Wednesday, June 30, 2010

Romania to cut wages, not pensions



Romania's Parliament Tuesday formally ruled that pensions cannot be included in sweeping spending cuts but said public sector wages can be reduced by one-fourth as the government struggles to keep a multibillion dollar loan from the International Monetary Fund on track.

The Constitutional Court ruled last week that planned pension cuts are unconstitutional -- a ruling that prompted the government to announce it would raise sales taxes from 19 to 24 percent to increase revenue.

Finance Minister Sebastian Vladescu said Tuesday the government was forced to hike the sales tax after pension cuts fell through. The government pledged to keep the budget deficit at 6.8 percent of gross domestic product.

Vladescu said the IMF board will meet on July 2 to discuss the disbursement of about euro850 million (US$1037 million) to Romania and then send a mission to the country on July 20.

The uncertainty caused Romania's currency, the leu, to continue to lose ground against the euro. On Tuesday, the euro was trading at 4.3523 lei, a new record low for the leu.

Vladescu said he expected the economy to contract more than estimated in 2010. The IMF's forecast for the country's economic growth this year was between zero and minus 0.5 percent.

Romania negotiated the euro20 billion ($24.67 billion) loan from the IMF, the European Union and the World Bank last year. The loan helped pay state wages when Romania's economy shrank by 7.1 percent.

Leu Weakens to Record Low Versus Euro on Romania Loan Concern

By Piotr Skolimowski

June 28 (Bloomberg) -- The Romanian leu depreciated to its weakest intraday level on record against the euro after the opposition pledged to mount another no-confidence motion in parliament, further complicating austerity plans aimed at reviving a bailout loan.

The leu slid 2.1 percent to as low as 4.3685 per euro as of 4:52 p.m. in Bucharest. It was the weakest level since at least February 1999 and the second-biggest loss among more than 170 world currencies tracked by Bloomberg.

Tuesday, June 29, 2010

AFP: Some Romanian leaders opposed to justice reform: minister

28 June 2010

(BUCHAREST) - Romania's Justice Minister Catalin Predoiu deplored on Monday that influential politicians still oppose justice reforms because they fear for their own interests.

"There are still influential politicians who are not interested in an efficient and impartial justice because it would affect them directly", Predoiu said during a seminar in Bucharest on the efficiency of justice.

Romania, like Bulgaria, is under strict monitoring by the European Union as it seeks to reform its justice system and improve the fight against corruption.

In a report published in March, the European Commission regretted that "the pace of progress has not been maintained".

It also criticized delays in corruption trials and light sentences doled out by the courts.

The minister said implementing the required changes in the judiciary "will only be possible when all political forces are dominated by the ones truly believing that we need an independent justice".

He deplored that crucial bills intended to increase efficiency of justice "drag on in parliament".

Besides delaying debates on some justice reforms, Romania's MPs have come under fire in May after adopting controversial changes to the country's anti-graft agency, leaving it "toothless" according to NGOs.

Romania's President Traian Basescu refused to promulgate the law, warning it could hurt efforts to fight corruption.

The initial draft from the Ministry of Justice was sent again to parliament and finally adopted in June.

Despite the austerity plan adopted by the centre-right government in order to curb a rising deficit, Predoiu insisted that justice should remain "a priority" for the executive.

A new evaluation report from Brussels is expected this summer.

Romania fiscal deficit widens in Jan-May

BUCHAREST, June 28 (Reuters) - Romania's budget deficit for the first five months of 2010 widened to 3.1 percent of gross domestic product at the end of May from 2.2 percent in January-April as spending rose while revenues dipped, finance ministry data showed on Monday. 

Bucharest has promised to slash the fiscal gap for the whole of 2010 to 6.8 percent of GDP under a vital, 20 billion euro International Monetary Fund-led rescue deal, needed to prop up markets' confidence in the European Union's second-poorest member.

Analysts say the five-month performance could lower the chances of it meeting the target unless planned austerity measures, including a 25 percent cut in public wages, are implemented.

"If we look at the pattern in recent years, 3.1 percent is huge for five months. This clearly indicates that the radical measures would need to be implemented over the next six months," said Ionut Dumitru of Raiffeisen Bank in Bucharest.

Finance Ministry data showed the gap reached 16.7 billion lei ($4.76 billion) in January-May as spending rose 5.7 percent on the year in nominal terms while revenues fell 1.6 percent.
Romania's top court on Friday rejected parts of an austerity package related to pension cuts on Friday in a ruling that markets worried would endanger the IMF-led bailout.

The centrist coalition government responded by saying it plans to raise value added tax by 5 percentage points to 24 percent on July 1 and said at the weekend the IMF Board would discuss its euros aid deal on June 30 and release aid by July 2.

IMF may delay Romania talks until early July

BUCHAREST, June 28 (Reuters) - The board of the International Monetary Fund might delay talks on Romania's 20 billion euros aid package until early July, the country's representative to the Fund was quoted on Monday as saying.

The centrist coalition government plans to raise value-added tax by 5 percentage points to 24 percent on July 1 and said at the weekend the IMF Board would discuss its 20 billion euros aid deal on June 30 and release aid by July 2.

But Romania's representative to the Fund, Mihai Tanasescu, said there was a possibility that the board may delay talks on Romania until early July.

"There is a possibility that the IMF Board will discuss the report on Romania on Wednesday, but it is only a possibility because there are some rules on how documents circulate within the IMF," news agency Agerpres quoted Tanasescu as saying.

"To catch Wednesday's board meeting ... we must follow all these requirements, which will be very complicated, but we will try to do everything possible."

The VAT hike, which replaces a planned cut in pensions which the country's top court rejected, should lead the IMF to approve disbursement of around 2 billion euros ($2.68 billion) in IMF and European Commission funds, Prime Minister Emil Boc has said.

The VAT rise hit the currency and stocks in early trade on Monday, analysts and dealers said.

"In the current context, the IMF executive board might want to wait for another review to take place in July before disbursing," BNP Paribas analysts said in a note.

By 0730 GMT, the blue-chip BET index had fallen 3.2 percent to 4,732 points .BETI and the leu EURRON= dropped 0.3 percent to 4.289 per euro.

"The short term impact is that IMF disbursement is not so sure anymore, even though Romania's Finance Minister stated the disbursement is to come on 1 or 2 July," said Nicolaie Alexandru-Chidesciuc, ING Bank Romania's chief economist. (Reporting by Luiza Ilie and Sam Cage; Editing by Mike Peacock)

Monday, June 28, 2010

FT: Romania to raise VAT to 24%

By Chris Bryant in Vienna

Published: June 26 2010

Romania’s government buckled to the inevitable on Saturday by agreeing to raise value-added-tax after a court had overturned part of its austerity package, threatening to delay financing from the International Monetary Fund.

Emil Boc, prime minister, told a press conference on Saturday that VAT would increase by 5 percentage points to 24 per cent from July 1.

“Under these conditions, the agreement with the IMF will continue,” he said, revealing that the IMF’s board would now meet on Wednesday to consider Romania’s deficit reduction measures – two days later than planned.

Bucharest had been extremely reluctant to raise taxes in order to meet this year’s 6.8 per cent deficit target and instead had attempted to force through painful spending cuts, including a 25 per cent reduction in public sector wages and a 15 per cent hit to pensions and benefits.

But the country’s constitutional court ruled on Friday that the pension cuts were illegal, requiring parliament to debate some of the measures anew.

The government controls only a thin majority in parliament and last week only narrowly survived a no-confidence motion brought by opposition Social Democrats. The party has threatened to call another no-confidence motion this week.

Markets reacted negatively to the news on Friday, with the leu tumbling by as much as 1.1 per cent.

The VAT hike is set to generate up to 4bn lei in additional revenues in 2010, helping the government to keep within its deficit target but threatening to dampen consumption at a time when the economy is already depressed.

After contracting by 7.1 per cent last year, the IMF has forecast a further decline of 0.5 per cent this year. Nevertheless, the Washington-based lender had previously urged Romania to consider tax hikes as part of its austerity drive.

In addition to salary and benefit cuts, around 200,000 of Romania’s 1.4m public sector employees are set to lose their jobs in the coming months.

“I cannot hide that I am deeply disappointed that today we are hiking VAT,” Sebastian Vladescu, finance minister, said, according to Reuters. “We are taking this measure because it is important to ensure our financing ability. But we believe this is not what is best for the Romanian economy.”

The VAT increase could also lead to a sharp rise in inflation, analysts wanted on Saturday. Mr Boc promised close coordination with the central bank to avoid such inflationary effects.

Romanian court: Some budget cuts unconstitutional


BUCHAREST, Romania — A top Romanian court ruled Friday that some of the austerity measures proposed by the government were unconstitutional — a move that will likely delay a crucial multibillion loan from the International Monetary Fund.

The ruling by the Constitutional Court, whose decisions on constitutional matters cannot be appealed, came after dozens of Romanians tried unsuccessfully to storm the presidential palace to protest the measures and gain an audience with President Traian Basescu.

Riot police repelled those who tried to force their way past barricades into the 17th-century palace.

Prime Minister Emil Boc said he would present alternative measures to reduce spending and qualify for the loan from the International Monetary Fund. He declined to say what steps he would take until he had consulted with the fund and the World Bank. The government is thought likely to try to raise the sales and income taxes.

Jeffrey Franks, the IMF's mission chief for Romania, said in a statement the fund was assessing the court's ruling. A meeting previously scheduled for Monday in which the board was to decide whether to disburse the next installment of the loan was cancelled.

