote in order to show their displeasure with the opposition's tactics.

Under Romanian parliamentary procedure, the reform package now becomes law automatically.
The vote had been seen as a key test of the nine-month-old cabinet's ability to agree on painful policies ahead of a Nov. 22 presidential election and to meet terms for a 20 billion euro ($29.45 billion) package it secured in March to help it ride out a deep recession.

"After 20 years, Romania cannot afford to wait anymore," Prime Minister Emil Boc told parliament in reference to stop-and-go economic reforms during post-communist years.
"If these reforms are not made, all we will accomplish is to deepen the crisis and keep privileges in the wage system."

Designed to slash public sector costs and streamline a bloated administration, the reforms should ease the financial burden on state coffers and free up cash for investment.

"Clearly this is a good step forward ... Romania badly needs these reforms," said Nicolaie Alexandru-Chidesciuc of ING Bank.

But the plan has sparked mounting social tensions in the new European Union member, hit by recession and rising unemployment. It also has put strains on the uneasy two-party governing coalition which controls 70 percent of the assembly seats.

Analysts say social protection and state wages are likely to dominate a hotly-contested campaign for the presidential ballot which pits incumbent president Traian Basescu against Mircea Geoana, leader of the leftist Social Democrat coalition partner.

Basescu welcomed Thursday's vote but said further restraint was needed. He called a national referendum for the same day as the election to gauge popular support for his plan to streamline parliament by trimming it to a single house from two now and cutting seats by one third.

REFORM UNDER WAY
Romania was the EU's fastest-growing economy early last year but with domestic lending frozen and low foreign demand hurting exports, it was forced to seek foreign aid and implement unpopular wage freezes to prevent a financing crisis.

The reform package includes three bills to restructure the public sector by cutting the number of state-controlled agencies, impose a new wage scheme for state employees and reform the outdated education system.

The government said the wage bill would be further improved by September, 2010 and also appease some IMF concerns regarding its transparency and ease of implementation.
Boc has said no wages would be cut but top salaries would be frozen in the coming years until a 12/1 ratio between the highest and the lowest wage in the economy is reached.

Many trade unions say the law discriminates against certain occupations. A general strike to oppose the bill is scheduled for Oct. 5 and it is expected to bring public institutions to a near-standstill for the day.

As part of the plan the government will also halve the number of state agencies to 112, axing around 9,500 jobs.

Thursday, September 24, 2009

Romanian dictator Ceausescu's favorite waiter dies

The Associated Press (AP) — TIMISOARA, Romania

Cornel Urcan, the most-trusted waiter serving the late Romanian dictator Nicolae Ceausescu, has died, according to local newspapers Thursday. He was 67.

Urcan died of a heart attack on Sept. 18, his son Tinel told daily Click newspaper.Urcan began working as a waiter at the Continental Hotel in Timisoara when he was 14 and worked there 30 years, being called on by the dictator to serve on special occasions for state dinners in Bucharest and other towns around Romania.

Known for carrying up to 24 plates on one arm, Urcan waited on eight heads of state and 14 prime ministers at Ceausescu's official dinners in the 1980s before the dictator was executed during the 1989 anti-communist revolt, his son reportedly said.

He also was likely an agent for Ceausescu's feared secret police, the Securitate-a post he would have needed to be allowed contact with senior foreign officials at the time.

After Ceausescu's death and the fall of communism, Urcan tried to buy the Continental but was briefly imprisoned in 2001 for failing to pay loan installments on the hotel purchase.In prison he contracted tuberculosis. He later sued the hotel, which this year was ordered to pay him $500,000 (?338,000) in damages.

Romanian government faces no-confidence vote

BUCHAREST, Sept 24 (Reuters) - Romania's centre-left government faces a no-confidence vote in parliament on Thursday over fiscal reforms promoted by the IMF but deemed ineffective by the centrist opposition.

The vote is seen as a key test of the nine-month-old cabinet's ability to agree on painful policies ahead of a Nov. 22 presidential election and to meet conditions for a 20-billion-euro ($29.45 billion) IMF package it secured in March.

Commentators have said the cabinet of Prime Minister Emil Boc, which controls about 70 percent of parliament seats, is expected to survive and get a seal of approval for tough spending cuts required by International Monetary Fund (IMF) in return for aid.

Both the ruling Social Democrat Party and their Democrat-Liberals partners said they would boycott the vote.'We will not be voting ... the IMF accord is Romania's top priority so a no-confidence vote is useless,' Health Minister Ionut Bazac said before the vote, expected to take place later in the day.

Designed to slash public-sector costs and streamline bloated administration, the reforms should ease the financial burden on state coffers and free up cash for investment in the long term.

Wednesday, September 23, 2009

Romania's SIF shares up on higher stake cap hopes

BUCHAREST, Sept 22 (Reuters) - Shares in Romania's five geographically-defined investment funds traded near 11-month highs on Tuesday, after a senate committee voted to raise the cap on maximum stakes to 5 percent from 1 percent.

Observers say the bigger cap, which the funds opposed, is seen as a way to boost liquidity on Bucharest's bourse, which has a meagre market capitalisation of around 18 billion euros."There is still a very long process to go through," said Senator Viorel Arcas, a member of the budget-finance committee.

The high-yielding funds, or SIFs, are closed-end entities set up by the government in the 1990s as part of a mass privatisation programme and listed on the Bucharest Stock Exchange in 1999.SIF shares, which have a market capitalisation of 3.3 billion lei ($1.14 billion), are among the most liquid on the Bucharest bourse.

