Tuesday, November 30, 2010

About 100 Roma protest in Romania over proposal to use 'Gypsy' in official documents

BUCHAREST, Romania - About 100 Roma have protested a proposal to use the term "Gypsy" in official documents in Romania when referring to their ethnic group.

Lawmaker Silviu Prigoana argued that "Roma" was too close to Romanian, causing confusion. The move has the backing of the Romanian Academy.

The Romanian government is discussing the issue.

Roma leader Nicolae Gheorghe said Tuesday that using "Gypsy" would lead to fear of repression. About 25,000 Roma were deported from Romania during World War II, based solely on their ethnicity. Gheorghe called for international mediation on the issue.

"Gypsy" can have negative connotations in Romania where discrimination is widespread against the group.

Romania has an estimated 1.5 million Roma, but official figures put that number at 500,000.

Monday, November 29, 2010

Romanian Corn Harvest Increases 14% to Highest in Five Years

Romania’s corn harvest rose 14 percent in 2010, producing the biggest crop in five years, according to preliminary figures posted on the Agriculture Ministry’s website.

Farmers reaped 9.08 million metric tons of the grain from 5.7 million acres. The crop was the biggest since the 10.4 million tons gathered in 2005, the figures show.

The country may raise as much as 360 million euros ($476 million) from selling about 2 million tons of corn on international markets, the Agriculture Minister Valeriu Tabara told news service Mediafax on Oct. 19.

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

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

AP: Romania's foreign minister found guilty of discriminatory remarks on the Roma

BUCHAREST, Romania - Romania's anti-discrimination board has ruled that the country's foreign minister was guilty of discriminatory remarks about the Roma, or Gypsy population.

The board's chairman Csaba Astalosz said Friday the minister will receive the mildest sanction, a recommendation, and not a warning or a fine.

In February, Foreign Minister Teodor Baconschi said "we have some physiological, natural problems of criminality among some of the Romanian communities" in France, "especially among the Roma."

The ministry denied that the comments had a racist tone, saying Baconschi tried to imply there was a certain "natural" rate of criminality within any group of immigrants.

Romania has an estimated 1.5 million Roma, most of them living in poverty and facing discrimination.

Friday, November 26, 2010

Romanian Banca Transilvania Delays Vienna Share Sale Until 2011

Banca Transilvania SA, Romania’s second-largest publicly traded bank, has postponed its plan to sell shares on the Vienna Stock Exchange until next year, Chief Executive Officer Robert C. Rekkers said.

The bank, based in Cluj-Napoca, Romania, is focusing on a share-capital increase approved by its shareholders on April 30 and decided to delay the share sale originally planned for this year, Rekkers said in an interview in Bucharest yesterday.

Banca Transilvania, whose largest shareholder is the European Bank for Reconstruction and Development with 14.6 percent, plans to increase its share capital by 392 million lei ($121 million) and will probably announce investor subscriptions by the end of the week, Rekkers said.

The capital increase has been challenged in court by Romanian investment fund SIF Banat-Crisana, which is also one of the reasons why the bank postponed the Vienna share sale, according to Rekkers. SIF Banat-Crisana is a shareholder.

“We’ve postponed the share sale on the Vienna Stock Exchange for next year because of legal problems with SIF Banat- Crisana,” Rekkers said. “Now we want to finish the share- capital increase and then we’ll go ahead with the share sale next year.”

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

Romania Sells 1.32 Billion Euros in 3-Year Bonds; Yield 4.8%

Romania’s Finance Ministry sold 1.32 billion euros ($1.76 billion) in three-year euro-denominated Treasury bonds on the domestic market, the second such auction this year, to fund the country’s budget deficit and refinance 1.4 billion euros due on Nov. 29, the central bank said.

The average yield on the bills due Nov. 29, 2013 was 4.8 percent, the Bucharest-based Banca Nationala a Romaniei said on its website today. Romania had planned to borrow the money at less than 5 percent, President Traian Basescu told public television station TVR on Nov. 18.

Demand at the auction was 2.05 billion euros and the government had originally offered to sell 1 billion euros of the bonds.

The eastern European country has struggled since July to find buyers for its leu-denominated debt on the domestic market as investors pushed for higher yields amid rising inflation forecasts triggered by a government increase in a value-added tax. It sold 1 billion lei ($310 million) in one-year bills this week at a 7.22 percent average yield and rejected all bids at a five-year leu-denominated bond sale on Nov. 18, citing “unacceptable yield bids.”

Central Bank Governor Mugur Isarescu said earlier today that the ministry should repay its 1.4 billion euros due this month as it has sufficient funds to do so and tap the market again afterwards.

“Although issuing more than planned could be seen as a success, in reality it seemed very likely that the whole amount of 1.4 billion euros is to be rolled-over,” ING Bank Romania SA economist Ana-Maria Morarescu

Romania, which relies on a 20 billion-euro bailout led by the International Monetary Fund, dropped this month a self- imposed yield cap of 7 percent for one- and three-year leu- denominated debt, paying as much as 7.3 percent as it seeks to cover its budget deficit of 6.8 percent of gross domestic product.

To contact the reporters on this story: Irina Savu in Bucharest at isavu@bloomberg.net; Andra Timu in Bucharest at atimu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net
wrote in an e-mailed note to clients today before the auction announcement. “It is also interesting to point out that previous one-year paper matures the same day these new papers are scheduled to be issued and this fact hints that the Finance Ministry does not enjoy a comfortable liquidity position.”

AP: Romanian pres: Adopt new laws to secure bailout


Romania's president urged parliament Thursday to quickly enact new wage laws, saying Romanians should ignore the lies of "girls with lipstick on and eyes as big as onions" who whip up sentiment against austerity measures.

One of the laws would reform public sector wages. Another would increase public sector wages by 15 percent and raise the minimum wage from 600 lei (euro139) to 670 lei (euro156) per month, beginning in January. They must be passed for Romania to receive the next installment of a euro20 billion ($26.67 billion) loan from the International Monetary Fund, the European Union and World Bank last year, when the country's economy shrank by 7.1 percent.

"Be responsible!" President Traian Basescu urged lawmakers. "Next year may be too late."

Last summer, the government implemented harsh austerity measures, slashing public sector wages by one-fourth and increasing the sales tax from 19 to 24 percent, triggering a series of protests.

Basescu said Romanians "are lied to every day" and appeared to blame TV broadcasters, referring to "girls with lipstick on and eyes as big as onions" who criticize the budget cuts.

Romania's Transelectrica sees 2011 profit rising

Nov 25 (Reuters) - Romanian state-owned power grid operator Transelectrica TSEL.BX said on Thursday gross profit should jump next year, after it lowered expectations for 2010.

In a business plan for 2011-2013 sent to the stock exchange on Thursday, Transelectrica said it expects its gross profit to rise to 20.2 million lei ($6.28 million) next year.

It expects 2010 gross profit at 6.5 million lei, lower than initially forecast.

However, it noted that the performance of the leu currency EURRON=, which is key for Transelectrica's results, as it has high foreign debt, is uncertain.

Romania's persistent economic contraction hurt Transelectrica last year and in 2010 as it saw low energy demand and a weak currency.

At the start of the year, the company envisioned a gross profit of 11 million lei. (Reporting by Luiza Ilie; Editing by Erica Billingham)

AP: Romania's government adopts wage laws

Romania's government says it has sent to Parliament the drafts of two wage laws needed to keep a bailout agreement with the International Monetary Fund.

The government adopted the drafts late Wednesday, increasing public sector wages by 15 percent and the minimum wage from 600 lei (euro139) to 670 lei (euro156), from January 2011.

Prime Minister Emil Boc said that's all Romania can afford during the crisis. The country pledged a budget deficit of 4.4 percent of gross domestic product next year.

In the summer, the government slashed public sector wages by one-fourth, triggering a series of protests.

Romania took a euro20 billion ($26.67 billion) loan from the IMF, the European Union and World Bank last year, when its economy shrank by 7.1 percent.

Thursday, November 25, 2010

Garbage exhibition opens in Romanian shopping mall


BUCHAREST — An exhibition made up of garbage has opened in a huge shopping mall in Romania's capital in an attempt to alert the public to the impact of consumerism on the environment, organisers said.

"This is a parable teaching visitors that everything they see in this shopping centre, from the smallest to the biggest objects and from the most desirable to the most useful ones, will turn into trash," Ilie Brie, head of a local sustainable development group, told AFP.

"One must remember that every single gesture, every single wish to buy something generates rubbish and then someone else must find a way to deal with it."

From old TV sets and computers to used bulbs and plastic bags, the exhibits illustrate the path from garbage collection to recycling.

Artworks including sculptures and pieces of furniture made of beer cans and bottle caps are also on show.

In a country where protecting the environment is hardly a priority, organisers have created several sets showing forests and beaches littered with garbage left behind by picknicking tourists.

In September, the environment ministry and several NGOs organized a "national housekeeping day" during which volunteers cleaned up fields, forests and rivers, filling up 550,000 large waste bags.

Romanian mayor who wore a swastika is exonerated

The Associated Press
Wednesday, November 24, 2010; 8:26 AM

BUCHAREST, Romania -- A rights group says prosecutors have offended Holocaust victims by exonerating a Romanian mayor who was investigated for wearing a swastika in public.

Radu Mazare, mayor of the Black Sea city of Constanta, goose-stepped on stage in a World War II German army uniform with a swastika at a July 2009 fashion show.