However, Boc said he hoped Romania could stay on track for the IMF loan.

The court did not publish its reasons for ruling. Romanian media and unions said the reason was that Romanian law forbids cutting pensions that are based on worker contributions. They said that salary cuts are not unconstitutional and the government may still go ahead with them.

The government had proposed cutting pensions by 15 percent and public sector wages by 25 percent.

Romania's currency, the leu, lost more than 1 percent of its value after news of the court decision, with a rate of 4.28 lei to the euro, and 3.49 lei to the dollar.

Romania negotiated the euro20 billion ($24.49 billion) loan from the IMF, the European Union and the World Bank last year. The loan helped pay state wages when Romania's economy shrank by 7.1 percent.

National Bank of Romanian official Eugen Radulescu called the court ruling "disastrous" for Romania saying it sent a "very bad message." The country may have difficulty in borrowing from foreign markets, he said in an interview with The Money Channel television station.

Boc's government needs to keep the budget deficit at no more than 6.8 percent to secure the loan.

The World Bank declined comment. The IMF office in Romania also it had no immediate comment.

Deputy Prime Minister Bela Marko said one solution may be for the government to increase the nation's sales and income taxes. "In my opinion.... there is no other solution," he said on television.

Romania has about 5.5 million retirees and only about 4.3 million employees — from which about 1.36 million are public sector workers.

Associated Press Writer Alina Wolfe Murray in Bucharest contributed to this report

Romania Seeks to Ensure IMF, EU Funding After Court Ruling

By Irina Savu

June 25 (Bloomberg) -- Romania is in talks with the International Monetary Fund and European Union to avert a second freeze on payments from its bailout loan after a court threw out measures designed to help meet an IMF-mandated deficit target.

The Constitutional Court ruled today that a proposed 15 percent cut in pensions was illegal, leaving a hole in the government’s plans for meeting the IMF’s deficit target of 6.8 percent of gross domestic product. A proposed 25 percent reduction in wages doesn’t breach the Constitution, it said.

“Our main goal is to keep the IMF and EU agreement on track and meet the targets,” Prime Minister Emil Boc told reporters today in Bucharest. “We’re doing the best we can and I hope the IMF board will make a decision next week.”

The Washington-based lender was expected to meet on June 28 to review Romania’s progress toward consolidating its budget and decide on about 850 million euros ($1 billion) in payments. The 20 billion-euro loan package was first frozen on Nov. 6 after political infighting toppled the previous government. The IMF resumed payments in February after Boc’s Cabinet passed a budget for this year.

The next payment will probably be delayed, according to Kenneth Orchard, an analyst at Moody’s Investors Service.

“Moody’s perceives this as temporary issue and not a fundamental break in the program,” he said in an e-mailed response to questions. “The most likely course of events is that the government takes remedial action, probably raising some taxes, and the IMF/EU program will continue.”

Romania’s rating may come under pressure if the government is unable to meet deficit target, Orchard said.

Plan B

The leu weakened 1 percent to 4.2763 per euro, the lowest in seven months, as of 2:21 p.m. in Bucharest. It was the second-biggest decliner among 25 emerging-market currencies tracked by Bloomberg after South Korea’s won. The BET equity index tumbled 4.2 percent, the most among the 93 the indexes tracked by Bloomberg.

Finance Minister Sebastian Vladescu said before the ruling that the government had a back-up plan, without providing details. President Traian Basescu said May 6 that the government had considered raising the main value-added tax to 24 percent from 19 percent and the flat income tax to 20 percent from 16 percent before choosing to cut wages and pensions.

Opposition lawmakers appealed the austerity measures to the Constitutional Court after the government survived a vote of no confidence on June 15.

Confidence Vote

The opposition may ask for another confidence vote next week because “state employees will be severely affected by the decision to cut wages,” Social Democrat leader Victor Ponta said today in a speech on Realitatea television.

The austerity program has provoked a storm of protest, with dozens of people trying to storm the presidential palace earlier today.

“The government will have to find alternative savings options, though we do not see this impacting the lending program,” said Simon Quijano-Evans, head of emerging-market research at Credit Agricole Cheuvreux in Vienna. “We remain underweight Romanian equities due to the consumer backdrop and the noise on the fiscal front,” though “we don’t see the latest events as something that justifies a leu” sell-off.

Hundreds of Romanians try to storm palace


BUCHAREST, Romania — Dozens of Romanians have tried to storm the presidential palace to protest austerity measures.

Anti-riot police repelled those who tried to force their way past barricades into the 17th century palace.

Some 600 Romanians staged the protest Friday as the country's top court was expected to rule whether the cuts in public wages and pensions are constitutional.

Protesters are demanding that the president does not approve the sweeping cuts in public wages and pensions.

Prime Minister Emil Boc announced 25 percent cuts in public sector wages and a 15 percent drop in pensions. Boc said the cuts must be made to meet the demands of the International Monetary Fund and to keep the budget deficit at 6.8 percent.

Thursday, June 24, 2010

Romania’s Vladescu ‘Optimistic’ on Receiving Next IMF Payment

June 23 (Bloomberg) -- Romanian Finance Minister Sebastian Vladescu said he is “optimistic” the country will receive the next bailout payment from the International Monetary Fund after a court decides whether government austerity measures are legal.

The Constitutional Court tomorrow will review challenges to spending cuts the government proposed to meet an IMF-mandated budget deficit of 6.8 percent of gross domestic product.

“I’m optimistic about the next payment,” Vladescu told reporters today after a government meeting in Bucharest. “If the Constitutional Court clears the law, then the IMF board will discuss it on the 28th. I have no reason to doubt Romania will get the IMF money.”

The EU’s second-poorest member is relying on 20 billion euros ($24.5 billion) of loans to resurrect its economy after the worst recession in 60 years. The next IMF installment would be 850 million euros, with 1.2 billion euros scheduled to come from the European Commission.

Prime Minister Emil Boc survived a no-confidence vote last week after opposition parties opposed his plan to reduce the wages of public employees by 25 percent and pensions and jobless benefits by 15 percent.

The government today extended the 16 percent flat tax to meal tickets, copyrights, interest on bank deposits and capital gains from July 1 as it seeks to boost dwindling revenue, Vladescu said. The measures will generate revenue equal to 0.3 percent of GDP he said.

In addition, state-controlled companies, including publicly traded utilities Transelectrica SA and Transgaz SA, will transfer 90 percent of their annual profit to the state budget, up from 50 percent, Boc said at the same briefing as Vladescu.

“State-owned companies must be part of the solidarity effort to support the state budget,” Boc said.

Romanian media criticized as a security threat


BUCHAREST, Romania — Like other countries, Romania sees terrorism, corruption and organized crime as potential threats to its national security. But as far as the government is concerned, the media should be added to that list.

The Supreme Defense Council, which sets defense priorities and how to protect Romania, also lists tax evasion and undue political influence in state institutions as threats.

Its reports carry weight — the council is made up of the nation's president, the defense minister, Romania's intelligence chiefs and other senior officials.

Romanian journalists are calling the council's document a blow to press freedom in a democracy. The document, drawn up Tuesday, was sent for approval to Parliament on Wednesday.

Relations between the government and the media have become more strained in the last two years since Romania went into a recession.

Newspapers and television stations, some of which are owned by political players, are generally biased, either supporting or opposing the government.

The council's document criticizes "orchestrated media campaigns that denigrate state institutions by disseminating false information."

In another development regarding the media, the country's most notorious TV journalist and his producer were formally arrested Wednesday and detained for 29 days on charges of blackmailing and threatening a mayor. Dan Diaconescu and producer Doru Parv are charged with demanding money from Ion Motz, the mayor of Zarand village, to avoid broadcasting compromising material about him.

Romania threw off communist rule more than two decades ago. Under communism, its media were tightly controlled.

Romania levies new taxes on state firms, individuals

BUCHAREST, June 23 (Reuters) - Romania's government raised the amount state-owned companies must contribute from their profits to the state budget and enforced new taxes on individuals and employers as it seeks to cut its budget deficit.

State-controlled firms -- many of them highly subsidised and loss-making -- must give up 90 percent of their profit to the state budget, up from 50 percent, to help the centrist coalition cabinet control ailing finances, Prime Minister Emil Boc said on Wednesday.

"State companies need to be part of the solidarity effort to support the state budget and they will deliver 90 percent of their profit to the state budget," Boc told a news conference following the cabinet's weekly meeting.

Utilities Transgaz (TGNM.BX: Quote) and Transelectrica (TSEL.BX:Quote) are the largest listed state-owned companies and among the few which are profitable. They have budgeted gross profits worth a combined 363 million lei ($105.5 million) for this year.

Bucharest's stock market had closed by the time of the announcement.

Under its 20 billion euros aid package led by the International Monetary Fund, the government has committed to lower subsidies to state firms and better control spending. State firms must also cut spending on goods and services other than those necessary to boost production and they are banned from spending money on cars or furniture, Boc said.

The government also introduced new taxes as part of its commitment to the IMF to step up its fight against tax evasion, Finance Minister Sebastian Vladescu told reporters.

The cabinet has widened the taxation pool by enforcing a 16 percent tax on income from copyright, income generated from interest rates on bank savings and meal tickets -- which some companies use to subsidise employee meals.