The BETFI .BETFI index, which tracks the five funds, was up 4.1 percent by 1235 GMT, near 11-month highs and outperforming the bourse's main index .BETI, which was up 1.9 percent, in line with regional peers."The SIFs are rising because the Senate commission approved an increase in the shareholding cap to 5 percent," said one trader with a foreign brokerage house in Bucharest.Since parliament resumed its session on Sept. 1 the BETFI index has risen roughly 18 percent amidst speculation that the years-long debate on raising the ownership cap was nearing its end.The increase still needs the senate's approval before it is sent for debate in parliament's lower house, which has the final say. (Reporting by Luiza Ilie and Marius Zaharia; Editing by Greg Mahlich)

Tuesday, September 22, 2009

Immoeast to Sell Assets in Romania, May Dispose of Moscow Mall

By Peter Woodifield

Sept. 22 (Bloomberg) -- Immoeast AG, Austria’s largest real estate developer, will dispose of assets in Romania and may sell a Moscow mall to reduce dependence on those markets, according to Chief Executive Officer Eduard Zehetner.“We are over-invested in certain countries like Romania or shopping centers in Moscow,” Zehetner, 58, said in an interview in Amsterdam last week. “We are not forced sellers and we are going to sell to restructure our portfolio into what we want.”

The property market in Romania, Immoeast’s biggest in central and southeast Europe, has been hit harder by the global financial crisis than anywhere else in the region, the Vienna- based company said in its annual report.

In Russia, it has become more difficult to finance new shopping centers and tenants have been hurt by the ruble’s decline against the dollar, it said.Immoeast will open Europe’s largest mall, the Golden Babylon Rostokino shopping center, in Moscow on Nov. 18. Tenants of the 241,000 square-meter (2.59 million square-foot) complex include Zara, a unit of Inditex SA, the world’s largest clothing retailer, and Hennes & Mauritz AB, Europe’s second-largest clothes seller.The company will open a fifth shopping center, to be known as the GoodZone mall, in Moscow next year and then decide whether to sell one, Zehetner said.“We may sell more than budgeted as we are getting offers for more than we expected,” he said on Sept 16. “We have certain constraints. We don’t want to lose money in terms of the initial investment.”

Romanian Assets

In Romania, the company had 72 properties and assets totaling 750 million euros ($1.1 billion) as of April 30. That’s about 13 percent of the company’s assets. Immoeast is developing three malls with 114,500 square meters of space due to open in the country next year.The proportion of Immoeast’s portfolio in Romania is relatively high, saidGernot Jany, an analyst at Erste Group Bank AG in Vienna, who recommends investors buy the shares.“Selling assets in Romania could make sense if it is good for cash flow and they can invest the money better elsewhere,” said Jany. “Maybe it makes some sense to sell some finished properties and invest in their development pipeline.”

Immoeast, 55 percent owned by Immofinanz AG, is the best performer on theVienna exchange this year. The stock has climbed more than eightfold, giving the company a market value of 3.1 billion euros.

Editors: Ross Larsen, Andrew Blackman.To contact the reporter on this story: Peter Woodifield in Edinburgh atpwoodifield@bloomberg.net.

Friday, September 18, 2009

Romania’s Opposition Asks for No-Confidence Vote Over Wage Bill

By Irina Savu
Sept. 17 (Bloomberg) -- Romania’s main opposition parties will ask parliament today to hold a vote of no confidence in the coalition government of Prime Minister Emil Boc two months before presidential elections on Nov. 22.

The Liberal Party and the Democratic Union of Hungarians in Romania will seek the vote after Boc submitted a bill aimed at cutting public staff costs to 7 percent of gross domestic product by 2015 from 9.5 percent, Liberal official Eugen Nicolaescu said on Antena 3 TV.

The bill is a condition of a bailout granted by an International Monetary Fund-led group.“A single wage bill, which should balance revenue and rationalize expenses, can’t be passed during an economic crisis,” Nicolaescu said. “Such a law is better drafted at times of sustained economic growth, when the private sector can absorb the unemployed people.”The coalition government, which has 70 percent of the seats in Parliament, said on Aug. 11 it will send all state workers on 10 days leave without pay this year and fire some next year to meet budget-deficit target.

The leave will cut costs by about 0.3 percent of and help the government meet its 2009 deficit target of 7.3 percent of GDP.Romania needs to fulfill the targets to comply with the terms of a 20 billion-euro ($28 billion) loan package that’s financing the current-account and budget gaps. The budget target agreed with the IMF compares with a deficit of 4.8 percent last year.

To contact the reporter on this story: Irina Savu in Bucharestisavu@bloomberg.net.

Thursday, September 17, 2009

Vote of Confidence called

By Luiza Ilie
BUCHAREST, Sept 15 (Reuters) - The Romanian government called on Tuesday for a vote of confidence in parliament, trying to win quick support for tough spending cuts required by the International Monetary Fund in return for aid.

Aiming to slash public sector costs and streamline ineffective administration, the reforms should ease the financial burden on the state and free up cash for investment in the long term.But they have sparked social tensions in European Union member Romania, plagued by a deep recession and rising unemployment, putting strains on the uneasy centre-left coalition government before a Nov. 22 presidential election.Shortly before the parliament session began, the ruling leftists of the Social Democrat Party (PSD) pledged to stay in government, despite disagreements over the reform package, easing some concerns over a potential rupture in the coalition.

Local commentators have said in recent weeks the leftists may leave the coalition over the bills because of deepening rifts with their centrist partners, the Democrat-Liberals.