The Center for Monitoring and Combating Anti-Semitism says Wednesday the decision not to prosecute him "deeply offends the memory of the Holocaust victims killed by people dressed in the same uniform."

It is illegal to display swastikas in Romania.

Mazare later expressed regret for his actions and denied being a fascist or an anti-Semitic. Prosecutors who investigated Mazare closed his case Tuesday.

AP: IMF urges Romania not to cut income tax

An International Monetary Fund official has urged Romania not to reduce its income tax from 16 percent to 10 percent, warning that could jeopardize the country's international loan agreement.

IMF mission chief Jeffrey Franks said Wednesday the Senate's vote to reduce the fixed income tax rate paid by all wage earners would increase the budget deficit agreed for 2011. The other house of Romania's Parliament, the Chamber of Deputies, hasn't voted on the bill yet.

Frank said tinkering with the tax system would create "instability," and he urged the government to stick to the agreed budget deficit of 4.4 percent of the GDP.

Last year, Romania took a euro20 billion loan from the IMF, the EU and the World Bank, to shore up its ailing economy, which shrank by 7.1 percent in 2009.

Romania Approves IMF-Backed Law to Raise Wages in 2011

Nov. 24 (Bloomberg) -- Romania’s government approved an International Monetary Fund-backed draft bill envisaging a 15 percent pay increase for public workers in 2011 and will seek to fast-track its approval through parliament to qualify for payments under its international bailout package.

Prime Minister Emil Boc said the government will send the draft law to parliament as early as tomorrow for fast-track approval, which will give the opposition the option to file for a no-confidence vote against the Cabinet. The government is also waiting for parliament to set the date for a no-confidence vote already filed by the opposition against a law overhauling the education system, Boc said.

A pay increase of 15 percent compared with October “is all Romania can afford right now,” he told journalists after a government meeting in Bucharest today.

Romania, which is counting on a 20 billion-euro ($26.7 billion) bailout from the IMF and the European Union to resurrect its economy from the worst recession on record, raised a value-added tax by 5 percentage points and cut public wages 25 percent from July to trim its budget deficit and qualify for the loan. The government plans to fire as many as 74,000 public employees this year to narrow the budget deficit to the target of 6.8 percent of gross domestic product for 2010 and 4.4 percent in 2011.

Shrinking Economy

“The wage increase is possible as long as the government meets the target of 39 billion lei for total wage expenses in 2011 agreed with the IMF and the European Commission,” Ionut Dumitru, chief economist of Raiffeisen Bank Romania SA and president of the advisory Fiscal Council, said by telephone. “From the preliminary calculation, we think a 15 percent increase in wages could mean more layoffs in the public sector next year.”

Romania’s economy contracted 2.5 percent in the third quarter and is expected to shrink as much as 2 percent this year as government austerity measures damp demand and stall a recovery. It will probably return to growth of 1.5 percent in 2011, according to the IMF, which is leading the loan package.

Boc said output may grow as much 2 percent next year if the country doesn’t “abandon its reform path.” Romania’s minimum monthly wage will also rise 12 percent in 2011 to 670 lei ($208) from the current 600 lei, he said.

“We still have a correction in public wages, considering that workers’ incomes decreased in 2010 by more than 25 percent and now we are talking about a 15 percent increase,” Banca Comerciala Romana SA Chief Economist Lucian Anghel said by telephone. “This wage increase may also partially rebuild consumers’ confidence and help the country have economic growth next year. There is also a risk that these additional expenses with the increase may mean less money for investments.”

--Editor: Jennifer M. Freedman

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

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

Wednesday, November 24, 2010

The Economist: The Romani row, revisited

LAST month the European Commission organised a two-day conference in Bucharest. The ostensibly bland theme of the event—“Contribution of EU funds to the integration of Roma”—was enlivened by the politically charged atmosphere following Nicolas Sarkozy’s decision in the summer to expel thousands of Romani migrants, most of them Romanian, from France. The event was the first real get-together of Romani leaders, Romanian government representatives and the EU since the expulsions.

No clear consensus emerged on the impact of EU funds on Romania's Romanies, most of whom live in dire conditions. This is no great surprise considering that red tape and ministerial incompetence has meant that only about 1% of the €20 billion allocated to Romania in EU structural funds has actually been spent. Government programmes for the Romanies, such as positive discrimination for universities, barely scratch the surface. Most of Romania's Romanies remain marginalised, with little or no access to healthcare, education or social services.

But the conference did have two interesting outcomes. One was a discussion of an excellent piece of research

The second was a paper by Nicolae Gheorghe, a well-known Romani activist and a former adviser to the OSCE on Romani issues (declaration of interest: I edited Mr Gheorghe's paper, a summary of which was published on the Guardian website). Mr Gheorghe believes that Romania is not taking responsibility for the Romani issue. The key part of his document reads:
“This is a Romanian problem, not a European one. "Getting rid of the gypsies" has been part of the Romanian psyche since the deportations in WW2. The mass Roma migration since EU accession serves a similar purpose of getting Roma out of the community... All this makes me worry. The Roma as an EU citizen is a subtle argument but the solution has to be found here, in Romania.”

Romania has come under considerable pressure from France, since the expulsions, to come up with a new strategy for the Roma. Mr Gheorghe is concerned that the French could use the issue as an excuse to block Romania’s entry into the European Union's passport-free Schengen zone, scheduled for March 2011 (a recent EU Observer storyseemed to confirm his fears).

Mr Gheorghe also gives insight into the story of Roma migration. He says that when small numbers of Roma migrants started to appear in French and Italian municipalities there was initially some sympathy for them, particularly among left-wing mayors who were willing to make an effort at integrating these newcomers.

But two factors changed this: a flood of new Romani migrants broke down this sympathy; and France decided on a crackdown. Although it was this year's expulsions that made the headlines, France's move against the Roma began back in 2005, when Mr Sarkozy, then the interior minister, ordered his prefects to take a “firm approach towards semi-sedentary settlements that settle mostly on the outskirts of cities.”

Mr Sarkozy took a beating in the international press over the expulsions, and at home is as unpopular as ever. But the issue hasn’t gone away. While “voluntary” repatriations of Romanies from France continue, on arriving home many of the “returnees” simply turn around and go back to France. (I twice visited Barbulesti, a village near Bucharest, to try to meet some of the Roma returnees, but the mayor told me they had all returned to France.)
by the World Bank, which states that the cost of educating Romania's Romanies would be far exceeded by the contribution an educated Romani workforce would make to the national economy. The opportunity presented by the report suggested that all the chatter—by both government representatives and Romani leaders—about strategy, empowerment, consultation, rights, monitoring, community projects, exclusion, research, discrimination and poverty was missing the point.

Romanian Senate Approves Tax Cut, Opposes Cabinet

Nov. 23 (Bloomberg) -- Romania’s Senate approved a cut in the country’s flat income-tax rate to 10 percent, which now heads to the lower house where the government likely will use its majority to reject the proposal.

The move aims to raise budget revenue by encouraging tax payments and help the economy emerge from its worst recession on record, Senator Iulian Urban said by phone from Bucharest today. The cutting of the rate from the current 16 percent would match Bulgaria as the lowest tax rate in the European Union.

Romania’s government opposes the tax reduction, saying it would cut revenue. Prime Minister Emil Boc’s Cabinet raised the value-added tax by 5 percentage points to 24 percent from July to meet the terms of an international bailout of 20 billion euros ($27 billion). It also cut public wages by 25 percent to narrow its budget deficit.

“The government doesn’t support this flat-rate cut and its 2011 budget envisages a 16 percent income and corporate tax,” Finance Minister Gheorghe Ialomitianu said today in the Senate. “I’m confident this initiative will be rejected” when it goes to lawmakers in the lower house for final approval, he said.

The Balkan nation, which secured a bailout from the International Monetary Fund, the EU and other lenders last year to shore up its economy, must narrow its budget deficit to 6.8 percent of gross domestic product for this year from 7.2 percent last year under terms of the credit.

It must also approve a 2011 budget that trims the deficit further as a sovereign-debt crisis in Ireland, which is under pressure to raise its 12.5 percent corporate tax rate after seeking a bailout, reverberates throughout the 27-nation bloc.

The tax cut will have a negative budget impact of about 1 percent of GDP, Deputy Finance Minister Gheorghe Gherghina was quoted by news service Mediafax as saying.

Romania must also enact a unified wage law and revise consumer-credit and pension rules to qualify for 2.4 billion euros of bailout loans by March next year.

--With assistance from Andra Timu in Bucharest. Editors: Alan Crosby, Douglas Lytle

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

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

Monday, November 22, 2010

AP: Bechtel to lay off most of Romania work force

A Romanian union leader said Friday U.S. company Bechtel had informed him it will lay off three-quarters of employees working on a highway in Transylvania.

Mihai Lup received notification from Bechtel saying the company plans to terminate contracts with 800 workers in January 2011. He said the company is owed more than euro70 million ($95 million) in unpaid bills for work carried out, something also confirmed by the company last month.

There was no reply to phone calls made to Bechtel's three offices in Romania. Bechtel currently employs more than 1,000 in Romania.

Work on the highway which runs from the central city of Brasov to Hungary's eastern border began after it signed the contract in 2003, and has advanced slowly. It was unclear what would happen to the highway.

The contract was criticized by the European Union, because it was awarded without a tender. Romania joined the EU in 2007.

Romania is the seventh-largest country in the EU in area size, and has poor road infrastructure, with more than 300 kilometers (187 miles) of highway.