The measures, and some other minor taxes, will be enforced as of July and are expected to generate tax receipts worth an additional 0.3 percent of gross domestic product, Vladescu said. (Reporting by Marius Zaharia and Luiza Ilie; Editing by Mike Peacock) ($1=3.440 Lei)

Monday, June 21, 2010

Romania: Power Pressure

Oxford Business Group Latest Briefing

Romania is planning a major restructure of its energy sector by bundling its electricity utilities, privatising part of the industry, and seeking to attract local and foreign investments to reverse the slow decline of its generation capacity. The country must also meet certain deadlines for complying with strict EU emissions standards, though the government is facing numerous hurdles in its efforts to achieve these goals.

Plans to consolidate most of the country's energy utilities into two large holding companies are awaiting final clearance from regulatory and anti-trust agencies. Consolidation would allow producers using older coal-fired technology to merge with state energy firms that use nuclear energy, gas or hydropower to generate electricity.

Under the plan, the state power provider, Termoelectrica - responsible for generating power using coal-fired plants - would be broken up. Its plants would be divided between the two other major state power suppliers firms, Electra and Hidroenergetica, which in turn would be opened up to private investment. Although these newly formed energy firms would provide for more economical administrative sales methods and allow for the sale of surplus assets as needed, the consolidations do not address the main problems facing Romania's energy industry - ageing plants and a lack of investment.

According to official estimates, the capital needed to improve efficiency and ensure that facilities meet EU standards could reach up to $10.7bn - money that the government cannot spare as it looks for expenditure cuts to comply with the requirements of its IMF standby agreement.

The government is also planning to privatise other segments of the energy sector. On May 11, the economy minister, Adriean Videanu, announced the planned floatation of at least some of the shares of state-owned gas producer Romgaz on the Bucharest Stock Exchange early next year, reviving a plan that was rejected in 2006.

"We want to list Romgaz and we will soon start the evaluation so that 10-15% of company shares could be floated in nine months," Videanu told local media.

The government hopes that floating part of the country's largest gas producer on the local bourse will not only attract investors but will also energise the exchange itself.

"It is important to try it on the bourse because this can also revive the Bucharest Stock Exchange, while companies could attract capital for investments," Videanu said.

The government hopes to dust off the long-postponed plans to double Romania's nuclear energy capacity. In late May, Prime Minister Emil Boc said he hoped that two new reactors at the Cernavoda nuclear plant would be commissioned soon and that a second nuclear power station would be built in the coming years. After a May 20 meeting with Yukiya Amano, director-general of the International Atomic Energy Agency (IAEA), Boc said nuclear energy was a vital component in Romania's energy mix.

However, though nuclear power may be vital to the country's energy scheme, the state will soon play a smaller part in the mix. The government has unveiled plans to cut its 51% controlling interest in EnergoNuclear, the company established to build two new reactors at Cernavoda, the country's only nuclear power station. The aim is to reduce its stake to between 20% and 34%, to free up government funds for use elsewhere. It is possible that other stakeholders in the scheme - many of them foreign companies - may seek to increase their shares in EnergoNuclear or that a new potential partner may emerge when the government scales back its stake.

One discouraging factor for investors, at least in the short term, is that demand for electricity fell by 8.2% in 2009 as production was scaled back and consumers sought to cut costs. According to Petru Ruset, the head of divisions, energy transmission and distribution, fossil and renewable power at Siemens Romania, this weak demand will temporarily stall new investments.

"There is a high investment interest in building cogeneration units in Romania, but companies prefer to wait at least until the electricity demand will rise again as a consequence of an increase in industrial output," Ruset said in an interview with the regional press in June.

Though 2010 could be a slow year, with demand for power remaining low due to weak industrial activity, consumption will pick up in the medium term as eurozone economies rebound. To prepare for higher consumption, Romania would likely need to put in place at least some of the investments necessary for the expansion of its energy industry.

Friday, June 18, 2010

Romania negotiates cheaper Russian gas-EconMin

BUCHAREST, June 17 (Reuters) - Romania has negotiated lower prices for some of the gas it imports from Russia and hopes to get further cuts by the end of the year, Economy Minister Adriean Videanu said on Thursday. 

Speaking a day after meeting Gazprom officials in Moscow, Videanu said he found a "willingness to cut imported gas prices" from the supplier.

He said Romania has already negotiated a cut of $13 per thousand cubic metres of gas imported from Wintershall, an intermediary.

"This gives me confidence concerning the gradual lowering of gas prices," Videanu told reporters. "We are still negotiating and I am counting on more cuts (by year-end)."
After the price cut, which Videanu said was recently negotiated, Romania paid for stored gas at $352 per thousand cubic metres.

The European Union state is less reliant on Russian gas than other ex-communist bloc members, importing a third of its annual domestic consumption through intermediaries, and producing the rest from local fields.

Romania has recently signalled it wants to expand its range of choices from European Union and Kremlin-backed projects. Earlier this year, it signed a deal with Georgia and Azerbaijan to build two new terminals for liquefied natural gas (LNG).

Videanu said in April he had asked state-owned gas producer Romgaz to tap spot international markets for potential future gas imports as a way to diversify from Russian imports.

Also on Thursday, Videanu said Gazprom showed interest in partnering state-owned Romgaz in building gas-fired electricity units.

Talks will likely continue in the autumn when Gazprom's chief executive is expected to visit Bucharest.

Videanu also said he estimated the government could sell some of its shares in Romania's top oil and gas group Petrom , majority owned by Austria's OMV in September.

Romania, US start talks on missile shield: official


BUCHAREST — Bucharest and Washington have launched negotiations on US plans to deploy elements of a new missile shield in Romania, officials said Thursday.

"I am happy to announce the formal start of negotiations on Romania's participation in the US anti-missile defence system in Europe," Romanian junior foreign affairs minister Bogdan Aurescu told a press conference.

Romania was officially invited in February by US President Barack Obama to be part of the missile shield.

The Balkan country will host SM3-type medium-range ballistic missile interceptors, which should be operational by 2015.

"I am here today with the US delegation to conduct consultations with our Romanian government counterpart on security issues of mutual interest including work on an agreement to station US missile defense assets in Romania," Ellen Tauscher, US Under Secretary of State for Arms Control and International Security Affairs, said.

"We look forward to working together to enhance European security and strengthen our partnership," she added.

Aurescu said a new meeting should take place in about two months' time.

Washington originally planned to install an anti-missile shield in Poland and the neighbouring Czech Republic, aimed at countering feared attacks from Iran.

In September 2009 US President Barack Obama scrapped that project, which had been pushed by his predecessor George W. Bush and enraged Russia.

Washington has since reworked the scheme and signed a new treaty with Moscow on reducing strategic nuclear weapons, which has yet to be ratified.

Russia has said it reserves the right to withdraw from the treaty if Washington presses ahead with missile defence systems in eastern Europe in a way that Moscow opposes.

Bulgaria, Romania a step closer to Schengen visa zone

Bulgaria and Romania are a step closer to having their border checks with the Schengen area lifted, following a vote on June 16 2010 at the European Parliament, according to a European Parliament media statement.

The most recent assessments show that both countries comply with data security requirements for connecting to the Schengen Information System, the database used by border control agents to exchange information in the fight against crime and illegal immigration, the statement said.

The European Parliament approved the next step towards both countries' accession to the SIS when MEPs adopted a report by Carlos Coelho (EPP, PT) by 525 votes to 18, with 54 abstentions, approving the Council decision which is a first move towards the lifting of border controls.

A working group asked to verify whether Bulgaria's and Romania's branches of the SIS system ensure satisfactory levels of data protection has reached an overall positive conclusion, so paving the way for further tests before the end of 2010.

Thursday, June 17, 2010

New Wave of Romanian Cinema Revisits a Not So 'Golden Age'

The Daily Californian Online

By Derek Sagehorn
Contributing Writer
Thursday, June 17, 2010

Bloc party. In the PFA's Romanian film series, 'Tales from a Golden Age' palimpsests previously oppressed media forms in 15 short vignettes driven by both plot and politics.

Forget France, Italy and Hollywood. Who needs the pretension, vanity and indulgence of these three capitals of cinema in a dirty and complex age? The new kings of world cinema reside in Romania - not in Roman villas - handling yesterday and today's problems with care not frivolity. "4 Months, 3 Weeks and 2 Days" and "Police, Adjective" are two recently released films celebrated for their unflinching treatment of disturbing social issues. The release and success of these movies and others in the last several years has heralded what a Romanian New Wave. Acknowledging the impact of Romania, the Pacific Film Archive is currently holding a program entitled "Tales from the Golden Age: Recent Romanian Cinema." The center piece of the showings is the titular "Tales from the Golden Age."

The film is composed of five short stories set during the last year's of Nicolae Ceausescu's communist regime. While these facts locate the film in a specific and depressive period in Romania's history, the oppressiveness of Ceausescu's personality and government is not the direct concern. Instead, evidence of the corrupt communist force is incidental: crooked police, anal-retentive bureaucrats and passionately stupid activists. The victims of this period aren't just the proponents of Western democracy, the specter of Eastern Bloc oppression manifests itself in the most sedentary lives.

Yet for all of the sadness and pain found in "Golden Age," the tales are chock full of comedy. The film relies on laughter as a sort of catharsis, presenting the ridiculous as an antidote for the impoverished. Comedy in the film is less like one-liners and more like the slow realization of a descent into madness. The segment "The Legend of the Official Visit," focuses on the tension between the leaders of a small town preparing for President Ceausescu's motorcade. When the advanced team piles on absurd demands for white pigeons and authentic folk music, party niceties are sacrificed for a libation of wine and prankishness. Each segment relies on this sort of Vonnegut-ian humor, an exasperated celebration of the nonsensical in the face of insanity.