'I believe a government that exists and functions right now is better than a political crisis in Romania,' PSD leader Mircea Geoana said. 'Had we opposed this ... we would have seen the government collapsing and a political crisis.'Many commentators see the bills as a key test of the government's ability to agree on painful policies and meet conditions for the 20 billion euro ($29 billion) IMF package secured in March.

Romania received a first tranche worth about 5 billion euros in May. Further release of funds depends on successful completion of quarterly reviews of the deal. Without aid, the country may face a financing crisis, and any signs of the government breaking up could shake financial markets.

FISCAL BURDEN

The reforms aim to undo years of runaway growth of the public sector, which employs a third of the Romanian workforce and offers some of the highest salaries in the economy.Economists say bloated state finances are a crucial obstacle to effective development of infrastructure and modernisation of Romania, which has lagged behind many of its former Soviet bloc peers since communism fell there in 1989.'The Romanian state is oversized and overweight but is lacking resources.

Reforming such a state is painful and requires tough measures,' Prime Minister Emil Boc told deputies.But with powerful public sector trade unions an important source of support for many politicians, particularly the PSD, reform efforts so far have been lacklustre.Hundreds of workers picketed parliament during Tuesday's parliamentary debate, protesting against pay freezes and thousands of planned redundancies.

Chanting 'thieves' and 'shame', they exposed the dilemma facing policymakers who need to secure IMF funds while vying for support ahead of the presidential ballot.It pits top officials from the ruling centre and left groups against each other, with the leftists' Geoana running second in opinion polls behind incumbent Traian Basescu, who has close ties with the co-ruling centrists.

Unions have also called a general strike for Oct. 5, expected to muster 800,000 public sector workers nationwide, including doctors and teachers.After Boc's presentation of the reform package, opposition parties now have three days to schedule a no-confidence vote. If none calls for one, the bills become law automatically without a vote.

Romania says in advanced talks over Nabucco supplies

BUCHAREST, Sept 16 (Reuters) - Romania is in advanced talks with Asian states to secure supplies for a planned natural gas pipeline designed to reduce Europe's energy dependence on Russia by transporting gas from the Caspian and Middle East from 2014.

"We are in advanced talks with Azerbaijan, Turkmenistan and Kazakhstan ... to import gas for the Nabucco pipeline," Deputy Economy Minister Tudor Serban told an energy seminar. He would not elaborate.

Nabucco's shareholders are Hungary's MOL (MOLB.BU), Romania's Transgaz TGNM.BX, Bulgaria's Bulgargaz, Turkey's Botas, Germany's RWE (RWEG.DE) and Austria's OMV (OMVV.VI).The pipeline is seen pumping as much as 31 billion cubic metres of natural gas annually, but its construction has been questioned already because of limited supplies and infrastructure.

Romania 8-month budget gap at 4.4 pct/GDP

BUCHAREST, Sept 16 (Reuters) - Romania's estimated consolidated budget deficit rose to 4.4 percent of gross domestic product in the first eight months of the year, Deputy Finance Minister Gheorghe Gherghina said on Wednesday.

Romania plunged into recession at the start of the year as the global economic crisis slashed domestic consumption, froze lending and dried up foreign investment.

To avoid a potential financing crisis, the European Union state turned to the International Monetary Fund for a 20 billion euros aid package. In return for aid, Romania must enforce deep cost-cutting reforms of its public administration.

During January-July, Romania's deficit reached 17.6 billion lei, or 3.3 percent of a GDP estimated at 531.2 billion lei.

Since then, Romania revised its budget to reflect a deeper than forecast recession, lowering its GDP expectation to 497.3 billion lei and raising its end-year budget deficit target to 7.3 percent of GDP from 4.6 percent.

Romania to list 15-20 pct of new energy holdings

BUCHAREST, Sept 16 (Reuters) - Romania plans to list stakes worth 15-20 percent each in the two major energy companies it wants to create as part of an energy sector overhaul, Deputy Economy Minister Tudor Serban said on Wednesday.

The reform envisages integrating largely inefficient assets into two holdings which should become fully operational by the second half of 2010. The ministry plans to prepare a law setting up the holdings by October.

Officials say the overhaul, which critics say lacks transparency and credible details, should help lower energy costs and raise competitiveness with regional power giants.

"We intend to list stakes, but we won't list more than 15-20 percent," Serban told an energy seminar. He did not offer a potential timing for the listings.

Serban said the potential listings also involve Fondul Proprietatea, a state-owned investment fund set up to compensate Romanians whose properties were seized under communism.

With assets worth roughly 3.5 billion euros and bourse listing plans for 2010, Fondul Proprietatea holds 5-20 percent stakes in most state-owned assets, including energy firms.
Serban said he hoped to start next week talks with the fund about potentially lowering the stakes it would own in the two energy holdings.

"To own 20 percent is huge," Serban said. "Even 5 percent is an enormous lot. For the rest we must have banks, industry investors to give them (the holdings) ... strength."

According to plans, one company, with a market share of 45 percent, will include Romania's two nuclear reactors, as well as lignite-fired power holdings and hydro-power plants.

The second will be made of hard coal and other hydroelectric plants, as well as parts of state-owned gas producer Romgaz. Its market share will stand at 40 percent.

The listings could draw interest and much-needed funds from regional power firms like Czech CEZ, Germany's E.ON or Italy's Enel, which own distribution units and have shown interest in buying production assets.

Meanwhile, Serban said the economy ministry has appointed Mihai David and Constantin Balasoiu, the heads of hydro-power firm Hidroelectrica and lignite-fired energy holding Craiova, as coordinators for the two new companies.