Romania Seeks 1 Billion Euros in Bonds on Home Market

Romania plans to sell three-year euro-denominated bonds worth 1 billion euros ($1.4 billion) on the domestic market next week as it seeks to cover its budget deficit and refinance 1.4 billion euros due Nov. 29.

The Finance Ministry will try to sell bonds on Nov. 25 to local banks at a 4.5 percent coupon rate, the ministry said on its website today. Romania plans to borrow the money at an interest below 5 percent, President Traian Basescu told public television station TVR late yesterday.

The country has struggled since July to find buyers for its leu-denominated debt on the domestic market as investors pushed for higher yields amid rising inflation forecasts triggered by a government increase in a value-added tax. It rejected yesterday all bids at a five-year leu-denominated bond sale, citing “unacceptable yield bids.”

“The success of the euro-bond issue will depend on the yield the ministry is willing to pay,”Nicolaie Alexandru- Chidesciuc, the chief economist of ING Bank Romania SA, said by phone today. “If they offer a yield closer to 4.5 percent, the success will be limited; on the other hand, if they pay more than 5 percent or closer to that level, the offer will be definitely oversubscribed.”

Self-Imposed Cap

Romania, which relies on a 20 billion-euro bailout led by the International Monetary Fund, dropped this month a self- imposed yield cap of 7 percent for one- and three-year leu- denominated debt, paying as much as 7.3 percent as it seeks to cover its budget deficit of 6.8 percent of gross domestic product. Prime Minister Emil Boc’s Cabinet increased value-added tax in July by 5 percentage points to 24 percent and cut public- sector wages 25 percent to qualify for loans from the IMF, the European Union and other lenders.

A rate less than 5 percent at the bond auction will justify the government decision to cut wages and raise VAT to satisfy the terms of the bailout, Basescu said.

“The Finance Ministry announced they plan to raise only 1 billion euros even though they have to refinance a larger amount as they consider that if they manage to attract more than that, then they will give a positive signal in terms of credibility,” Chidesciuc said. “It’s a false signal because if they wanted to test their credibility they should have issued on the external markets.”

IMF Mission Chief Jeffrey Franks said on Nov. 1 that the government’s plan to raise as much as 7 billion euros over three years through its euro-denominated medium-term note program is “very advanced” and “they should be ready to go next year with that program.”

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net. Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

Templeton threatens legal action over Romania's Romgaz

LONDON Nov 19 (Reuters) - Fund manager Franklin Templeton on Friday threatened legal action if Romania forces energy firm Romgaz to make a donation towards the budget deficit, and said the issue risked damaging the country's investment reputation.

Romgaz, Romania's main gas producer, is one of the portfolio holdings of the Fondul Proprietatea, a 3.4 billion euro fund that Templeton manages. It was created to compensate citizens whose properties were confiscated by the communist government.

Romania's government, struggling to raise funds to finance its budget, was originally set to propose a donation of up to 400 million lei ($130 million) from Romgaz at general shareholder meetings (GSM) on Sept. 14 and Oct. 18.

While the motion was withdrawn at the time, Templeton said the proposal was back on the agenda for the Nov. 22 GSM.

Templeton accused the Economy Ministry of using its position as Romgaz' main shareholder to the detriment of other owners. The amount that could be extracted represents about 4.5 percent of shareholder equity as of end-2009, it said.

"This is a very serious issue which could damage Romania's reputation globally as an investment destination. It raises very serious questions about conflicts of interests," Templeton Executive Chairman Mark Mobius said in a statement.

A government ordinance giving majority state-owned firms the option to donate to help cover the budget deficit breached free market principles as well as Romanian law, Mobius said, noting it may also hit plans to list Romgaz on the stock market.

"It sets a very negative precedent.

"Templeton will take all legal action necessary in order to revoke any GSM decision approving such a donation," Mobius added in the statement.

Romania's Economy Minister Ion Ariton declined to immediately comment when contacted by Reuters.

Templeton suggested instead that Romgaz pay a special dividend to all shareholders which it said would result in an extra cost to the company of 70.6 million lei.

It was not immediately clear what stake Fondul Proprietatea held in Romgaz. (Reporting by Sujata Rao; Additional reporting by Radu Marinas in Bucharest)

Friday, November 19, 2010

Romania’s Ariton Says No ‘Rush’ in Petrom Stake Sale

Romania doesn’t want to “rush” the sale of a 9.84 percent stake in the Balkan nation’s largest oil company, OMV Petrom SA, as it seeks to get a “very good” price, Economy Minister Ion Aritonsaid.

The sale is part of a program that needs to be reassessed, Artion told reporters in Bucharest. The Economy Ministry is currently selecting a legal adviser before picking a brokerage to manage the sale on the Bucharest Stock Exchange.

Romania plans to sell minority holdings of its utilities and of Petrom to meet international bailout conditions and cover infrastructure investments. The country is relying on a 20 billion-euro ($27 billion) loan led by the International Monetary Fund after the nation’s recession and austerity measures reduced budget revenue.

“I don’t want to rush the stake sale because we want to obtain very good prices,” Ariton said. “We don’t have a time limit for the Petrom stake sale.”

Petrom wants to raise as much as 600 million euros by selling shares to maintain funds for investments, estimated at 6.9 billion lei ($2.2 billion) this year and at as much as 5 billion euros in the next five years. The Chief Executive Officer of OMV AG, Wolfgang Ruttenstorfer said on Nov.10 that the company may extend Petrom’s authorization to carry out a share sale past an initial term of April 2011. OMV will wait for a decision by Romania before it considers carrying out a share sale at Petrom, he said.

Romania also plans to sell a minority stake in natural gas producer Romgaz SA via the stock exchange next year, Ariton said today. The ministry plans to finish selling minority stakes in utilities Transgaz SA and Transelectrica SA in 2001 as it raises money to finance the budget, Ariton said in an e-mailed response to Bloomberg questions on Nov 12.

Romania may raise more than 2 billion euros from the energy-stake sales, former Economy Minister Adriean Videanu said on Aug. 19.

The Balkan nation has sufficient natural-gas storage to cover the consumption this winter, while the prices paid by the households should not increase, Ariton said today.

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

To contact the editor responsible for this story: Alan Crosby at acrosby1@bloomberg.net

Romania Fails to Sell 5-Year Bonds on Higher Yields

Romania rejected all bids in an auction of five-year bonds as investors sought higher yields after the government this month dropped a 7 percent yield cap and signaled it may sell Eurobonds on the domestic market.

The Finance Ministry planned to raise 300 million lei ($95 million) in the auction, which attracted bids totaling 790 million lei, the central bank said on its website. The Balkan nation sold 200 million lei in five-year bonds on Oct. 21, the first sale since July, at an average yield of 7 percent.

The country struggled since July to find buyers for its leu-denominated debt on the domestic market as investors pushed for higher yields amid rising inflation forecasts triggered by a government increase in a value-added tax.

“The banks probably requested very high yields, especially after they saw that at the past two auctions the ministry paid more than 7 percent,” Florentina Manea, an economist at Royal Bank of Scotland Romania SA, said by phone. “There could have been banks that pushed the yields toward 7.3 percent.”

Romania, which relies on a 20 billion-euro ($27 billion) bailout led by the International Monetary Fund, dropped a self- imposed yield cap of 7 percent for one- and three-year debt, paying as much as 7.3 percent as it seeks to cover its budget deficit of 6.8 percent of gross domestic product.

VAT Increase

Prime Minister Emil Boc’s Cabinet increased the VAT in July by 5 percentage points to 24 percent and cut public-sector wages 25 percent to qualify for loans from the IMF, the European Union and other lenders. The central bank raised on Nov. 4 its inflation prediction for this year to 8.2 percent because of the effects of the tax increase. In August, the central bank forecast annual inflation of 7.8 percent in December and 3.1 percent at the end of 2011.

“The Finance Ministry doesn’t need as much cash as we expect the budget-deficit target to be met, but on Nov. 29 a 1.4 billion-euro bond matures, so they are trying to signal another Eurobond issue on the domestic market to cover for that,” Manea said.

The government has raised 34.2 billion lei through the sale of Treasury bills and bonds on the domestic market this year, compared with a planned 46.7 billion lei.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net. Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

Romania Seeks to Borrow 1 Billion Euros by Nov. 25, TVR Reports

Romania wants to borrow about 1 billion euros ($1.37 billion) with a three-year maturity from the domestic market by Nov. 25, President Traian Basescu told public television station TVR.

Romania plans to borrow the money at an interest below 5 percent to refinance a euro-denominated bond worth 1.4 billion euros due Nov. 29, Basescu said late yesterday in an interview on TVR.

A rate less than 5 percent will show the eastern European country regained its credibility in front of the market after the government “did the right thing in 2010” by slashing public wages and raising a value-added tax to meet international bailout terms, Basescu said.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

Thursday, November 18, 2010

Geopolitical Journey, Part 3: Romania

Geopolitical Journey, Part 3: Romania is republished with permission of STRATFOR.

November 16, 2010


Editor’s note: This is the third installment in a series of special reports that Dr. Friedman will write over the next few weeks as he travels to Turkey, Moldova, Romania, Ukraine and Poland. In this series, he will share his observations of the geopolitical imperatives in each country and conclude with reflections on his journey as a whole and options for the United States.