To be sure, these are tall tales presented as urban legends carried over from the communist period. The presentation and titles play off this move, often giving a humorous, open-ended assurance of the characters' fates. Understanding these stories as myths puts "Golden Age" into a far more sympathetic context. Otherwise what interest would a family devastated by an exploding pig mean to anyone besides farmers? But as myths, dealing specifically with the political and quotidian trauma of life behind the iron curtain, these stories gain much more power: power to expose the private pains of citizens, the tales of oppression that don't show up in history books.

"Golden Age" is attributed to no less than five directors, but Cristian Mungiu is no doubt at the helm of the project. As the director of the aforementioned "4 Months," his hands are everywhere in the film, including the writing credits for all five segments. He even brings in Thesp Vlad Ivanov, veteran of "4 Months" in the final segment, "The Legend of the Chicken Driver."

Overall the film does an incredible job at displaying personal stories of the so-called Golden Age in Romanian history. There are quiet, powerful performances across the board and a sort of earnestness in the directing not often seen this side of the Ural mountains- further proof that the Golden Age, at least in Romanian cinema, is now.
Tags: PFA, Tales from the Golden Age, Romanian New Wave, Film

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Romanian Bonds, Stocks Rally as Parliament Backs Prime Minister

By Krystof Chamonikolas and Piotr Skolimowski

June 16 (Bloomberg) -- Romanian bonds rallied the most in three weeks and the main stock index climbed to its highest in a month after Prime Minister Emil Boc’s government survived a no- confidence vote, clearing the way for economic austerity.

The advance in the benchmark euro-denominated bond maturing in 2015 pushed the yield down 21 basis points to 6.16 percent, the biggest drop since May 26, at 4:30 p.m. in Bucharest. The BET equity gauge jumped 2.7 percent to 5,099.99, its highest closing level since May 19 and the biggest gain among 93 national indexes. The cost of protecting against a Romanian default fell.

Legislators voted against an opposition no-confidence motion aimed at blocking spending cuts yesterday after the stock market closed. Boc has proposed reducing public wages by 25 percent and pensions and jobless benefits by 15 percent to help meet terms of an International Monetary Fund bailout loan.

“They survived the vote, which is very good from a political stability point of view,” Simon Quijano-Evans, head of emerging-market research at Credit Agricole Cheuvreux in Vienna, wrote in a report to clients today. “On the equities front, we will continue to see upside moves, but the consumer story is going to be hit even more by the measures.”

Default Risk

The European Union’s second-poorest member is relying on a 20 billion-euro ($24 billion) IMF and EU loan to revive its economy from recession. Romania stands to receive 2.5 billion euros from the IMF and 2.3 billion euros from the EU if it meets the deficit target of 6.8 percent of gross domestic product agreed with the IMF, Boc said on June 7.

The opposition and trade unions say the cuts will spark a social crisis. Public sector employees have staged daily protests in front of the parliament and city halls across the country to urge lawmakers to topple Boc’s government. Opposition leader Victor Ponta said yesterday after the vote his party will challenge the planned measures at the Constitutional Court.

“The ruling coalition remains very fragile” after some of its legislators “voted against the government,” said Elisabeth Andreew, chief currency analyst at Nordea Bank AB in Copenhagen in a report today. “Hence, the leu will remain vulnerable.”

Credit-default swaps, contracts that protect investors from a default and which drop in price as risk perception improves, slid 2.5 basis points to 346.5 basis points earlier today, according to CMA DataVision data.

Romania Opposition Appeals Government Spending Cuts After Vote

By Irina Savu

June 16 (Bloomberg) -- Romania’s opposition appealed the government’s austerity plan to the Constitutional Court, saying they are illegal and potentially delaying implementation, after Parliament backed Prime Minister Emil Boc in a confidence vote.

The largest opposition party, the Social Democrats, said the wage and pension cuts are “a new income tax” for state workers and breach the constitution, according to an e-mailed statement from the party. The court will discuss the challenges on June 24, news service Mediafax said today.

Boc survived a no-confidence motion by eight votes yesterday, seeking to keep International Monetary Fund and European Union bailout funds flowing and clearing the way for his austerity program. Boc has proposed reducing public wages by 25 percent and pensions and jobless benefits by 15 percent.

“Clearing the Constitutional Court is the main hurdle on the way to implementation but chances for the IMF disbursement to be released in July have increased after yesterday’s vote,” ING Bank Romania economist Vlad Muscalu wrote in a note today. “We believe this should prove less of an issue.”

The EU’s second-poorest member is relying on a 20 billion- euro ($24.6 billion) loan to resurrect its economy. Romania stands to receive 2.5 billion euros from the IMF and 2.3 billion euros from the European Commission if it meets a deficit target of 6.8 percent of gross domestic product agreed with the IMF as a condition of its loans, Boc said on June 7.

If the court throws out the spending cuts, the government will be forced to raise taxes, killing off a recovery, RBC analysts including Nick Chamie and Nigel Rendell said in an e- mailed note. The austerity measures also risk sparking more social unrest, they said.

“A protracted period of fiscal uncertainty with potential political risks will continue to drive” the euro-leu exchange rate “higher,” the analysts said.

Bank of Cyprus pulls bid to up Romanian bank stake

Wed, Jun 16 2010

NICOSIA, June 16 (Reuters) - Bank of Cyprus BOC.CY (BOCr.AT: Quote, Profile,Research, Stock Buzz) has withdrawn an application to raise its stake in Romanian Banca Transilvania BATR.BX to up to 20 percent, it said on Wednesday.

The Cypriot bank cited "other priorities" for its decision to withdraw its request from the Romanian Central Bank.

On May 17, Bank of Cyprus said it had received an initial approval from Cyprus's Central Bank to raise its 10 percent stake in Banca Transilvania to 20 percent, with any increase would subject to regulatory approval in Romania.

Bank of Cyprus aquired a 9.99 percent stake in Banca Transilvania in December for about 60 million euros ($74 million). Banca Transilvania, with more than 500 branches, holds an estimated 8.5 percent share of Romania's deposit market. (Writing by Michele Kambas; Editing by Dan Lalor) ($1 = 0.8101 euro)

Romania opposition asks court to rule on austerity

Wed, Jun 16 2010

BUCHAREST (Reuters) - Romania's opposition appealed to the country's constitutional court on Wednesday to rule on whether the government's planned harsh spending cuts, measures needed to secure an international aid package, are legal.

The leftist Social Democrats failed to topple Romania's coalition government with a no-confidence motion on Tuesday over the planned cuts of 25 percent in public sector wages and 15 percent in pensions and now hope the powerful court will block the measures.

Opposition leader Victor Ponta said his party would challenge the cuts, which the government needs to push through to secure a 20 billion euro IMF-led economic aid deal, adding he was disappointed and upset the no-confidence motion had failed.

The centrist government can start applying the austerity measures ahead of any court judgment, but if declared unconstitutional they would have to be revoked.

The IMF requires the measures to pass that stage before releasing the latest 2 billion euro tranche of aid to the recession-hit economy.

The EU's second poorest member has pledged to reform its sprawling, highly-unionised public sector, but labour resistance is casting doubt over the austerity drive and raising the spectre of Greek-style debt woes in the country of 22 million.

Wednesday, June 16, 2010

NYT: Romanian Government Survives No-Confidence Vote


PRAGUE — Romania’s center-right government narrowly survived a no-confidence vote on Tuesday as thousands of angry Romanians protested outside Parliament against tough new austerity measures meant to stave off a Greek-style crisis.

The vote help clears the way for Romania to receive the next installment from a 20 billion euro ($24.6 billion) aid package the country secured last year from the International Monetary Fund and the European Union to finance its current account and budget deficits and pay state sector salaries.

But the narrowness of the government’s victory — it was spared by a margin of just eight votes — illustrated the challenges ahead as it tried to rein in the spending that has made the country among the most economically vulnerable in the region. The vote was 228 to 197, with a majority of 236 votes needed to unseat the government.

As lawmakers debated, more than 3,000 public sector workers and retirees gathered to demonstrate against the belt-tightening measures, which include cutting public sector wages by 25 percent and pension payments by 15 percent.

Some threw water at the police, The Associated Press reported, while others set fire to effigies of government ministers impaled on poles. Union members attending the debate before the vote heckled Prime Minister Emil Boc during his speech.

Romania, a member of the European Union that does not use the euro, finds itself in a similar position to other deficit-ridden countries across the 27-member union, from Hungary to Spain. It is caught between unforgiving financial markets or creditors demanding austerity and a population unwilling to shoulder further economic pain.

Last week, Romania’s neighbor, Hungary, was forced to backtrack after senior government officials scared investors by declaring that the country risked becoming another Greece.

In Romania, the opposition Social Democrats have equated the cuts to “social genocide.” But the government insists they are necessary to reach a deficit target of 6.8 percent of gross domestic product and secure financing from international creditors. In the absence of that money, Mr. Boc has warned that Romania could reach the point where it could not pay wages, benefits and pensions.

Last week, he also insisted that in the absence of the austerity measures, the budget deficit would spiral to 9.1 percent of gross domestic product. The government has called for 195,000 jobs to be cut this year and in 2011 from Romania’s 1.4 million-member public sector to squeeze savings from the budget.

Economists said that even though the government had survived the no-confidence vote, the continuing threat of political instability was undermining Romania’s ailing economy.

A previous Boc-led government collapsed in October, forcing the I.M.F. and the European Union to suspend payments from the rescue package until a new government could be formed. The measures, in particular the cuts to pensions, also face legal challenges in the country’s constitutional court.