AP: Romanian PM visits Italy

Romanian Premier Emil Boc says relations between his country and Italy are good, as he seeks to move past tensions over a spate of crimes in Italy blamed on Romanian immigrants.

Boc met in Rome on Wednesday with Italian Premier Silvio Berlusconi and said both countries have "zero tolerance" for crime.

He said responsibility for individual crimes lies with the criminals, and cannot be "generalized" and extended to an entire community.Relations between Italy and Romania soured after a crime wave in Italy was blamed on Romanians. It is estimated that at least 600,000 Romanians live in Italy.Boc and Berlusconi said bilateral and economic relations between the two countries are good.

Earlier Wednesday, Boc met Pope Benedict XVI at the Vatican.

Wednesday, September 16, 2009

Romanian leftist chief says party will stay in govt

BUCHAREST, Sept 15 (Reuters) - Romania's Social Democrats (PSD) will not pull out of the government despite some opposition to a package of fiscal reforms put forward by the centre-left coalition, their leader said on Tuesday.

Some local commentators have said in recent weeks the leftists may break the coalition over the bills because of disagreements with their centrist partners, the Democrat Liberals.

'I believe a government that exists and functions right now is better than a political crisis in Romania,' PSD leader Mircea Geoana said. 'Had we opposed this ... we would have seen the government collapsing and a political crisis.'The government is expected to call for a parliamentary vote of confidence later on Tuesday to secure quick support for fiscal reforms required by the International Monetary Fund in return for aid.

EU to probe Romanian aid for chemical firm Oltchim

BRUSSELS, Sept 15 (Reuters) - European Union antitrust regulators launched an in-depth investigation on Tuesday into whether Romania's plans to support state-controlled chemical producer Oltchim complied with EU state aid rules.

Romania notified the European Commission in July of its intention to grant a 135 million euro ($197.6 million) debt-to-equity swap and a 339.2 million euro state guarantee for Oltchim.
"The Commission must verify whether the measures planned for Oltchim would entail state aid, and if so whether such measures would not give rise to excessive distortions of competition," Competition Commissioner Neelie Kroes said in a statement.

The EU competition watchdog did not specify a timeframe for its investigation.
Oltchim, which plans to buy the petrochemical assets owned by the country's biggest oil firm, Petrom, faces financing problems amid falling demand for its products.

Monday, September 14, 2009

Romanian Recovery Optimism ‘Premature,’ Capital Economics Says

By Adam Brown
Sept. 14 (Bloomberg) -- Romania’s economy, which the central bank says is exiting recession, will contract for a second year as unemployment and bad debt rise and the government cuts spending, Neil Shearing of Capital Economics said.“It’s premature and a bit worrying to start talking about recovery,” said Shearing, an emerging-Europe economist, in a telephone interview on Sept. 11. “Clearly the outlook has improved but there are still too many downside risks. We see economic contraction of half a percentage point next year.”

Romania’s government has said the economy has started to recover afterindustrial output and retail sales reports improved and the quarterly contraction in gross domestic product slowed. The government predicts an emergence from recession in the fourth quarter and growth of as much as 1 percent next year.

France and Germany, which Romania relies on for export demand and investment, emerged from their recessions in the second quarter, prompting analysts to predict a recovery across most of eastern European as early as the end of this year.

Romania’s industrial output slump slowed to an annual 6.9 percent in July from 8.9 percent in June and the retail sales drop slowed to an annual 13.8 percent from 17.3 percent, the National Statistics Institute said last week. The contraction slowed to a quarterly 1.1 percent in the second quarter from 2.9 percent in the first quarter.

Recovery Process

“We have started the recovery process, seeing that industrial output has already started to improve,” central bank Governor Mugur Isarescu said on Sept. 9. “There will be more economic growth adjustments in the future.”While sales and output data improved, unemployment rose to 6.6 percent in August from 6.3 percent in July, exports dropped by 14.5 percent on the year, foreign direct investment plunged almost by half and bad loans more than tripled.

On an annual basis, the economic contraction deepened in the second quarter to 8.7 percent from 6.2 percent in the first.“Bad debt will continue to rise and the labor market will continue to deteriorate, which will further expose the banking sector,” Shearing said. “All in all there are too many uncertainties. And, not least, we will see fiscal policy tightening throughout next year.”The government has agreed to cut spending and raise some taxes this year and next as part of a 20 billion-euro ($29 billion) international financing package led by the International Monetary Fund and the European Union.

Romania joined the EU in 2007 along with Bulgaria.As state revenue declines, the government must cut 1 billion euros in planned spending this year to target a budget deficit of 7.3 percent of gross domestic product. It must cut expenditure further to meet the 2010 deficit target of less than 6 percent.

The government has frozen state wages and created a tax on services this year. It said last month it will send all state workers on 10 days of unpaid leave this year, fire many next year, raise and announce a series of further measures to contain the deficit.“It’s too early to speak of recovery with so many uncertainties,” Shearing said. “The outlook is much better than it was at the start of the year,” though “our prediction is fresh and based on the latest data.”

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

Italian lawmaker moves to block Romanian film

9/11/2009
ALISON MUTLER
The Associated Press (AP)

BUCHAREST, Romania - A movie about a Romanian immigrant who dreams of finding a better life in Italy has caused an uproar even before it hits the screens."Francesca" may not even reach Italian movie theaters, because lawmaker Alessandra Mussolini, granddaughter of dictator Benito Mussolini, has filed a legal motion to ban the film, in which she is called "a whore" in one scene.