By George Friedman

In school, many of us learned the poem Invictus. It concludes with the line, “I am the master of my fate, I am the captain of my soul.” This is a line that a Victorian gentleman might bequeath to an American businessman. It is not a line that resonates in Romania. Nothing in their history tells Romanians that they rule their fate or dominate their soul. Everything in their history is a lesson in how fate masters them or how their very soul is a captive of history. As a nation, Romanians have modest hopes and expectations tempered by their past.

This sensibility is not alien to me. My parents survived the Nazi death camps, returned to Hungary to try to rebuild their lives and then found themselves fleeing the communists. When they arrived in America, their wishes were extraordinarily modest, as I look back on it. They wanted to be safe, to get up in the morning, to go to work, to get paid — to live. They were never under the impression that they were the masters of their fate.

The problem that Romania has is that the world cares about it. More precisely, empires collide where Romania is. The last iteration was the Cold War. Today, at the moment, things seem easier, or at least less desperate, than before. Still, as I discussed in Borderlands, the great powers are sorting themselves out again and therefore Romania is becoming more important to others. It is not clear to me that the Romanians fully appreciate the shift in the geopolitical winds. They think they can hide in Europe, and perhaps they can. But I suspect that history is reaching for Romania again.

Geopolitics and Self-Mutilation

Begin with geography. The Carpathian Mountains define Romania, but in an odd way. Rather than serving as the border of the country, protecting it, the Carpathians are an arc that divides the country into three parts. To the south of the mountains is the Wallachian Plain, the heart of contemporary Romania, where its capital, Bucharest, and its old oil center, Ploesti, are located. In the east of the Carpathians is the Moldavian Plain. To the northwest of the Carpathians is Transylvania, more rugged, hilly country.

And this is the geopolitical tragedy of Romania. Romania is one nation divided by its geography. None of the three parts is easy to defend. Transylvania came under Hungarian rule in the 11th century, and Hungary came under Ottoman and Austro-Hungarian rule. Wallachia came under Ottoman rule, and Moldavia came under Ottoman and Russian rule. About the only time before the late 19th century that Romania was united was when it was completely conquered. And the only time it was completely conquered was when some empire wanted to secure the Carpathians to defend itself.

Some of us experience geopolitics as an opportunity. Most of humanity experiences it as a catastrophe. Romania has been a nation for a long time, but rarely has it been a united nation-state. After becoming a nation-state in the late 19th century, it had a precarious existence, balanced between Austria-Hungary, the Ottoman Empire and Russia, with Germany a more distant but powerful reality. Romania spent the inter-war years trying to find its balance between monarchy, authoritarianism and fascism, and it never quite found it. It sought safety in an alliance with Hitler and found itself on the front lines in the German invasion of Russia. To understand Romania as an ally one must bear this in mind: When the Soviets began their great counterattack at Stalingrad, they launched it over Romanian (and Hungarian) troops. Romanians maneuvered themselves into the position of fighting and dying for the Germans, and then got their revenge on the Germans by being slaughtered by the Soviets.

All of this led to Romania’s occupation by the Soviets, toward whom the Romanians developed a unique strategy. The Hungarians rose up against the Soviets and were crushed, and the Czechoslovaks tried to create a liberal communist regime that was still loyal to the Soviets and were crushed. The Romanians actually achieved a degree of autonomy from the Soviets in foreign affairs. The way the Romanians got the Soviets to tolerate this was by building a regime more rigid and oppressive than even that of the Soviet Union at the time. The Soviets knew NATO wasn’t going to invade, let alone invade through Romania. So long as the Romanian regime kept the people in line, the Russians could tolerate their maneuvers. Romania retained its national identity and an independent foreign policy but at a stunning price in personal freedom and economic well-being.

Contemporary Romania cannot be understood without understanding Nicolae Ceausescu. He called himself the “Genius of the Carpathians.” He may well have been, but if so, the Carpathian definition of genius is idiosyncratic. The Romanian communist government was built around communists who had remained in Romania during World War II, in prison or in hiding. This was unique among the Soviet Union’s Eastern European satellites. Stalin didn’t trust communists who stayed home and resisted. He preferred communists who had fled to Moscow in the 1930s and had proved themselves loyal to Stalin by their betrayal of others. He sent Moscow communists to rule the rest of the newly occupied countries that buffered Russia from the West. Not so in Romania, where native communists ruled. After the death of the founder of communist Romania, Gheorghe Gheorghiu-Dej, another Romanian communist who stayed in Romania ultimately took over: Ceausescu. This was a peculiarity of Romanian communism that made it more like Josip Broz Tito’s Yugoslavia in foreign policy, and more like a bad dream in domestic policy.

Ceausescu decided to pay off the national debt. His reason seemed to flow from his foreign policy — he didn’t want Romania to be trapped by any country because of its debt — and he repaid it by selling to other countries nearly everything that was produced in Romania. This left Romania in staggering poverty; electricity and heat were occasional things, and even food was scarce in a country that had a lot of it. The Securitate, a domestic secret police whose efficiency and brutality were impressive, suppressed unrest. Nothing in Romania worked as well as the Securitate.

Herta Muller is a Romanian author who writes in German (she is part of Romania’s ethnic German community) and who won the Nobel Prize for Literature in 2009. One of her books, The Appointment, takes place in Romania under the communists. It gives an extraordinary sense of a place ruled by the Securitate. It is about a woman who is living her life, working at her job and dealing with an alcoholic husband while constantly preparing for and living in dread of appointments with the secret police. As in Kafka, what they are looking for and what she is hiding are unclear. But the danger is unrelenting and permeates her entire consciousness. When one reads this book, as I did in preparing for this trip, one understands the way in which the Securitate tore apart a citizen’s soul — and remembers that it was not a distant relic of the 1930s but was still in place and sustaining the Romanian regime in 1989.

It was as if the price that Romania had to pay for autonomy was to punch itself in the face continually. Even the fall of communism took a Romanian path. There was no Velvet Revolution here but a bloody one, where the Securitate resisted the anti-communist rising under circumstances and details that are still hotly debated and unclear. In the end, the Ceausescus (Nicolae’s wife Elena was also a piece of work, requiring a psychological genius to unravel) were executed and the Securitate blended into civil society as part of the organized-crime network that was mistaken for liberalization in the former Soviet empire by Western academics and reporters at the time.

Romania emerged from the previous 70 years of ongoing catastrophe by dreaming of simple things and having no illusions that these things were easy to come by or things Romanians could control. As with much of Eastern Europe but perhaps with a greater intensity, Romanians believed their redemption lay with the West’s multilateral organizations. If they were permitted to join NATO and especially the European Union, their national security needs would be taken care of along with their economic needs. Romanians yearned to become European simply because being Romanian was too dangerous.

The Redemption of Being European

In thinking of Romania, the phrase “institutionalized prisoner” comes to mind. In the United States it is said that if someone stays in prison long enough, he becomes “institutionalized,” someone who can no longer imagine functioning outside a world where someone else always tells him what to do. For Romania, national sovereignty has always been experienced as the process of accommodating itself to more powerful nations and empires. So after 1991, Romania searched for the “someone else” to which it could subordinate itself. More to the point, Romania imbued these entities with extraordinary redemptive powers. Once in NATO and the European Union, all would be well.

And until recently, all has been well, or well in terms of the modest needs of a historical victim. The problem Romania has is that these sanctuaries are in many ways illusions. It looks to NATO for defense, but NATO is a hollowed-out entity. There is a new and ambitious NATO strategy, which sets a global agenda for the organization. Long discussed, it is an exercise in meaninglessness. Countries like Germany have no military with which to fulfill the strategy, assuming that any agreement to act could be reached. NATO is a consensual organization, and a single member can block any mission. The divergent interests of an expanded NATO guarantee that someone will block everything. NATO is an illusion that comforts the Romanians, but only if they don’t look carefully. The Romanians seem to prefer the comforting illusion.

As for the European Union, there is a deep structural tension in the system. The main European economic power is Germany. It is also the world’s second-largest exporter. Its economy is built around exporting. For a country like Romania, economic development requires that it take advantage of its wage advantage. Lower wages allow developing countries to develop their economy through exports. But Europe is dominated by an export superpower. Unlike the postwar world, where the United States absorbed the imports of Germany and Japan without needing to compete with them, Germany remains an exporting country exporting into Romania and leaving precious little room for Romania to develop its economy.

At this stage of its development, Romania should be running a trade surplus, particularly with Germany, but it is not. In 2007, it exported about $40 billion worth of goods and imported about $70 billion. In 2009, it exported the same $40 billion but cut imports to only $54 billion (still a negative). Forty percent of its trade is with Germany, France and Italy, its major EU partners. But it is Germany where the major problem is. And this problem is compounded by the fact that a good part of Romania’s exports to Germany are from German-owned firms operating in Romania.

During the period of relative prosperity in Europe from 1991 to 2008, the structural reality of the EU was hidden under a rising tide. In 2008 the tide went out, revealing the structural reality. It is not clear when the tide of prosperity will come rolling back in. In the meantime, while the German economy is growing again, Romania’s is not. Because it exists in a system where the main engine is an exporter, and the exporter dominates the process of setting rules, it is difficult to see how Romania can take advantage of its greatest asset — a skilled workforce prepared to work for lower wages.

Add to this the regulatory question. Romania is a developing country. Europe’s regulations are drawn with a focus on the highly developed countries. The laws on employment guarantees mean that Europeans don’t hire workers, they adopt them. That means that entrepreneurship is difficult. Being an entrepreneur, as I well know, means making mistakes and recovering from them fast. Given the guarantees that every worker has in Europe, an entrepreneur cannot quickly recover from his mistakes. In Romania, the agility needed for risk-taking is not readily available under EU rules drawn up for a mature economy.