Radu Soviani, an economist in Bucharest and commentator on the Money Channel on Romanian television, said he feared the protests could mean the beginning of a long summer of discontent once the cuts hit people’s pocketbooks.

“The worst is yet to come,” he said by telephone from Bucharest. “Romanians haven’t yet felt the crisis at full scale, but when these cuts are implemented it will pour gas on the fire, especially since there is a feeling that the government bears the responsibility for creating this mess.”

Mr. Soviani tempered his warning by stressing that Romania was on surer financial footing than Greece, saying that it was not shackled by an outsize level of indebtedness or an endemic protest culture. He said Romania’s total debt of about 40 billion euros was dwarfed by the 300 billion euros Greece owed when its credit crisis exploded in May.

Even so, uncertainty over Romania’s ability to enforce austerity measures has pushed up yields on the country’s debt in recent weeks. The leu, the Romanian currency, fell to its weakest level Tuesday in more than a month on fears that the no-confidence vote would succeed.

Leu Is Little Changed as Romania No-Confidence Fails by 8 Votes

By Krystof Chamonikolas and Piotr Skolimowski

June 15 (Bloomberg) -- The leu strengthened, then weakened and finally was little changed against the euro in late trading after Romanian Prime Minister Emil Boc survived a no-confidence motion by eight votes, clearing the way for economic austerity.

The leu was at 4.2272 per euro as of 7:04 p.m. in Bucharest, after gaining as much as 0.1 percent and depreciating as much as 0.2 percent following the vote.

Legislators today voted against a no-confidence motion filed by the opposition in an attempt to block austerity measures designed to meet the conditions of an International Monetary Fund loan. Boc has proposed reducing public wages by 25 percent and pensions and jobless benefits by 15 percent. The leu weakened as much as 0.4 percent against the euro before the vote, the lowest intraday level in more than a month.

“It is supportive for the market even if it is not good for the people,” said Murat Toprak, an emerging-market strategist at Societe Generale SA in London. “The government will be able to implement austerity measures to contain the deficit and keep the IMF program going. From an investor’s perspective, this reduces the sovereign risk.”

The European Union’s second-poorest member is relying on a 20 billion-euro ($24 billion) IMF and EU loan to resurrect its economy from recession. Romania stands to receive 2.5 billion euros from the IMF and 2.3 billion euros from the European Commission if it meets the deficit target of 6.8 percent of gross domestic product, agreed with the IMF as a condition of its loans, Boc said on June 7.

Even so, the government will need to borrow as much as 3 billion euros this year, he said. Boc’s plan to cut wages and pensions may push the economic recovery back a year, according to ING Groep NV.


The opposition and trade unions say the austerity measures will spark a social crisis. State worker unions have staged daily protests in front of the parliament as well as city halls across the country to urge lawmakers to vote against the government.

“The situation is starting to look precarious,” Nigel Rendell, a senior emerging-market strategist at RBC Capital in London, said by phone before the results. “The measures proposed by the government look rather harsh and they are facing widespread protests. There seems to be doubts whether the plan is feasible.”

Tuesday, June 15, 2010

Romanian govt faces confidence vote over austerity

By Luiza Ilie

BUCHAREST, June 15 (Reuters) - Romania's centrist coalition government looks likely to survive a no-confidence vote in parliament over planned spending cuts on Tuesday, giving it greater scope to carry out its reforms.

The EU's second-poorest member has pledged to reform its mammoth, highly-unionised public sector, but social unrest is casting doubts over its austerity drive and raising the spectre of Greek-style debt woes in the country of 22 million.

Investors are nervous about the debt and deficit position of emerging European economies like Romania after Hungarian assets slumped in early June on comments from officials that it might suffer a crisis similar to Greece's.

Romanian Prime Minister Emil Boc should manage to pull together enough support from independent deputies to survive and secure a vital 20 billion euro international aid package for the recession-hit economy, led by the International Monetary Fund.

"We do not expect the no-confidence vote to pass, as other parties will still sit on the fence," said UniCredit analyst Dmitry Gourov.

"Should the vote fail, we would expect the opposition to appeal to the Constitutional Court, but tension should ease after today, and an IMF mission is expected in Bucharest at the end of the month."

Unions had hoped up to a million Romanians would support a planned one-day general strike on the day of the vote in an attempt to pressure deputies.

There was little industrial action on Tuesday, however, and labour leaders said they were focusing on staging protests outside parliament, where some 2,000 people braved high temperatures to demand the government step down.

"I expect the motion to pass, the government to fall and I hope competent people will replace them," said 52-year-old Adriana Paler, a public clerk in Bucharest who was taking part in the demonstration.


Boc's centre-right coalition needs 236 votes to survive the vote, expected to take place in the early afternoon after a debate in parliament which starts at 0700 GMT.

Even if the government does win the vote, it could face problems pushing through reforms beyond the proposed spending cuts if its victory margin is tight.

Its proposed cuts of 25 percent in public sector wages and 15 percent in pensions could also be derailed by legal challenges at the constitutional court.

A defeat, which is seen as unlikely, would tip Romania into a fresh political crisis and slam asset prices, but looks unlikely as parliamentarians fear the consequences would be far worse than the spending cuts.

The country's leu currency fell 0.2 percent in early trade to 4.234 per euro by 0710 GMT. Blue chip stocks rose 0.2 percent .

Uncertainty over Romania's ability to enforce austerity measures, aimed at capping the budget deficit at 6.8 percent of GDP this year, has pushed yields on the country's debt higher in recent weeks. (Writing by Sam Cage; editing by Noah Barkin)

CORRECTED-Romania finmin not desperate to sell debt - press

BUCHAREST, June 14 (Reuters) - Romania can afford to reject bids at debt tenders if yields asked by investors are too high, Finance Minister Sebastian Vladescu was quoted as saying ahead of a T-bill auction on Monday. 

Uncertainty over Romania's ability to enforce austerity measures, vital to keep a 20 billion euro aid deal led by the International Monetary Fund afloat, has pushed yields higher in recent weeks and the ministry has rejected bids at four tenders since May 6.

"Our decision to reject the offers at several successive auctions was triggered by pretty heavy pressure (on yields) from banks," Vladescu told local financial daily Ziarul Financiar.
"We're not that desperate, we still have money in the treasury so we are fighting the banks."
The ministry tenders 1 billion lei ($285.3 million) worth of six-month treasury bills later on Monday, one day before a government no confidence vote.

Vladescu said that whether the IMF board meets to decide the disbursement of its next loan tranche to Romania on June 28 or two weeks later "was not that important" because the country was not in "such a vulnerable position".

Monday, June 14, 2010

AFP: Ancient cave paintings found in Romania

Romanian experts have discovered the most ancient cave paintings found to date in Central Europe, aged up to 35,000 years old, Romanian and French scientists said Sunday.

The pictures show animals including a buffalo, a horse and even a rhinoceros.

"It is for the first time in Central Europe that... art this old has been found and confirmed", said a joint statement from the Romanian Federation of Speleology -- the scientific study of caves -- and Jean Clottes, an expert working with UNESCO.

It is a "major discovery" and "its authenticity is certain", Clottes, a specialist in prehistoric art, told AFP. He was called on by Romanian specialists to certify the discovery.

His team included cavers, a paleontologist, an archaeologist and two cave art specialists and estimated the drawings were "attributable to a period of ancient rock art, the Gravettian or the Aurignacian (between 23,000 and 35,000 years ago)."

Carbon tests must confirm these estimates, they said.

The black-paint drawings, discovered three or four months ago in the Coliboaia cave in northwestern Romania, depict animals, including a buffalo, a horse, bear heads and rhinoceros, federation chief Viorel Traian Lascu said.

AP: Romanian PM cuts pensions of high earners

June 11, 2010

BUCHAREST, Romania --Romania's prime minister says he's slashed the pensions of former generals, scientists and other top civil servants to reduce this central European country's burgeoning budget deficit.

Emil Boc says that as of Friday, the highest monthly pension a former state employee can receive is 37,000 lei (euro8,800 euros; $10,600). The average pension is 710 lei (170 euros; $205).

Rumors widely circulate that some top earners receive huge payouts, but Boc offered no figures.

Boc says the cuts must be made to meet the demands of a multibillion dollar loan from the International Monetary Fund.

The move will also be popular among Romania's masses because many high earners were once senior figures in regime led by Nicolae Ceausescu. 

Romanian dance beats prove a hit throughout Europe


Romanian dance beats prove a hit throughout Europe

Never mind Ibiza — Romania is emerging as a new center for Europe’s dance scene.

In the past 18 months, numerous hits have been exported from the Balkans into Western Europe. Romanian duo Edward Maya and Vika Jigulina hit the top 10 of Billboard’s European Hot 100 Singles chart twice this year with “Stereo Love” and “This Is My Life.”

“Stereo Love” even cracked the notoriously Europhobic U.K. singles chart, peaking at No. 4 and selling 101,000 units, according to the Official Charts Company. Another Romanian dance star, Inna, hit the U.K. top 10 in March with “Hot,” selling 193,000.

Such success represents the international blossoming of an underground scene that took root after the fall of President Nicolae Ceausescu’s Communist regime in 1989.

“For many locals, clubbing equals freedom,” says Cosmin Duru, manager of Bucharest-based clubbing website

The country is also home to an Ibiza-style summer dance scene centered on the Mamaia holiday resort, which attracts A-list DJs to its numerous clubs. British house DJ Steve Lawler describes the crowds there as “fantastic.”