Verona Mayor Flavio Tosi says he filed a criminal complaint against Romanian filmmaker Bobby Paunescu because he is portrayed in a "vulgar" way in the film. A court ruling is expected before the end of October when the film is due for release. So far, Paunescu says he has no plans to cut any of the scenes.

Paunescu, who grew up in Italy, said Friday he hoped the film would help improve Romanian-Italian ties. Relations soured after a recent crime wave in Italy that has been blamed on Romanian immigrants.

The idea for "Francesca" came after a Romanian immigrant, Nicolae Mailat, who was living in a Gypsy camp, robbed and killed the wife of an Italian naval commander in 2007, a case that shocked Italians and Romanians and marked a decline in relations. Mailat was sentenced to 29 years in prison.

"I feel very ashamed of what happened," Paunescu said in an interview from his Bucharest lakeside offices. "I felt like doing something but I didn't know what."The movie, which marks Paunescu's writing debut, is co-produced by Romanian filmmaker Cristi Puiu, whose "The Death of Mr. Lazarescu" won "Un Certain Regard" honors in 2005.

The movie is in Romanian, with subtitles in English in one version, and another in Italian, for foreign audiences."Francesca" follows the current trend in Romanian movie making of in-your-face realism."I tried to do something pretty honest with the situation we have today," Paunescu said. The film is much more critical of Romania, featuring a loan shark and corruption between a city hall clerk and the boyfriend of the main character played by actress Monica Birladeanu, Paunescu's longtime girlfriend.

Of the remarks that have offended Mussolini and Tosi, Paunescu says, "I would invite them to see the movie."I heard these kind of comments on the streets, the buses and the subway. Some people dream of emigrating to Italy, it's their promised land. But others make aggressive comments" about some politicians, he said.

About 600,000 Romanians live in Italy, according to official estimates, but the true number is believed to be more than 1 million. Many moved to Italy after Romania joined the EU in 2007.

When the film premiered last week at the Venice Film Festival it was later scheduled to be screened in two Venetian theaters, but Italian distributor Fandango stopped that after Mussolini's complaint.

Criticism of the film has also touched a nerve in Romania where people are sensitive to the notion of censorship, 20 years after former dictator Nicolae Ceausescu was toppled and executed. In Ceausescu's time, every article, every play, every work of fiction that was published had to pass a censor.

Romanian Prime Minister Emil Boc argued "Francesca" should be screened the way it is, saying the content was "a right to free speech." He said he would raise the issue with Italian Premier Silvio Berlusconi when he makes an official visit next week to Rome.

Paunescu says he was "puzzled" by the strong reaction."As a director this was very bad news. It leaves me with a bad feeling," he said. "It is unbelievable something like this can happen."

Organic food hits Eastern Europe

By Isabelle Wesselingh (AFP)

BUCHAREST — When communism crumbled two decades ago, Eastern Europeans were only too delighted to discover the fast-food chains that symbolized the West. But today they increasingly long for organic food."The general trend is that more and more organic products are being sold in former Soviet-bloc countries," said Amarjit Sahota, head of the research department of London-based consulting firm Organic Monitor.

The Romanian capital recently saw the opening of organic stores named Biofood, or Bio Revolution, and in neighbouring Hungary, organic markets are held countrywide on a regular weekly basis.

In Poland, there are organic corners in almost every supermarket, and in the Bulgarian capital Sofia, the country's first specialist organic store, which opened last year, now is extending its activities to a neighbouring cafe.Even Transylvania's archbishop has converted to pesticide-free food."As consumers become more informed about food production, they look for higher quality products," Sahota told AFP.

Romanian newspapers for instance are multiplying reports on organic agriculture and healthy food, with Adevarul, the biggest daily, creating a "green page" dedicated to environmental and organic topics."Romanians were fascinated by McDonalds and Coca-Cola after the 1989 Revolution, but today people think more about their health and are starting slowly to come to organic food," said Marian Cioceanu, president of NGO Bio Romania.

But the Eastern European market remains a Tom Thumb compared to Western Europe, with research by Organic Monitor showing 2007 organic food and beverage sales amounting to 60 million euros (88 million dollars) in Eastern and Central Europe, compared to 20 billion in Europe as a whole.

In Romania and Bulgaria, for instance, organic food and beverages account for a mere one percent of total food sales, according to Agriculture ministries in both countries.But growth is steady, with little impact on the sector from the economic crisis.In Romania, organic food sales in 21 supermarkets owned by French giant Carrefour increased 15- to 20-fold in the first six months of 2009 compared to the same period last year, managing director Andreea Mihai told AFP.

In Poland, customers of online organic shop Ecolive.pl leapt 200 to 300 percent in one year, company official Beata Mioduszewska told AFP."Our branch of activity was not at all impacted by the economic crisis even though prices remain a big hurdle for Polish customers," she said.

Extra costs are due to the lack of processing facilities in these countries, meaning a long journey between the producer and the consumer.Organic products in Poland can cost between 30 percent -- for fruits and vegetables -- to 300 percent -- for eggs, cheese -- more than industrial equivalents.

In Bulgaria, differences ranges between 30-50 percent more.In Romania, where the average monthly salary is 325 euros, one litre of organic apple juice is twice the price of regular juice, or 3.3 euros instead of 1.2 to 1.7 euros."Central and Eastern European countries have large amounts of organic farmland that produce raw materials such as cereals, organic fruits and vegetables."But the finished products -- biscuits, dairy products, breakfast cereals -- are all processed in Western Europe," said Sahota, and have to be transported back to organic stores in Eastern Europe."It's not very ecological in terms of the carbon footprint," he added.Romanian farmer Aurel Petrus, for instance, is a pioneer in organic farming.Aged 49, he Tproduces organic wheat, corn, sunflowers, hay and malt on 1,300 hectares in the village of Stefan Cel Mare, 100 kilometres east of the capital.