Romania should be a country of small entrepreneurs, and it is, but there is extensive evasion of Brussels’ — and Bucharest’s — regulations. It is a gray market that creates legal jeopardy and therefore corruption in the sector that Romania needs the most. Imagine if Germany had the regulations it champions today in 1955. Could it possibly have developed into what it is in 2010? There may be a time for these regulations (and that is debatable), but for Romania it is not now.

I met a Romanian entrepreneur who marketed industrial products. In talking to him, I raised the question of the various regulations governing his industry and how he handled them. There was no clear answer or, more precisely, I didn’t realize the answer he had given me until later. There are regulations and there are relationships. The latter mitigate the former. In Germany this might be called corruption. In Romania it is survival. A Romanian entrepreneur rigorously following EU regulations would rapidly go out of business. It may be that Romania is corrupt, but the regulatory structure of the EU imposed on a developing economy makes evasion the only rational strategy. And yet the entrepreneur I talked to was a champion of the European Union. He too hoped for the time when he could be a normal European. As Rousseau said, “I have seen these contradictions and they have not rebuffed me.”

It is difficult to for an outsider to see the specific benefits of NATO and EU membership for Romania. But for the Romanians, membership goes beyond the specifics.

Romania’s Choice

August and September are bad months in Europe. It is when wars and crises strike. August and September 2008 were bad months. That August, Russia struck Georgia. In September, the financial crisis burst wide open. In the first, Russia delivered a message to the region: This is what American guarantees are worth. In the European handling of the financial crisis in Eastern Europe, the Germans delivered a message on the limits of German responsibility. Both NATO and the European Union went from being guarantors of Romanian interests to being enormous question marks.

In my conversations with Romanians, at all levels and almost universally, I have found the same answer. First, there is no doubt that NATO and the European Union did not work in Romania’s favor at the moment. Second, there is no question of rethinking Romania’s commitment to either. There are those Romanians, particularly on the far right, who dislike the European Union in particular, but Romania has no strategic alternative.

As for the vast majority, they cannot and will not conceive of a Romania outside the confines of NATO and the European Union. The mere fact that neither is working well for Romania does not mean that they do not do something important: NATO and the European Union keep the anti-democratic demons of the Romanian soul at bay. Being part of Europe is not simply a matter of strategic or economic benefits. It represents a transitional point in Romanian history. With membership in the European Union and NATO, Romania has affirmed its modernity and its democratic institutions. These twin amulets have redeemed Romania’s soul. Given this, I suppose, an unfavorable trade balance and the absence of genuine security guarantees is a small price to pay. I am not Romanian, so I can’t feel their ineffable belief in Brussels.

Romanians do acknowledge, again almost universally, the return of Russia to the historical stage, and it worries them. Of particular concern is Moldova, a region to the east that was historically Romanian, taken by the Soviets in a treaty with Hitler and the rest of which was seized after World War II. Moldova became an independent country in 1991 (a country I will be visiting next). For much of the post-Cold War period it had a communist government that fell a few years ago. An election will be held on Nov. 28, and it appears that the communists might return. The feeling is that if the communists return this time, the Russians will return with them and, in the coming years, Russian troops will be on Romania’s borders.

Romanian officials are actively engaged in discussions with NATO officials about the Russians, but the Germans want a more active involvement of Russia in NATO and not tension between NATO and Russia. The Western Europeans are not about to be drawn into Eastern European paranoia fed by nostalgic American strategists wanting to relive the Cold War, as they think of it.

I raised two strategic alternatives with Romanian officials and the media. One was the Intermarium — an alliance, perhaps in NATO, perhaps not — of Poland, Slovakia, Hungary, Romania and Bulgaria. (To readers who asked why I did not go to Bulgaria on this trip, it was simply a matter of time. I will go there as soon as I can.) Very interestingly, one official pointed out substantial levels of cooperation on military planning between Hungary and Romania and discussions between Romania and Poland. How serious this is and whether it will go beyond the NATO context is unclear to me. Perhaps I can get a better sense in Warsaw.

But military planning is one thing; the wherewithal to execute military plans is quite another. The Romanians are now caught in a crisis over buying fighter planes. There are three choices: the Swedish Gripen, the Eurofighter and used American F-16s. The problem is that the Romanians don’t have the money for any of these aircraft, nor does it seem to me that these are the defense measures they really need. The Americans can provide air cover in a number of ways, and while 24 F-16s would have value, they would not solve Romania’s most pressing military problem. From where I sit, creating an effective mobile force to secure their eastern frontier is what is needed. The alternative I’ve heard was buying naval vessels to block a very real Russian naval buildup in the Black Sea. But if Romania has trouble buying 24 fighters, naval vessels are out of the question.

The Romanians are approaching defense planning from a NATO perspective — one used for planning, not implementation, and one that always leads to sophisticated systems while leaving the basics uncovered. This may seem like an unnecessary level of detail for this essay, but the Romanians are deep in this discussion, and questions like this are the critical details of strategies growing out of geopolitics. It is the difference between planning papers drawn up by think tanks and the ability to defend a nation.

The Black Sea is a critical part of Romania’s reality, and the rise of Turkey makes the system of relationships interesting. Turkey is Romania’s fourth-largest export target, and one of the few major trading partners that imports more from Romania than it exports. I pointed out to Romanians that it is the great good fortune of Turkey that it was not admitted to the European Union. Turkey’s economy grew by an annualized rate of 12 percent in the first quarter of 2010 and has been surging for years.

Turkey is becoming a regional economic engine and, unlike Germany, France and Italy, it offers compatibilities and synergies for Romania. In addition, Turkey is a serious military force and, while not seeking confrontation with Russia, it is not subservient to it. Turkey has adopted a “360 degree” strategy of engagement with all countries. And since Turkey is a NATO member, as are Hungary, Slovakia and Poland, there is no incompatibility with a dual strategy of the Intermarium and the Black Sea. For now, they fit. And the irony of Romania reaching out to the heir to the Ottomans is simply that and no more. This is the neighborhood that Romania inhabits. These are the options it has.

What doesn’t fit for Romania is the NATO/EU system alone. Perhaps this is part of a rational mix, but it cannot be all of it. For Romania, the problem is to move beyond the psychological comfort of Europe to a strategic and economic understanding that accepts that the post-Cold War world is over. More important, it would be a move toward accepting that Romania is free, responsible for its future and capable of managing it.

It is this last step that is the hardest for Romania and many of the former Soviet satellites — which were also bound up with World War I and Hitler’s disaster — to come to terms with. There is a connection between buying more expensive German cars than you can afford, and more of them than you need, and the novels of Herta Muller. The appointment can be permanently canceled, but the fear of the interrogation is always with you. In this region, the fear of the past dominates and oppresses while the confident, American-style military planning and economic restructuring I suggested is alien and frightening.

The Romanians emerged from a world of horror, some of it of their own making. They fear themselves perhaps more than they fear others. For them, becoming European is both a form of therapy and something that will restrain the demons within and without. When you live with bad memories, you live with the shadows of reality. For the Romanians, illusory solutions to haunting memories make a great deal of sense.

It makes sense until war comes, and in this part of the world, the coming of war has been the one certainty since before the Romans. It is only a question of when, with whom and what your own fate will be when it arrives. The Romanians believe with religious fervor that these things will be left behind if they become part of Europe. I am more skeptical. I had thought that Romania’s problem was that it was part of Europe, a weak power surrounded by stronger ones. They seem to believe that their solution is to be part of Europe, a weak power surrounded by stronger ones.

I leave Romania confused. The Romanians hear things that I am deaf to. It is even at a pitch my Hungarian part can’t hear. I leave now for another nation, Moldova, which has been even more exposed to history, one even stranger and more brutal than Romania’s

Friday, November 12, 2010

France wants to delay Schengen accession for Bulgaria and Romania



EUOBSERVER / BRUSSELS – France wants to delay a decision on allowing Romania and Bulgaria to join Europe's border-free Schengen zone at least until summer 2011 and is pressing for more results in the fight against corruption and a better surveillance of the border with Moldova.

"We have to be very vigilent" about enlarging the border-free area to Bulgaria and Romania "who hope to join in March," EU affairs minister Pierre Lellouche said Wednesday in the French parliament, as quoted by AFP.

He warned against an "automatic enlargement" and said that the technical evaluations, which so far have all been positive, are not enough. Naming the Netherlands as its other ally, the French minister said his country was pressing "to delay this decision at least until summer 2011," when the European Commission is set to present its annual report on the fight against corruption and organised crime in the two countries.

Mr Lellouche's comments will deal a blow to efforts by Bulgarian and Romanian officials to separate Schengen accession from the commission's continued monitoring of their justice reform and anti-corruption efforts.

When the two countries joined the EU, in 2007, persistent corruption and insufficient reforms of their jutice systems determined the set-up of an unprecedented monitoring mechanism, which so far led to the freezing of some €500 million in Bulgaria due to fraud associated with EU funds.

Mr Lellouche said the latest reports of the commission were "worrying", as they noted too little progress in the two countries.

Adding to the overall situation, the French minister also said he was concerned about the Romanian-Moldovan border "because of the distribution of Romanian passports outside their border" and the separatist conflict in Moldova's eastern region, Transnistria, a "black hole" as he described it, in reference to the organised crime gangs and trafficking in weapons, drugs and people eluding the Moldovan or Ukrainian state authority.