“You have two scenes, one very commercial and one very underground, but they co-exist happily and feed into each other,” Lawler says.

Romania’s January 2007 entry into the European Union was another turning point for the country’s dance scene, according to Marius Mates, CEO of Bucharest-based Premium Management, which represents Romanian dance artists Claudia Pavel, Bentu de Soli and David Deejay.

“Local writers and producers had the chance to travel abroad and were exposed to higher production standards,” says Mates, who also owns club chain Bamboo. “Doing business is much simpler being part of the EU.”

Meanwhile, Western companies like the United Kingdom’s Ministry of Sound and All Around the World and the Netherlands’ Spinnin’ compete to license hits that emerge on Romanian labels like Mayavin, Roton and Cat Music/Media Services.

Still, it’s a long process from Romanian club play to Western charts, according to Scott Simons, A&R manager and head of international at Ministry of Sound (MoS) in London.

Records first pick up play in Romanian resorts, before crossing over to Greece, Turkey, Egypt and Southern Europe club play, he says.

“Nine to 12 months after being released in Romania,” Simons adds, “they end up charting in the U.K. and (Germany, Switzerland and Austria) because everyone who went on holiday to (Romania) knows them really well.”

Accordingly, MoS will release “One” by Anya featuring Jayko in the United Kingdom at the end of summer, after its Romanian release in February on Cat Music/Media Services. Other releases being prepped as Europe’s summer holiday season gets under way include Pavel’s “Don’t Miss Missing You” (Cat Music/Media Services), de Soli’s “Pearls of Summer” (Camper Music) and “So Bizarre” (Spinnin’) by David Deejay featuring Dony.

“This will be the year Romanian dance goes totally mainstream,” van der Zwan says.

Romanians Pine for Ceausescu’s ‘Order’ as Premier Pushes Cuts

June 14 (Bloomberg) -- Georgeta Simionescu joined hundreds of nurses, clerks and doctors waving banners in Bucharest last week outside the gargantuan palace built by former Romanian dictator Nicolae Ceausescu, and pined for the “old order.”

Ceausescu, who ruled the former communist country before he was shot in the 1989 revolution that brought democracy, stood for “order and stability,” said the 67-year old Simionescu in front of the building that is now home to the country’s lawmakers. “He would protect us.”

Prime Minister Emil Boc faces a no-confidence motion in parliament tomorrow over budget-cutting measures, which include reducing public wages by 25 percent and pensions and jobless benefits by 15 percent to avoid Romania becoming the next Greece. Romania is joining governments from Spain to Germany in slashing spending and the EU has crafted a 750 billion-euro ($905 billion) rescue package to save the euro.

Boc, 43, is caught between placating voters and reassuring the International Monetary Fund and investors, who have poured 22.4 billion euros into Romania since it joined the EU. Investors are wary about his resolve to reduce the deficit, while economists have also raised concern the measures will erode the economic recovery in the country, the EU’s second- poorest after Bulgaria.

Credit-default swaps are the second-highest in the EU, behind Greece, and the Romanian leu has fallen to the lowest level this year as the Greek debt crisis roiled the Balkan region. Credit-default swaps linked to five-year bonds rose to 407 basis points on June 8, when Parliament scheduled the vote, according to CMA DataVision prices. The cost of insuring against default on the country’s debt is now the highest since July 13.

‘Ongoing Uncertainty’

“The ongoing uncertainty regarding the passage of the relevant legislation in particular and the upcoming no- confidence vote are among the key factors behind the recent deterioration in Romania’s relative performance in credit markets,” said Citigroup Inc. economists Ilker Domac and Engin Dalgic in a June 10 note to clients.

Romania failed to sell debt on June 7 for the fourth time since the beginning of May. The Finance Ministry rejected all bids for 1.2 billion lei ($343 million) in one-year bills and 600 million lei in three-year bonds it planned to sell at the previous auction on June 3. Five-year notes sold on March 11 to yield 5.17 percent are now trading at a yield of 6.34 percent, according to prices on Bloomberg.

“The government’s credibility or the probability to actually see the measures implemented is pretty low as far as the markets are concerned,“ ING Bank Romania Chief Economist Nicolaie Alexandru-Chidesciuc said.

Weakening Currency

The leu lost about 2 percent against the euro in the past month. It will probably fall about 3 percent by June 2011 to 4.35 per euro because of concern over the government’s spending reduction plans, ING’s Chidesciuc said on June 7. He had previously predicted the leu to rise.

Romania’s largest opposition party, the Social Democrats, needs 236 votes to topple Boc, while the premier can count on 257 votes. State worker unions are staging daily protests in front of the parliament as well as city halls across the country to urge lawmakers to vote against the government. They plan a human chain around the parliament building to block its entrance when the vote takes place.

Boc’s plan to cut wages and pensions to meet an IMF- required budget deficit of 6.8 percent of gross domestic product may push the recovery back a year, according to ING Groep NV, BNP Paribas SA and Morgan Stanley.

Neighbors Doing Better

Romania’s economy will continue to “underperform” its neighbors for the rest of the year as the government tightens spending, BNP Paribas analysts wrote in a note on June 3. The economy will be pinched this year, after shrinking a record 7.1 percent in 2009, London-based Morgan Stanley economist Pasquale Diana said on June 2.

Romania’s economic contraction slowed to an annual 2.6 percent in the first quarter from 6.5 percent in the previous quarter as industry and export growth partly offset plunging construction and consumption. The government and the IMF predict the economy will contract as much as 0.5 percent this year and return to growth in 2011.

Madalina Ionescu, a 51-year-old nurse, makes 1,700 lei ($488) a month, after 30 years of service. That’s below the average wage of $566, which in turn is less than half the average pay in the Czech Republic and Poland, two eastern European nations that dropped communism for free-market economies in the same year as Romania.

“This government is no longer doing what it’s supposed to be doing, to protect its citizens,” said Ionescu.

Romania eyes debt yield dip on confidence vote win

BUCHAREST, June 14 (Reuters) - Romania's government will likely snub investors seeking high premiums in a debt sale on Monday, gambling it will create a more stable political backdrop and ease pressure on yields a day later by winning a no-confidence vote.Uncertainty over Romania's ability to enforce austerity measures, needed to keep a 20 billion euro deal led by the International Monetary Fund afloat, has pushed yields on its sovereign debt higher in recent weeks.

The finance ministry has rejected several bids since May 6 and analysts said it will probably do so again at a debt tender later on Monday, waiting until after the no-confidence vote, called over the austerity cuts, before selling more.

Finance Minister Sebastian Vladescu was quoted as saying by daily Ziarul Financiar that Romania could afford to reject bids as its cash position was not "desperate". The ministry tenders 1 billion lei ($285 million) worth of six-month treasury bills later on Monday. "I understand from this statement that they will reject bids today as well," said ING Bank analyst Vlad Muscalu. "Most likely is that the government will not fall tomorrow and this should ease some of the pressure (on yields)."But this is only a first step, pressure won't cool off too much. It will be gradual, if budget figures support it. We still have to see what happens with the constitutional court and then to see how the measures will be implemented."

The centre-right coalition of Prime Minister Emil Boc needs 236 votes to survive on Tuesday and will get more than that if a group of independents in parliament holds good on a pledge of support for the measures.The motion will be debated in parliament starting at 0700 GMT and be followed by the vote probably in the early afternoon local time.

Even though political risk could ease after the vote, analysts say Romania's constitutional court could hamper the government's plan to enforce drastic pay cuts, aimed at capping the budget deficit at 6.8 percent of GDP this year.

Observers fear mounting social pressure could also sway the government to ease some of the spending cuts, with powerful trade unions having called a one-day general strike for Tuesday.Unions are hoping to get support from a million workers, about a quarter of the total labour force, but analysts say summer holidays may result in a much lower turnout.Besides domestic woes, the ministry is also up against increasingly negative sentiment towards the region's debt, as shown by a poor auction in Hungary last week and rising yields in the Czech Republic.

Investors are expected to ask for yields of up to 7.3 percent at Monday's tender, the level at which six-month paper is being quoted on Romania's dormant secondary market. Some dealers say a small amount of debt could be sold at yields around 7 percent.The government last sold 6-month treasuries on May 10, when the average accepted yield shot up to 6.38 percent, from a previous 5.74 percent. The cut-off yield came at 6.5 percent.($1=3.505 Lei)

1,000 go on strike at Daewoo shipyard in Romania over wage increase demands

BUCHAREST, Romania (AP) - Some 1,000 workers have gone on strike at the Daewoo shipyard on the Black Sea over demands for pay rises.

Union leader Marian Florian says employees want a monthly raise of 300 lei (euro71.50; $86.71) and a yearly bonus. He says they were offered an increase of just 40 lei (euro9.50).

Mediafax news agency quotes personnel manager Gemal Memetcea as calling the strike illegal and saying the company has filed a court appeal to stop the strike.

Some 3,000 work at the Daewoo Mangalia Shipyard in southeastern Romania.

Romania is in a deep recession and the government wants to cut public workers salaries and pensions to keep a budget deficit of 6.8 percent.

Thursday, June 10, 2010

Romania Inflation Rate Rose to 4.4% in May as Currency Weakened

By Irina Savu

June 10 (Bloomberg) -- Romania’s inflation rate rose in May for a second month as a weaker currency drove up the costs of goods priced in euros.