Business is profitable, with a revenue of around 500,000 euros last year and 18 fulltime staff as well as seasonal workers.But most of the crops have to be exported to Austria and Germany due to a lack of organic processing facilities in Romania."Under former dictator Ceauscescu, state farms used a lot of pesticides and chemical fertilizers but there were no funds for village cooperatives," he told AFP."The lack of funding helped us in a sense because the land did not receive any chemical substances for years, which enables us today to be certified for organic farming."Though he does not receive European Union subsidies for organic farming -- the Romanian government failed to present a distribution mechanism acceptable to the EU -- Petrus is convinced the "future is organic," as stated on a sticker in his office.

Likewise for Mihai and Mariana Huzu in Plevna village, east of Bucharest.With the support of French organisation Ecolife bio, this year they began producing organic tomatoes, aubergines, basil and "gogosari," a Romanian variety of red pepper, in the backyard of their country house.Mihai, 41, built his own small greenhouse and put a donkey to use to help plough the field."Organic farming is a lot of work but we live better than with our former jobs. We are happier," said the former village shoe-shop employee. Her husband was a construction worker.

Each week, a small van from Ecolife bio collects their vegetables for supermarkets in Bucharest or direct sale to customers."We have about 100 customers who come two evenings a week to our head office to get their organic vegetables. Most are doctors or families with children who believe it is important to eat organic food," said Gilles Caillaud, a founder of Ecolife bio.He believes the future will see an increasing number of eastern Europeans switching to organic.

Friday, September 11, 2009

Romanian judges vote on strike

By Thomas Escritt in Bucharest
Published: September 10 2009
The Financial Times

Romania’s judges vote on Thursday on whether to continue a strike demanding the payment of bonuses that they themselves have ruled they are entitled to.

The strike, which began at the beginning of this month, comes at a time when the government, faced with falling revenues, is trying to rein in spending and cut wage bills across the public sector as part of the terms of the €20bn bail-out deal it signed with the International Monetary Fund and the European Union in March, and is a further blow to the reputation of a judicial system that has been repeatedly criticised by the European Commission for failing to meet EU standards.

Judges say that a system of bonuses, introduced in the 1990s, to compensate public sector workers for burdens such as having particularly stressful jobs, being required to keep confidentiality or being exposed to electro-magnetic radiation via using a computer, should also apply to them. The bonuses, which have contributed to the public wage bill growing 86 per cent over the past three years, were abolished in 2000 for judges, who are among the highest-paid of Romania’s public employees, with even relatively junior judges earning as much as senior hospital doctors.

Since then judges have individually obtained rulings from their colleagues saying that the abolition of the bonuses is a form of discrimination against them. Back-payment would cost the country, which faces a 7.3 per cent budget deficit and an economic contraction of more than 8 per cent this year, some €300m.

Catalin Predoiu, the justice minister, has pledged to make the payments over the next two years, and plans to raise judges’ basic salaries next year. Despite this, they threaten to continue the strike, during which judges are refusing to hear any cases apart from those involving arrests and minors, saying the bonuses have not been incorporated into the new pay scheme.

Laura Stefan, a legal affairs expert at the Romanian Academic Society, a thinktank, said: “It is illegal for magistrates to strike, as it is for the police. But if the police strike, then the courts can rule it illegal. If judges strike, then there’s nobody to acknowledge the strike’s illegality.”Mr Predoiu told the Financial Times: “The pillars of the state have to interact reasonably ... You can’t claim a position as one of the state powers, the judiciary, and then ignore the difficulties faced by the government, another state power.”

But magistrates argue they are seriously underfunded, lacking funds even to post summonses to plaintiffs. Lidia Barbulescu, vice-president of the Supreme Court, said: “Many courts are behind on payments for renting their premises,” adding the judicial system’s lack of resources was a “humiliation” for judges.

Thursday, September 10, 2009

OTP Romanian unit to expand branch network -MTI

BUDAPEST, Sept 10 (Reuters) - Hungarian OTP Bank's OTPB.BU Romanian unit plans to increase the number of its branches from 106 to about 200 in five years, expanding either organically or via acquisitions, OTP Bank Romania CEO Laszlo Diosi said.

Diosi was cited by Hungarian national news agency MTI as saying in Bucharest that the bank's original goal was to achieve 4 to 5 percent market share, but fierce competition in the Romanian market has limited it to 1 to 2 percent based on total assets.

He said OTP's Romanian unit now has 200,000 corporate and retail clients and had total assets worth more than 367 billion Hungarian forints ($1.94 billion) at the end of 2008.OTP Bank, Hungary's biggest commercial bank, entered the Romanian market in 2004 with the acquisition of RoBank.

OTP shares traded at 4,902 forints at 0848 GMT, up 1.2 percent, while the official BUX index was up 1 percent. ($1=188.93 Hungarian Forint) (Reporting by Krisztina Than; Editing by Hans Peters)

Less volatile Romanian leu good for economy-cbank

BUCHAREST, Sept 9 (Reuters) - The limited volatility of Romania's leu currency is good for the economy because it helps exporters, central bank Governor Mugur Isarescu said on Wednesday.