The level of corruption in neighbouring Ukraine is also a matter of concern to France.

These arguments are new, considering that so far, Paris had rather pressed for Romania and Bulgaria to "properly integrate" their Roma communities before joining Schengen, as the French authorities unleashed an unprecedented crack-down on Roma camps, linking them to a rise in criminality.

In a press briefing with foreign journalists in Sofia, Bulgarian interior minister Tsvetan Tsvetanov on Tuesday vowed to tackle "organised migration of Roma into EU countries."

Meanwhile, his Romanian counterpart, Constantin Igas, briefed a German-speaking audience in Brussels about the efforts undertaken by his government, despite the austerity measures, to boost security at the borders and meet all the standards for Schengen accession.

"After our EU membership in 2007, Schengen accession has become our number one priority," he said, adding that the government paid some €540,000, despite budget cuts, to improve the quality of border checks. EU funds amounting to some €500,000 were also used for the purpose.

Mr Igas admitted that Romania had "one of the longest and most difficult EU borders", over 2,000 km long, but insisted that all Schengen standards will be met by March next year.

As to corruption amongst border guards, he said the phenomenon was decreasing, as attested by the commission's reports.

EU officials familiar with the Schengen enlargement process say that if the remaining technical tests in November and December turn out positive, it will be "very hard" and even "unfair" not to let the two countries in.

A delay of a few months is possible, however, in order to signal that the process is not "automatic" and to put more pressure on the two capitals to clamp down on corruption and organised crime.

The decision has to be taken by unanimity of member states in the EU Council of Ministers, even though not all countries are part of the Schengen area, with Ireland, Great Britain and Cyprus being outside the zone.

Eastern diplomats point to the fact that new member states who joined the Schengen area in 2007 – ranging from the Baltic states to Hungary and Slovenia, "are more prepared" than some of the old member states. Greece for example, recently asked the EU to send some 200 guards to help with surveillance of its land border with Turkey, the point where most irregular migrants cross into the EU.

Romania to Finish Sales of State-Owned Utility Stakes in 2011, Ariton Says

By Andra Timu and Irina Savu - Nov 12, 2010

Romania plans to finish selling minority stakes in utilities Transgaz SA and Transelectrica SA next year as it raises money to finance the budget, Economy Minister Ion Ariton said.

The government wants to sell a 15 percent stake in its natural-gas transmission company, Transgaz, on the Bucharest Stock Exchange in the second half of next year after starting procedures in the first quarter, Ariton said in an e-mailed response to Bloomberg questions.

“In Transelectrica’s case, the sale procedures will be initiated by the end of this year and will be finalized in the middle of next year,” said Ariton.

Romania plans to sell minority holdings of its utilities and largest oil company OMV Petrom SA to meet international bailout conditions and cover infrastructure investments. The country is relying on a 20 billion-euro ($27 billion) loan led by the International Monetary Fund after the nation’s recession and austerity measures reduced budget revenue.

Romania may raise more than 2 billion euros from the energy-stake sales, former Economy Minister Adriean Videanu said on Aug. 19.

“The money from the sales will represent revenue for the state budget,” Ariton said.

The administration, which owns 20.6 percent of Petrom, plans to sell 9.84 percent of the company within six months to one year, said Tudor Serban, an adviser to the Economy Ministry, on Oct. 16. It will also seek to sell its minority stakes in the Romanian units of Enel SpA andE.ON AG to its majority owners, Ariton said.

Legal Adviser

The ministry is currently selecting a legal adviser for the sale of the Petrom stake before picking a brokerage to manage the sale on the Bucharest Stock Exchange, according to Ariton.

The government also aims to sell a majority stake in unprofitable Oltchim SA, a PVC maker. The sale is based on a proposal from the IMF.

Oltchim is awaiting approval from the European Commission to increase its share capital and convert debt worth 538 million lei ($171 million) into shares, which qualifies as state aid strictly regulated under European Union rules, according to the minister.

The company’s other creditors, including Erste Group AG’s Banca Comerciala Romana SA, the largest bank, may also be able to become shareholders in Oltchin, after converting debt into stakes, Ariton said.

A U.S. and a European investment fund are interested in becoming shareholders in Oltchim, Deputy Economy Minister Karoly Borbely said on Oct. 25.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

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

Romanian GDP Shrank Annual 2.5% in Third Quarter as Domestic Demand Falls

By Irina Savu - Nov 12, 2010

Romania’s economic decline accelerated in the third quarter as a tax increase and public payroll reductions damped consumer demand in the country of 22 million.

Gross domestic product fell a preliminary unadjusted 2.5 percent from a year earlier compared with a 0.5 percent decline in the second quarter, the National Statistics Institute in Bucharest said today in an e-mail. GDP contracted 0.7 percent from the previous three months, after the first quarterly growth since 2008 in the second quarter.

Romania, which took an International Monetary Fund-led bailout last year, will probably see output decline for a second year in 2010 because of austerity measures implemented in July to meet budget-deficit targets, IMF Mission Chief Jeffrey Franks said Nov. 1. The government raised the value-added tax by 5 percentage points and cut public wages by 25 percent to narrow the gap to 6.8 percent of GDP this year and 4.4 percent in 2011.

The IMF forecasts GDP may contract as much as 2 percent in 2010 because of weak consumer demand, after shrinking 7.1 percent last year. The economy may return to growth next year, when it is forecast to expand as much as 1.5 percent.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

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

Romania struggles with integration of Roma into society


The European Union asked Romania to step up its efforts in integrating its large Roma minority. But the government in Bucharest has proven unable to get EU aid to the communities that need it most.

Despite the smell of fresh paint, there is a pervasive stench of rotting garbage that litters the schoolyard at School No. 136, in Bucharest's Ferentari district. Starving stray dogs prowl around the building.

But School No. 136 is one of Ferentari's few success stories.

About 70 percent of the city's 90,000 inhabitants are Roma as are the majority of the 400 students at Scholl No. 136.

As the European governments struggle to deal with their Roma populations living in their countries, a similar struggle is playing out across Romania, which joined the EU in 2007.

A group of organizations that aim to improve the lives of Roma in Romania have begun an education program with School No. 136 and 90 other schools across Romania to support the process of integration between Roma and the rest of Romanian society.

"We are trying to provide a safe place for children off the street," said Valeriu Nicolae of the Policy Center for Roma and Minorities. "If they had the same, or better approach in every community, where children were happy to be in school, it would change the way these communities work."

The education program targets kids aged 10 to 15, predominantly Roma, who are currently exposed to high risk behavior like crime, drugs and prostitution. Most of the kids in the program are barely literate.

The aim is to keep these kids in school by providing opportunities like a football team, photography and film classes and peer mentoring. The club welcomes any kids from the ghetto who want to join.

Urgent need for improvement

Social inclusion in education cannot be ignored anymore, Nicolae said, adding that 40 percent of Roma are youth and that education needed to play a prominent role in breaking the cycle of poverty in Roma communities.

Of the 10 to 12 million Roma in Europe, an estimated 2 million live in Romania, making it the largest Roma population in one country.

The European Union has committed 17 million euros ($23.3 million) to a special fund for Roma education initiatives in several EU member states. But the projects have been slow to start in Romania.

Efforts to desegregate Roma and non-Roma education, a practice Romania had said it would abolish by 2010, are being supported by the Roma Centre for Social Intervention and Studies (CRISS). But it involves more than just combining classes, according to CRISS' Cezara David.

"The problem is not just that they are physically separated, it's also about the quality of education and teacher training in Roma schools," David told Deutsche Welle, adding that desegregating schools often results in "white flight," where non-Roma parents simply remove their children from mixed classes.

Just under 10 percent of Roma children complete secondary school while less than 1 percent complete a tertiary education. Teaching staff are hard to retain too, with over 50 percent of teachers in ghetto schools leaving every year.

European integration funding

But when it comes to funding the social integration of Roma, which EU member states have committed to by 2020, there is no shortage of cash. From 2007 until 2013, the European social fund offered 13 billion euros to help finance education and housing projects for Roma living in EU states participating in the Decade of Roma Inclusion, which began in 2005.

Presently, only a fraction of that money has been utilized by the member states. In Romania, 1 percent of the 2.25 billion euros made available by the European Social Fund has been implemented.

The low rate of absorption of the EU funds in Romania is due to a weak and inefficient civil service, as well as a lack of transparency, according to Oana Niculescu-Mizil, a member of Romanian parliament from the Ferentari District.

"It's a lack of political will," she told Deutsche Welle. "The government doesn't have experts. Even the agency for Roma is badly managed. The funds provide a lot of money which could be absorbed by Romania, but it doesn't come to Roma community. What can I say? The national strategy doesn't exist."

European Commissioner for Employment, Social Affairs and Inclusion Laszlo Andor agreed that infrastructure in Romania is weak.

"What we see in Romania and other countries is the consequences of ignorance of several decades," he said, adding that the poor are not benefiting from foreign aid.

"The role of the EU is about support and coordination, and we are ready to upgrade our efforts," he told Deutsche Welle. "But we've made it very clear the fundamental responsibility lies with member states where Roma are citizens. It's the obligation of the state to take care of people who live there."

But that's proving extremely difficult for the Romanian government. Integration projects - including the one operating at School 136 - are going bankrupt because it has not come up with the promised funds.