The rate rose to 4.4 percent in May from 4.3 percent in April, the Bucharest-based National Statistics Institute said in an e-mail today. The result was in line with the median estimate of seven analysts in a Bloomberg survey. Consumer prices rose 0.2 percent in the month.

“The main driver of inflation in May is the depreciation of the exchange rate, which surely boosted telephone bills and other services prices,” ING Bank Romania Chief Economist Nicolaie Alexandru-Chidesciuc said before the release.

The leu weakened 1.6 percent against the euro and 9.7 percent against the dollar in May on mounting concern that the European sovereign-debt crisis is spreading. In Romania, gasoline, telephone bills and other items are gauged in euros and paid for in lei, linking price growth to currency swings.

Prices of services, the most vulnerable to a leu depreciation, rose an annual 0.5 percent in May, while food- price inflation fell 0.1 percent, according to the institute.

Inflation accelerated from October through January as tobacco and alcohol producers raised prices in anticipation of a new tax that took effect on Jan. 1. Tobacco accounts for 4.7 percent of the basket of goods in the consumer price index.

Wednesday, June 9, 2010

BBC News: Frosty welcome for lucky plane stowaway

A 20-year-old Romanian man had a lucky escape after stowing away on a plane flying from Vienna to London.

The man hid himself in the rear wheel compartment of the plane which landed at Heathrow Airport on Sunday. He is now in police custody in London.

He had bruises and hypothermia from outside temperatures as low as -41C, Austrian media reported.

He managed to survive because the plane flew at a low altitude to avoid stormy weather.

The man apparently got under a fence at Schwechat airport in Vienna and climbed into the undercarriage of the first plane he saw without knowing its destination.

The plane belonged to a sheikh from the United Arab Emirates and had been standing empty on the tarmac at Schwechat airport since Thursday.

It flew without passengers to Heathrow, where the Romanian was picked up by police and arrested for stowing away.

He may be charged or fined or given a fixed penalty, the Metropolitan Police told the BBC. He will then be handed over to the UK Border Agency.

According to Austrian media reports, the man just wanted to get out of Vienna and look for work.

Romania is a member of the European Union, so Romanians can travel to the UK for holidays. However, controls on Romanians working in Britain remain in place.

Refugees from Myanmar arrive in Bucharest as Romania joins ranks of resettlement countries

BUCHAREST, Romania, June 8 (UNHCR) – Romania has become one of the few countries in the world to accept refugees for resettlement, following the recent arrival in the European country of 38 people originating from Myanmar.

The refugees, including eight children, flew to Bucharest from Malaysia on May 31 and June 1 under legislation adopted by Romania in December 2008. This provides for Romanian to accept up to 40 refugees for resettlement each year.

Machiel Salomons, UNHCR's representative in Romania, praised Romaniaefforts said Romania's e refugee agency had been forced to enhance its resettlement efforts. "Romania's contribution in this regard is both timely and very much appreciated,"

The group of 38 refugees, all ethnic Kachin, are currently staying at the Regional Centre for Accommodation and Asylum Procedures in Galati, a city on the Danube in eastern Romania. The facility is run by the Romanian Immigration Office (RIO). Their resettlement was organized by the RIO in close cooperation with UNHCR and the Romanian Red Cross.

Under Romanian law, the resettled refugees will be entitled to the same rights as Romanian citizen, save for politically related ones. In Galati, they will receive language and cultural orientation courses as well as being informed of their legal rights.

They will also receive support from UNHCR and its partners, including Save the Children Romania and the Jesuit Refugee Service Romania. The refugees will be able to stay in the centre for up to one year as they are helped to become self-sufficient.

Romania also hosts a landmark Emergency Transit Centre, which was opened in the city of Timisoara in late 2008 to provide a temporary haven for refugees in urgent need of evacuation from their first asylum countries due to life-threatening conditions. More than 600 refugees have transited the centre.

Last year, a total of 995 asylum applications were recorded in Romania, slightly down on 2008. During the same year, a total of 94 persons were granted some form of protection (refugee status or subsidiary protection).

By Claudia Liute in Bucharest, Romania

Romanian government set to beat June 15 confidence vote

(Reuters) - Independent parliamentarians expressed their support for Romania's troubled coalition government Tuesday, increasing the likelihood it will be able to defeat a crucial no-confidence vote due next week.

Prime Minister Emil Boc relies on backing from an ethnic Hungarian party and independents to command a fragile majority and needs their votes to push through controversial spending cuts and secure international aid.

"We will not back the opposition's motion. The main reason is that we want to ensure Romania's stability and we want to offer the IMF a legitimate partner in its relations with Romania," Marian Sarbu, head of the UNPR independent group, told reporters.

To back the motion "would have fueled an unprecedented economic and social crisis in Romania."

Boc's austerity plans, needed to secure the latest tranche of a 20 billion-euro International Monetary Fund aid deal, have been challenged by the leftist opposition and trade unions, who plan to stage a general strike the same day as the vote, now scheduled for June 15.

Analysts had said the independents might abstain, in which case the government would probably still have garnered enough votes to survive. But a small majority would have dramatically weakened its mandate to reform the recession-hit economy.

While some independents could still abstain or even vote against Boc, it now looks more likely the government will survive by a comfortable margin.

That would give it a free hand to slash state wages and pensions to reduce the ballooning budget deficit, though the plans could still be derailed by legal challenges at the powerful constitutional court.

The opposition, including leftist Social Democrats, currently commands about 200 seats and needs 236 votes to topple the government and stop the planned spending cuts.

It would have to gain some support from the independent and government camps to force through the no-confidence motion, but many parliamentarians are wary of voting against Boc because they fear the consequences of a political crisis.

Social Democrat head Victor Ponta said Tuesday his grouping still needed 20 more votes to topple the government.

Romania Jobless Rate Falls in May

Romania's unemployment rate fell in May to 7.67 per cent from 8.07 per cent in the previous month, the country's national employment agency ANOFM announced Tuesday.

The number of of unemployed people stood at 701,854 in May, compared with 738,187 in April. In May 2009, the unemployment rate was at 5.7 per cent.

Romania's total labor force at the end of 2009 was estimated to be 9.75 million people.

The number of unemployed is expected to rise in 2010, particularly in light of the government's planned cuts in the public sector, which aim to help lower the budget deficit to 5.9 per cent of GDP versus the 7.2 per cent of GDP seen last year.

Tuesday, June 8, 2010

Romanian Church to Borrow Money for Cathedral

04 June 2010
Marian Chiriac
Balkan Insight

Plans for building a very large and controversial cathedral in Bucharest are still alive, with the Orthodox Church intending to borrow around €200 million in a syndicated loan to start construction by the end of this year, local press reports.

Church project manager Nicolae Noica said the church put up its forests, churches and other property to guarantee the loan for the new building, which will be called the Cathedral for the Salvation of the People. He stressed that the money would be reimbursed from the collection plate and donations and not from the state budget.

Financial analyst Bogdan Baltazar says the church will not have problems in attracting the loan. "The Orthodox Church is a very credible and stable institution in Romania. Furthermore, it has a lot of assests which can be used for guaranteeing the loan."

More than 85 percent of Romania's population of 21 million belong to the Orthodox Church. The new facility will take its place among other archictectural giants in the capital city. Bucharest is already home to the second-largest building [the former Ceausescu palace] after the Pentagon, the largest hotel and the largest shopping mall in southeastern Europe.

Romania Industrial Output Growth Slows in April as Mining Fell

By Irina Savu

June 8 (Bloomberg) -- Romanian industrial output growth slowed in April as mining production dropped and a weaker local currency made imported raw materials more expensive.

Production grew an annual 3 percent in April, rising for a sixth consecutive month, after advancing 5.2 percent in March, the Bucharest-based National Statistics Institute said in an e- mail today. Output rose 0.7 percent on the month.

The leu weakened about 1 percent against the euro and 2.5 percent against the dollar in April, making capital goods imports more expensive for producers charging in lei. Miners and oil drillers also produced less in the year through April.

Production of minerals and oil fell 4.4 percent on the year, partly offsetting a 2.7 percent increase in manufactured goods output and a 12.7 percent increase in electricity generation, the institute said.

Industry grew an annual 4.2 percent in the first quarter, after rising 4 percent in the prior three months. The economic contraction slowed to an annual 2.6 percent at the start of this year from 6.5 percent in the fourth quarter.

The International Monetary Fund, which is leading a 20 billion-euro ($24 billion) bailout, says the economy will emerge from recession at the end of this year, led by industrial and export growth. President Traian Basescu said last month that the economy will resume growth in the third quarter this year.

AP: Romania expects 125,000 public sector jobs cuts


Some 125,000 public sector jobs need to be cut in 2011 to ease pressure on the state budget as the country remains mired in a deep recession, a government official has said.

Andreea Paul-Vass, economic counselor to the prime minister said late Thursday the public sector would need to shed 250,000 jobs to return to 2007 levels, when the government started hiring more agressively thanks to a three-year economic boom.

Finance Minister Sebastian Vladescu said earlier this year that 70,000 state-paid jobs should be slashed in 2010.

Romania has 1.36 million public workers at a population of about 22 million. Unemployment is currently about 8 percent.

The country took a euro20 billion ($24.54 billion) loan from the International Monetary Fund, the European Union and the World Bank last year to pay state wages when its economy shrunk by 7.1 percent.

In May President Traian Basescu announced sweeping cuts in state-paid wages, pensions and benefits. The IMF said the country had to reduce public expenditure to keep its soaring budget deficit under control, but insisted the measure to cut wages by one-fourth and pensions by 15 percent was decided by Romania's authorities.