Romania's leu has been the most stable floating currency in the eastern European Union since March, moving in a tight range around 4.2 per euro.

"It is a good thing for the economy, it helps exports," Isarescu told an economic seminar.
Isarescu said one of the factors that led to that was the central bank's intervention to stem the pace of its appreciation in 2007 when the economy was booming and also sold euros in "the winter months of this year", when Romania entered recession.

"I am almost certain that our pro-active approach discouraged exchange rate volatility," he said.
He declined to comment on market talk about more recent interventions and he also said that less liquid Romanian markets limited volatility.

"We do not encourage more volatility, but we do not discourage it either, markets are free," he said.

However, he warned that policymakers across the globe were talking with less enthusiasm than before about free floating and lack of market interventions.

Isarescu said the bank will continue to keep an eye on liquidity and he was ready to fight any increased appetite for weakening the leu through money market operations.
"We're trying to do a fine-tuning," Isarescu said.

Romania July unemployment rate rises to 6.6 pct

BUCHAREST, Sept 9 (Reuters) - Romania's unemployment rate rose to 6.6 percent in August from July's 6.3 percent, the employment agency said on Wednesday.

Dwindling demand from the euro zone has hurt central and eastern European economies in recent months, forcing many companies to trim output and lay off workers.Moreover, the centre-left government needs to make deep spending cuts to curb Romania's large imbalances bloated by lavish spending by the previous cabinet, especially since the country secured 20 billion euros in IMF-led aid in March.

This will also mean a restructuring of the country's inefficient public sector, which employs about a third of Romania's workforce.However, Labour Minister Marian Sarbu said in May that unemployment should rise less than previously expected this year, reaching no more than 7 percent or 620,000 people as the country's economic downturn shows signs of tempering.

Romanian cbanker sees room for manoeuvre on policy

BUCHAREST, Sept 9 (Reuters) - The Romanian central bank will have room for manoeuvre in monetary policy in the coming four months because of falling inflation, central bank governor Mugur Isarescu said on Wednesday.

Speaking to Reuters in an interview, Isarescu also said the bank had a 'good chance' to meet its 2009 inflation target of 2.5-4.5 percent on the year in December. Perhaps the monthly inflation figure will be negative (for August) and with the reduction in fuel prices in September, there are good chances (for inflation) to be within target,' he said.

The governor said Romanian manufacturing was showing 'very visible' signs of recovery but said that foreign direct investment flows, a key driver of economic growth in recent years, would not return to pre-crisis levels any time soon.He also warned that Romania's goal of becoming euro-ready in 2014 had become more ambitious in recent months, as recession forced Bucharest to up its budget deficit target sharply.

Wednesday, September 9, 2009

Romania Jan-July trade deficit shrinks 63 pct y/y

BUCHAREST, Sept 9 (Reuters) - Romania's trade deficit shrank by 63 percent on the year to 4.9 billion euros ($7.11 billion) in January-July as imports dived faster than exports, boosting expectations of deep economic contraction in the third quarter.

Romania's vast trade gap last year put it among the most vulnerable states in eastern Europe in terms of financing risks and forced it to secure 20 billion euros in an IMF-led aid in March. But the gap is narrowing sharply this year as the world economic crisis cuts demand.Data from the National Statistics Board (INS) showed on Wednesday that July's trade deficit was 487 million euros.

The INS said CIF (cost/insurance/freight) imports dropped 36.6 percent year-on-year to 21.2 billion euros, while exports fell 19.4 percent to 16.3 billion euros.Wednesday figures gave no breakdown on type of imports.

Analysts said the fall was in line with market expectations, signalling a sharp drop in demand.'The July figures are not a surprise, the trade shortfall is falling continuously ... For the third quarter we estimate an economic contraction of 9.1 percent,' said Rozalia Pal of UniCredit Tiriac Bank.

Revised GDP figures on Tuesday showed the economy collapsing by 8.7 percent on the year in the second quarter, versus a preliminary estimate of 8.8 percent and 6.2 percent in the first three months of the year.The International Monetary Fund sees Romanian economy contracting by 8-8.5 percent this year.

Romanian govt official says reappoint cbank gov

BUCHAREST, Sept 8 (Reuters) - Romania's central bank governor Mugur Isarescu should be reappointed to a second term in office, after his current five-year mandate expires in October, a top government coalition official said on Tuesday.

Mircea Geoana, who heads the government's left wing Social Democrats (PSD), told Reuters Isarescu was a 'natural choice.'

Under Romanian law, political parties have to present a list of potential central bankers, including the governor, to parliament's budget committees for discussion before the legislature gives a final approval to the bank's new board.Geoana said there was no agreement yet between the PSD and its ruling partners, the centrist Democrat-Liberals, and sources say official discussions have not started.

In recent months, Isarescu won praise from the International Monetary Fund, which has led a 20 billion euro aid package for Romania, for cautiously lowering borrowing costs at a time when the economy was shrinking sharply.

Early in his mandate, economists had criticised him for endangering the central bank's credibility, saying policy-makers had paid too much attention to foreign exchange levels when they introduced inflation-targeting in Romania.The central bank has declined to comment and Isarescu has not yet said whether he would seek a second term.

Romania to set up major power firms by H2 2010

By Luiza Ilie

BUCHAREST, Sept 8 (Reuters) - Romania announced plans on Tuesday to go ahead with a controversial overhaul of its energy sector by integrating its largely inefficient assets into two major companies by the second half of 2010.

The plan aims to lower energy costs for consumers and raise competitiveness with regional power giants such as Czech CEZ (CEZPsp.PR) as Bucharest hopes to become a major energy player in southeast Europe in coming decades.