The closure of welfare programs like this is common in Romania, according to David Mark from the Roma Civic Alliance.

"Unfortunately this is a common story among organizations that are implementing social funds," he said. "If you are waiting for 10 months or over one year for reimbursements then how can you concentrate on problems on the ground? I think the bureaucratic overburdening of implementers is seriously affecting the impact these projects are going to have."

Author: Sasha Pavey

Editor: Sean Sinico

| www.dw-world.de | © Deutsche Welle.

Wednesday, November 10, 2010

Barroso tells Romania to speed up judicial reforms

Published: 09 November 2010

José Manuel Barroso, the European Commission president, has advised Romania to speed up efforts to reform its judiciary system and combat corruption if it wants to join the EU's border-free Schengen area. EurActiv Romaina reports.

When Romania and Bulgaria joined the EU on 1 January 2007, shortcomings remained regarding judicial reform and the fight against corruption. In the case of Bulgaria, problems also remained on the fight against organised crime.

A Cooperation and Verification Mechanism was set up to assist both countries on judiciary matters after their EU accession. Moreover, the European Commission retained the right to use special safeguards. These allow the EU to refuse to recognise court decisions or even freeze payments of EU funds.

However, since 1 January 2010, three years after Bulgaria and Romania joined the EU, Brussels no longer has the power to trigger the clause.

On 13 September EU countries decided to extend monitoring of Romania and Bulgaria for another year.

Speaking to the press following a meeting with Romanian President Traian Basescu in Bucharest yesterday (8 November), Barroso said there was no legal link between Romania's EU monitoring in judiciary matters and the country's Schengen accession (see 'Background').

However, Barroso recognised that "some countries" thought that there was "a certain link" between reforms in the judicial field and achieving Schengen membership.

"The Schengen area means trust. Romania needs to convince member states that it deserves to be there," Barroso said.

In August, French State Secretary for European Affairs Pierre Lellouche said Romania could not be allowed to join the borderless Schengen area if it did nothing for the social inclusion of Roma.

A month later, Lellouche added: "It is not only the view of France. I think the implicit link made by all governments is that from the moment when the conditions required by the control mechanism are not fully met, a number of things are not feasible, including [the two countries] controlling the EU's external borders. Nobody opposed this view," Lellouche said in response to a question from EurActiv.

The Netherlands also insists that any decision regarding Romania and Bulgaria's Schengen accession should be related to their performance under the EU's Cooperation and Verification Mechanism on judiciary reforms, EurActiv Romania writes.

Barroso said Commission experts would be in Romania next week to assess the country's progress.

Romanian President Traian Basescu said he was aware that the EU's decision to allow Romania into the Schengen area must be taken by unanimity, meaning that every country would have veto powers.

However, he insisted that the criteria for joining the EU border-free area were purely technical, and that Romania had fulfilled those criteria.

'Timely' signature of border treaty

Barroso welcomed the signature of a border treaty with Moldova, which took place the same day in Bucharest.

The document was signed a few weeks before 28 November's parliamentary elections in Moldova, a country that partly shares the same language and history as Romania.

Barroso called it a "demonstration that Moldova is getting closer to the European Union".

Romanian Foreign Minister Teodor Baconschi said that by signing the treaty, the two countries hoped to "discourage the obsessive allegations of some political circles in Moldova" concerning "an imaginary irredentist agenda of Romania". Moldova was part of Romania until 1940, when it was annexed by the Soviet Union.

The signature of the border treaty is also timely in view of Romania's ambitions to join Schengen in March 2011. Indeed, the border of Romania with Moldova, a former Soviet Republic, will become the external border of the European Union.

Romanian Inflation Quickens to 7.9% as VAT Boosts Prices for Fourth Month

Romania’s inflation rate rose for a fourth consecutive month in October as the lingering effects of a 5 percentage-point increase in the value-added tax pushed prices higher throughout the economy.

The rate advanced to 7.9 percent, the highest since August 2008, from 7.8 percent in September, the Bucharest-based National Statistics Institute said today in an e-mail. On the month, prices advanced 0.55 percent.

Romania raised VAT to 24 percent in July to meet a budget deficit target of 6.8 percent of gross domestic product for this year and 4.4 percent for 2011. The country turned to the International Monetary Fund and the European Union for a 20 billion-euro ($27.6 billion) bailout during the worst recession in 20 years.

The central bank on Nov. 4 raised its inflation forecast to 8.2 percent for this year and 3.4 percent for 2011. That compares with August estimates of 7.8 percent and 3.1 percent.

Food price inflation accelerated to an annual 5.5 percent in October compared with 4.8 percent in September, the institute said. Prices for services rose an annual 6.1 percent, compared with 6.4 percent in September, and non-food prices gained 10.6 percent, compared with 10.7 percent the previous month.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

Romania's Transgaz 9-month net profit up 50 pct

BUCHAREST Nov 10 (Reuters) - Romania's state-owned gas pipeline operator Transgaz (TGNM.BX: Quote) said on Wednesday its nine-month net profit rose 50 percent, within market expectations.

The company reported a net profit of 284 million lei ($92.24 million), versus an average estimate of 286 million lei in a Reuters poll. It compares with net profit of 189 million lei in the same period of last year. (Reporting by Ioana Patran; Editing by Erica Billingham)

Monday, November 8, 2010

Thousands gather for funeral of Romanian poet


BUCHAREST, Romania (AP) 11/7/2010

Thousands of Romanians gathered Sunday for the funeral of Adrian Paunescu, one of the country's most famous poets whose verse struck a chord despite odes he wrote to late Communist dictator Nicolae Ceausescu.

Paunescu died Friday of multiple organ failure aged 67, and the nation immediately went into mourning for the larger-than-life poet. He was buried with military honors , as television stations covered the hours-long ceremony live.

"God loved the Romanian people so much that he gave us this volcano of a man ... who was born for poetry that flowed from his brilliant mind," said Corneliu Vadim Tudor, a nationalist politician, writer and friend of Paunescu.

Carrying flowers and beeswax candles, thousands of mourners gathered hours ahead of his funeral at the Bellu Cemetery in south Bucharest where he was buried next to another famous Romanian man of letters, the 19th-century poet Mihai Eminescu.

Paunescu was born in Moldova when that country was part of the Soviet Union and moved to Romania when he was a child. Many Moldovans came to his funeral.

Romanians chose not to dwell on the odes Paunescu wrote about Ceausescu, the late Romanian dictator who was executed during the bloody anti-communist revolt in 1989, when where more than 1,000 people were killed.

Mourners recalled his poetry, acts of generosity toward ordinary people, and Flacara, the liveliest magazine under communism when censorship was strict.

Former Premier Adrian Nastase called for a day of mourning. President Traian Basescu said he admired Paunescu's poetry but not his left-wing politics.

"He was a great hero of this country," said 46-year-old nurse Alis Turtulea. "God spoke to Romanians through him."

Friday, November 5, 2010

The new Romans

October 28, 2010

By Eric Reguly
From Friday's Globe and Mail

A place whose gold made Rome glorious faces new invaders-a cohort of Canadian miners. And it looks like all the red tape and celebrity flak will soon be worth it for Gabriel Resources' own dream of gilded glory

Estera Szekely is miserable.

Sturdily built, wearing a pretty blue and yellow dress and her hair gathered in a tight bun, she has spent her entire 60 years here in Rosia Montana, a tattered Transylvanian mountain village that hasn't seen any wealth since the local gold mines shut down. For the past 33 years, she has lived in a large, yellow stucco house on the village's main square, where she and her husband, Oliver, a carpenter, raised three sons.

Oliver died last year. His cluttered workshop on the house's ground floor remains untouched. His widow has found little solace in her family. Her brother is barely talking to her, and her daughter-in-law, who lives upstairs, is frosty as well.

The reason for Szekely's sadness and loneliness lies just across the square. She points to the offices of Rosia Montana Gold Corp., known simply as "Gold" among the locals. It is 80.5% owned by Gabriel Resources, a Toronto-based public company that plans to spend $1 billion to develop Europe's biggest gold mine, which would surround the village, turning it into an island in a sea of rubble (all currency in U.S. dollars unless otherwise noted).

Gabriel has already bought out many of the properties in Rosia Montana to make way for the mine. Szekely doesn't want to leave the only place she knows-the area is like a lush version of Tuscany, minus the millionaires' villas and postcard-perfect towns-and is refusing to hand over the keys at any price. Her brother and daughter-in-law support the Canadians. Both work for the gold company: he at a local charity it created, she in its environmental office.

Szekely says the tension between the residents who want to sell their properties to Gabriel and those who don't is unbearable. "It was a happy village," she says through an interpreter. "But now it's hard to speak openly about whether you are for or against this project. It kills you psychologically.

"My husband asked me not to sell the house-he's buried here and I am not going to open his grave," Szekely says, starting to weep. "He was a good, good man."

This is the face of gold fever, a compulsion to develop the planet's dwindling reserves that is so intense that mining companies find practically no obstacle to mine development to be insurmountable. The value of this precious metal may at bottom be more notional than practical, but here, as in places all over the world, the lust for more of the stuff requires drastic measures like uprooting an ancient town.

The ore at Rosia Montana is not even rich-now that the onetime Roman mining site has been tapped for two millenniums, only flecks remain, albeit in vast quantities. Yet with the price of gold seemingly ever-rising, flecks is all it takes to drive junior companies to develop new plays, and major companies to keep watch with their takeover wallets at the ready.