Romania has yet to implement the cuts. It stands to have an installment of the IMF loan delayed if the measures are not applied by the end of June. Prime Minister Emil Boc is expected to go to Parliament next week and try to get the legislature's approval for the measures.

AP: Controversial gold mine in Romania gets go-ahead


A Transylvanian gold mine project which critics say threatens the environment and an ancient Roman temple was approved for development by the Romanian government on Friday.

Environment Minister Laszlo Borbely said his ministry will clear the construction of two dams by Canadian mining company Rosia Montana Gold Corp. to extract gold from ore. The ministry had rejected the plans in 2007 on safety grounds, but the company filed a lawsuit and a court recently ruled in its favor.

The company still needs to get various permits from water and environment authorities before it can go ahead with the mining project.

President Traian Basescu and the government support the project, which has been bitterly opposed by civil groups, historians and archaeologists, and some politicians. Romania's economy is a in a deep recession and can use any new investments.

Critics say the mine could pollute streams and rivers in case of an accident, pointing out that a cyanide leak at a Romanian gold mine in 2000 killed much of the aquatic life in the Tisza River, a tributary of the Danube River, which runs also through Hungary. They also say the mine would damage a Roman temple and other monuments uncovered in the area.

The minining company argues the mine will develop the neglected area and create thousands of jobs.

Rosia Montana Gold announced about a decade ago that it wanted to mine for gold in Rosia Montana, which has had gold since Roman times. It will reocate hundreds of residents and rip apart a swathe of a mountain range.

The company plans to invest $1.7 billion (euro1.41 billion) at Rosia Montana, 190 kilometers (120 miles) east of the border with Hungary. It estimates a profit of $1.9 billion. According to the company's website, Rosia Montana Gold Corporation has already invested $400 million.

Gabriel Resources from Canada has 80 percent of the company, while a Romanian state-company owns about 19 percent.

Romania Needs to Borrow EU3 Billion in 2010, Boc Says

By Irina Savu

June 7 (Bloomberg) -- Romania’s government, which faces a no-confidence vote over planned austerity measures, must borrow as much as 3 billion euros ($3.6 billion) this year even if it receives more bailout payments, Prime MinisterEmil Boc said.

Boc reiterated today in Parliament, where he presented two bills on state wage and pension reductions, that the government must cut spending to meet an International Monetary Fund and European Commission-mandated budget deficit target, or face the possibility of being unable to pay benefits by year-end.

Romania stands to receive 2.5 billion euros from the IMF and 2.3 billion euros from the European Commission if it meets a deficit target of 6.8 percent of gross domestic product, Boc said. Additional borrowing would be domestic and international, he said. The country may also benefit from 4.5 billion euros in foreign direct investments this year, according to Boc.

“The world has changed and investors from abroad no longer finance deficits, while domestic lenders are close to the 25 percent limit of how much they can lend to the state, they are now at 20 percent exposure,” Boc said.

The nation’s economic contraction slowed to an annual 2.6 percent in the first quarter from 6.5 percent in the prior period as industry and export growth partly offset plunging construction and consumption. The government and the IMF predict the economy will shrink as much as 0.5 percent this year and return to growth in 2011

Boc also said today the economy, mired in the worst recession in 60 years, will probably post “slightly negative growth,” while final consumption will probably drop about 2 percent this year.

To contact the reporter on this story: Irina Savu in Bucharest

Romania's prime minister goes to Parliament with austerity measures

By Alison Mutler, The Associated Press

BUCHAREST, Romania - Hundreds of people protested outside Romania's parliament on Monday as the prime minister proposed cutting public wages by one-fourth and pensions by 15 per cent.

The opposition Social Democratic Party submitted a no-confidence motion after Prime Minister Emil Boc argued that the government needed to make the sweeping cuts to receive the next instalment of a multibillion dollar loan from the International Monetary Fund and the European Union.

Boc warned the budget deficit would soar to 9.1 per cent of GDP unless cuts are made and Romania would need to borrow euro11 billion (US$13.15 billion) this year.

The government has said 195,000 public sector jobs need to be cut this year and in 2011 to ease pressure on the state budget at a time of a deep recession.

Romania has 1.36 million public workers in a population of about 22 million. Unemployment is currently at about eight per cent.

The country took a euro20 billion ($24.54 billion) loan from the IMF, the EU and the World Bank last year to pay state wages when its economy shrank by 7.1 per cent.

Romanian Wages Rise in April

Salaries in Romania rose by 2.0 per cent in April compared to the same month in 2009, the National Statistics Board reported on Monday. April's average salary was Lei 1,436 (350 euros), down by 4.8 percent from March 2010.

The month on month drop was attributed to various bonuses that were given in March, such as for Easter and the thirteenth monthly salary.

Recession-hit Romania, which is relying on a €20 billion IMF-led loan, has pledged drastic public spending cuts to rein in its deficit, which this year stands at 6.8 per cent, and restart its economy, which continued to contract in the first quarter.

Starting from June 1, state sector wages is be cut by 25 per cent and all salaries, including the minimum wage, will be affected. Jobless benefits and pensions will be cut by 15 per cent.

Friday, June 4, 2010

Romanian Orthodox Church to borrow €200 million ($245 million) for cathedral

By The Associated Press

BUCHAREST, Romania — A church official says the Romanian Orthodox Church will borrow €200 million ($245 million) from banks to build a controversial cathedral.

Church project manager Nicolae Noica has said the church put up its forests, churches and other property to guarantee the loan for the Cathedral for the Salvation of the People.

Noica said Thursday that the money would be reimbursed from the collection plate and donations and not from the state budget.

More than 85 per cent of Romania's 22 million population belong to the church. It has been criticized for alleged extravagance on the project. Decoration alone will cost €100 million ($123 million).

Building will start on the cathedral this year, and is scheduled to be completed in 2013.

Romania calls on private sector to help boost R&D

Published on EurActiv (
Source URL:

Published: 03 June 2010

Romania has decided that its national target for boosting research and development will be 2% by 2020, but to reach this goal, the private sector would have to increase its financial effort six or seven-fold compared to current levels. EurActiv Romania reports.

Raising investment in R&D to 3% of the EU’s GDP is one of the five priorities of a draft ten-year economic plan unveiled by the European Commission in March, called 'Europe 2020' (EurActiv 03/03/10).

The strategy defines five headline targets at EU level, which member states will be asked to translate into national goals reflecting their differing starting points:
Raising the employment rate of the population aged 20-64 from the current 69% to 75%.
Raising the investment in R&D to 3% of the EU's GDP.
Meeting the EU's '20/20/20' objectives on greenhouse gas emission reduction and renewable energies.
Reducing the share of early school leavers from the current 15% to under 10% and making sure that at least 40% of youngsters have a degree or diploma.
Reducing the number of Europeans living below the poverty line by 25%, lifting 20 million out of poverty from the current 80 million.

In a series of articles, the EurActiv network will present the state of play in individual EU countries on each of the targets. This series looks at how member states react to the 3% R&D target.

The EurActiv network already found that Eastern EU countries have either rejected or dismissed as irrelevant the planned EU target to reduce poverty (EurActiv 06/05/10).

After Romanian President Traian Basescu declared in late April that Romania would not be able to attain the target of spending 3% of GDP on R&D by 2020, which is set out in the EU's new 'Europe 2020' strategy, the Romanian authorities came up with a more "realistic" figure of 2%.

‘"We cannot reach the 3% of GDP allocation objective for research and development and we'll have to establish what number is possible at national level. Even though it wouldn't be a problem for the government to allocate 1%, for the private sector to allocate 2% would be difficult. And even if we were to find resources for 3%, what is our research infrastructure like? Is our research capable of bringing out results in time?"

These were the words of President Basescu in late April (EurActiv 27/04/10).

More recently, Dragos Ciuparu, vice-president of the National Authority for Scientific Research (ANCS), said that the Europe 2020 strategy links research closely to innovation.

Ciuparu said a realistic budgetary allocation target would be 2% of GDP by 2020 for research, development and innovation. This figure is halfway between a pessimistic scenario, with an allocation of 1.8%, and an optimistic one with 2.2%, he stated.

Rolanda Predescu, a director at ANCS, confirmed that "the 3% target is especially ambitious and we would have liked to have it, but it is impossible in the budgetary conditions".

She says that the realistic figure of 2% was the result of an analysis by the government's secretariat and ministries. To achieve this target, Romania will need to constantly increase its annual allocations for innovation.

The private sector will have to increase allocations for R&D six or seven-fold compared to current levels, she said.

Predescu also said that in 2008, the resources allocated to R&D in the EU were at the level of 1.9% of GDP, while in 2009 this increased to 2.06%. "Romania will reach today's average EU level in 2020," she predicted.

On the other hand, Predescu signalled that Romania employs only a third of the average number of researchers in other EU member states.

ANCS Vice-President Ciuparu was also sceptical, asking the question: "A 2.2% increase scenario would mean 3,000 more researchers per year. Where are we going to get them from?"

Predescu spoke about the need for incentives to boost research and better use of EU funding.

At present, Romania particpates in 249 programmes from the EU's Seventh Framework Programme for Research (FP7), in 16 projects under the ERA-NET scheme and in nine under ESFRI, the European Strategy Forum on Research Infrastructures projects, as well as in five JTIs (Joint Technology Initiatives) and ten international research bodies, including CERN.

Romania also has the ambition of joining seven European joint programmes in the fields of health, agriculture, climate change, water management, cultural heritage and 'Urban Europe'.