But critics say the restructuring is likely to protect loss-making companies by merging them with profitable units, while investors complain of an opaque privatisation agenda.The overhaul has been repeatedly postponed in recent years as Bucharest's successive governments struggled to define their sell-off goals and backed away from potential social tensions arising from any job losses related to restructuring.

But time is running out for many energy companies, particularly hard coal mines, which are in dire need of cash to boost environmental standards and avoid being shut down by the European Union in 2010.

Romania must also address its debt-ridden industrial holdings to meet conditions of a 20 billion euro aid package it secured this year led by the International Monetary Fund."I hope we can present the law (that sets up the firms) in the government by October," Economy Minister Adriean Videanu said in an energy seminar. "I hope ... to start implementing it in early 2010."Videanu said implementation should be finished by June.

The ministry will select a financial adviser for the two firms and hopes to pick private management firms instead of political appointees to run them.One company with a market share of 45 percent will include Romania's two nuclear reactors, as well as lignite-fired power holdings and hydro-power plants.The second will comprise of hard coal and other hydroelectric plants, as well as parts of state-owned gas producer Romgaz. Its market share will stand at 40 percent.

FOREIGN INVOLVEMENT

To ensure competitiveness, Romania needs participation of foreign cash in the restructuring, analysts say.Romania's energy firms are currently separated into coal, hydro and nuclear power and many European industry majors have expressed interest in buying production assets.

At one point, the government had considered floating chunks of the companies on the Bucharest stock exchange but it is not clear whether this plan is part of the reform. No other privatisation ideas have been made public, keeping potential buyers on the sidelines.

One current investor in Romania, Germany's E.ON (EONGn.DE), which owns a local power distributor and is involved in other energy projects, says it wanted a clear government strategy before making further commitments."E.ON wants to further invest in Romania but it wants to see a good environment," said Frank Hajdinjak, general director of E.ON Romania. He added plans were "not very clear on ... future privatisations and collaborations with private investors".

The World Bank, which has advised Romania on energy reforms since the 1990s, says the restructuring plan lacks credible details and financing ideas and has criticised Bucharest for repeated delays it says discourage investors."We think enforcing this idea is very costly and cannot be done in a short term," said Doina Visa, a director at World Bank Romania and energy expert.

Romania picks 3 managers for 5-yr Eurobond issue

BUCHAREST, Sept 8 (Reuters) - Romania has chosen Deutsche Bank, EFG Eurobank and HSBC as lead managers for a planned Eurobond issue worth up to 1.5 billion euros, the finance ministry said on Tuesday.

The ministry has a government mandate for a Eurobond worth between 500 million euros and 1.5 billion, with a maturity range of 5-10 years.

The ministry has said Romania will be ready to issue the Eurobond at any time from September, but that it could postpone it until early next year if market conditions were unfavourable.
The European Union state launched its first Eurobond in five years in June 2008. The country is rated below investment grade by two ratings agencies.

Tuesday, September 8, 2009

Ford launches new van production in Romania

Associated Press
CRAIOVA, Romania -- Ford Motor Co. launched production of its new model Transit Connect in Romania on Tuesday, two years after it took over a state auto maker in the country.The Transit Connect, a compact van, will sell for euro14,000 to euro15,600 ($20,000 to $22,000) in Romania and the United States.

Ford of Europe President John Fleming and U.S. Ambassador Mark H. Gitenstein attended the launch in the southern city of Craiova, as did Romanian President Traian Basescu, and Senate chairman Mircea Geoana.In a speech, Basescu said the factory is now "part of the glorious history of Ford.""I want to thank the workers... With your hands and minds you have been reorganizing the workshop... You have been loyal partners of the investors from the very beginning." He later inspected with Fleming a white Transit Connect which was parked on a podium.

He said some euro12 million ($17.2 million) had been invested in training the work force.Ford plans to build 300,000 automobiles in Romania in the next four years, and said it will hire an extra 3,000 staff throughout the country. It currently employs about 4,000 people.In 2007, Ford bought a 72.4 percent stake in the state-owned Automobile Craiova, paying $88 million and vowing to invest $1 billion to upgrade and expand car production.

Romania will axe 8500 public servants

The Sofia Echo

In a statement to the country, Romanian prime minister Emil Boc has said the government has decided to dismiss as many as 8500 public servants, as part of the restructuring scheme, which aims to trim government agencies and make them more cost efficient as well as productive. As a direct consequence of the purge, more than half the government agencies will be terminated altogether while others will be restructured, Romanian media has reported. The administrative shake-up is expected to save as much as one billion euro.

According to the measures, out of the 224 government departments, agencies and other associations, directly or indirectly controlled and subjected to the central government, only 107 will remain in operation. This would mean that 8545 public servants will find themselves looking for a job.

On August 5 2009, Romanian president Traian Basescu told his country during a television address that between 10 000 and 15 000 public servants would be shed from government duty.

In the address, he stressed that as much as 20 per cent of the public sector would be trimmed in times of the global economic downturn.

"There are many incompetent people who currently have a government job," he said at the time. "And they will have to go".

However, he distinctly underlined that critical sectors such as health care, education, the armed forces and the ministry of interior would be unaffected by the purge.

The cleansing operation will affect not only government agencies but presidential institutions as well.

"Those measures should have been implemented a long time ago," Boc said. "Unfortunately, previous attempts to get rid of redundant institutions were blocked. But it will be done, as budget expenses must be curtailed, or we will be facing harsher problems in the future," he said.