The fate of Rosia Montana is not yet sealed. Gabriel has waged a marathon battle against a variety of opponents to develop its mine-and it now believes it's finally on the verge of winning. The struggle plays like an epic, spanning decades and featuring a dazzling international cast: starring roles for a colourful Canadian dynasty, a murderous despot and a mining developer with a seedy past; supporting roles for gold titans Barrick and Newmont and for three billionaire investors; and cameos by George Soros, Vanessa Redgrave and none other than Dracula himself.

On a July day, it is 30 degrees and sticky here in the Apuseni Mountains of Transylvania, some 400 kilometres northwest of the Romanian capital of Bucharest. The blast of cold air that comes when Valentin Rusu heaves open the steel doors to the mine shafts of Alburnus Maior comes as a relief.

The lanky guide, himself a former miner, leads the way down 157 slippery steps to a narrow, dimly lit corridor, where he points out the contours of the distinctive trapezoid "galleries" employed by the miners of ancient Rome.

Rusu then points to chisel marks on the wall and the niches that held the galleries' tiny oil lamps. The remains of wooden wheels used to pump water from the galleries can be found in the dangerous, off-limits parts of the mine. In total, about seven kilometres of Roman mining galleries remain, scattered throughout the valley and mountains in and around Rosia Montana (Red Mountain), the Romanian name for Alburnus Maior.

When Rome added Dacia-roughly what is now Romania-to its far-flung collection of exotic real estate, it gained one of its most dependable, long-term supplies of wealth. The seizure of the Dacian gold deposits in early second-century AD was considered such a coup that Emperor Trajan ordered 123 days of celebrations. The gold helped to finance a public construction spree in Rome that included Trajan's Column, the 30-metre-tall marble pillar that celebrates the Dacian conquest.

Almost 2,000 years later, the gold seekers come from Canada. The most ambitious of them is Gabriel, a Toronto Stock Exchange-listed company that wants to turn Rosia Montana into a new El Dorado.

Historians believe that Transylvania produced 55 million ounces of gold between the Dacian era and the mid-1990s, when the last of the latter-day mines started shutting down. Those mines were inefficient, toxin-spewing wrecks: They had been starved of investment during the Communist era, surviving on an intravenous drip of subsidies. The conditions attached to Romania's entry to the European Union required their closure.

But, for all that mining, Transylvania still has the biggest-known undeveloped gold reserves in Europe and one of the top three reserves globally. Geologists figure that the central Transylvanian area known to the new cohort of miners as the Golden Quadrilateral contains 30 million to 40 million ounces of gold-and additional drilling could find more. At current prices of about $1,300 an ounce, the gold has a market value of $39 billion to $52 billion. (Thirty million ounces is more than 20 times last year's output from Nevada's Goldstrike, the biggest property in the portfolio of the world's biggest gold miner, Barrick.)

The goal of Gabriel and its rivals is to extract the stuff over the next 20 years or so-in other words, those 30 million to 40 million ounces would come out of the ground in 1% of the time it took to scrape out the first 55 million ounces.

If the local picture is fraught thanks to resistance and red tape, the big picture makes Rosia Montana sparkle. Gold in the ground is a slowly vanishing resource, and the chase is on to lock up the last known major reserves. The World Gold Council says annual production has yet to top the peak it hit in 2001. That's in spite of the inspiration of price rises: Big gold discoveries (like big oil discoveries) are increasingly rare. The planet's total known gold reserves are in decline, as production, driven by the need to provide quick investment returns to impatient shareholders, outstrips reserve replacement. An estimated 65% of the gold mined since ancient times has been produced since 1950.

To the new wave of miners, Transylvania, at least on paper, seems a gift: vast reserves in a politically stable, fairly low-cost European country with a long tradition of mining, an educated workforce and a supply of skilled-and out-of-work-miners. But for Gabriel in particular, that's where the good news ends.

The first Canadian to be seized by the dream of developing Rosia Montana was the son of one of Canada's most colourful businessmen, uranium titan Stephen B. Roman.

In 1983, five years before his death, Roman and son Stephen G. were scouting for business opportunities in Romania. The country's Communist dictator, Nicolae Ceausescu, asked the Canadian duo to help develop his country's uranium and coal assets. He also asked them to lobby the Canadian government to speed up the development of the country's Canadian-designed Candu nuclear reactor.

Both the reactor and the dictator came to a sticky end. The reactor went vastly overbudget and became one of the biggest blots on the history of the star-crossed Candu export program. Ceausescu, who had driven the country to economic ruin and starvation, was executed along with his wife in the Romanian Revolution in 1989.

But unlike the uranium and coal prospects, the idea of a new period of Roman gold mining, so to speak, had life in it.

The younger Roman inherited his father's penchant for exotic mining and energy plays and, as of the mid-1990s, was dabbling in projects from Chile to Turkey. Accordingly, a mining finance colleague of Roman's in Toronto, Gerald (Tim) Wood, figured that it would be a good idea to introduce Roman to Frank Timis, a fast-talking, foul-mouthed Romanian entrepreneur.

Timis, by his own account, had been a refugee from the brutal Ceausescu regime. He landed in Toronto after a stint in Australia, where he had dabbled in gold plays and picked up three fines for heroin possession.

Timis told Roman that the gold mining licences in and around Rosia Montana had been transferred to his Rosia Montana Gold Corp. by a state-owned company in the mid-1990s. It was the sort of giveaway that became typical after Europe's Communist regimes collapsed: The post-Ceausescu government, which couldn't afford to keep the subsidized mines going, gave them up, along with nearby exploration properties, without realizing their development potential. Timis suspected that Rosia Montana hid more gold than anyone realized, and touted the area to Roman and Wood. "We were the first foreigners to bring drilling rigs into the country, post-Ceausescu, and we explored," Roman remembers. "The [projected] ounces kept climbing."

So it was time to raise financing. To speed up the process, Timis took a publicly listed, but idle, Yukon shell company and recast it as Gabriel Resources. As of the late 1990s, Gabriel became the legal owner of about 80% of Timis's Rosia Montana Gold Corp. Romania's state-owned mining company, Minvest, kept most of the rest, giving it a window into the new Transylvanian gold rush. About $5 million was raised for Gabriel privately; Timis was named the company's first chairman and chief executive officer, while Roman became vice-chairman.

Optimism about its founding project ran high at Gabriel. But the Romanian press had a field day after discovering that the core of Europe's biggest undeveloped gold play had fallen into the hands of a drug offender. Press accounts claimed the government had handed Timis the mining rights for an outrageously low $3 million. (In the notoriously opaque Romanian resources development industry, the figure is impossible to verify.)

Annoying as the media's focus was, a bigger obstacle was environmental opposition from the "Rosia Rebels," one name for the loose coalition of local and international opponents of the mine that jelled as the 2000s progressed.

In 2000, the tailings dam of an Australian-Romanian gold-recovery company in northern Romania overflowed, disgorging an estimated 100,000 cubic metres of cyanide-laced water. According to the BBC and other media, the cyanide polluted the drinking water of 2.5 million people in Romania and Hungary, and destroyed more than 1,200 tonnes of fish. There were no known human fatalities, but the accident contributed to the pan-European drive to outlaw the use of cyanide in gold mining. (The European Union Parliament recently proposed a ban, but the overarching European Commission has rejected it.)

It was an untoward development for Gabriel. Because the Romans mined out the rich seams, the reserves at Rosia Montana are relatively low-grade. Huge amounts of ore would have to be processed-with cyanide-to yield decent output. Forget unobtrusive underground mining; two mountainsides would have to be blown up to create huge open-pit mines, which would be exploited alongside two existing pits. The nearby Corna Valley would be filled with the mines' waste rock and cyanide-laced sludge. Covering nearly 300 hectares, the pond, supported by a dam that would rise from its initial height of 70 metres to 180 metres-one-third the height of Toronto's CN Tower-would eventually hold 215 million tonnes of waste.

The company has spent more than 10 years and about $400 million trying to put its plan into action. Gabriel has determined that its properties at Rosia Montana contain 10.1 million ounces of reserves-the amount it knows it can extract. It believes another 4.6 million ounces are in the ground (along with 47.6 million ounces of silver, which the company also aims to mine). The plan is to produce an average 500,000 ounces of gold a year for 16 years.

Gabriel vows to preserve and restore Rosia Montana's small historic centre and some of the Roman mining galleries; to that end, it has already opened a small mining museum. The company says about 2,000 people in and near Rosia Montana have to be relocated, an effort that is 75% completed, leaving the village with about 500 people.

The hitch is the refuseniks and their supporters, who believe Rosia Montana will become an environmental wasteland after Gabriel extracts its last ounce of gold. They are skeptical, too, of the direct job-creation figures cited by the company-about 2,300 during the two-year construction phase and 880 during the mining phase-noting that automation is turning mining everywhere into a low-employment industry; likewise, they doubt Gabriel's promises to protect Rosia Montana's heritage.

At the time of the northern Romania spill, Gabriel was in the early days of negotiating to buy the houses of Rosia Montana residents. Farmer Eugen David remembers the period well. "When they presented the project," he recalls, "they said: 'For the project to happen, you have to leave.'"

David didn't take kindly to that proposition and was inspired to help found an activist group which, with a nod to the Romans, named itself Alburnus Maior. It was ineffective at first, because the subsistence farmers who formed its core knew little about campaigning. That changed in 2002, when they met Stephanie Danielle Roth, a Swiss-French environmental activist.

Roth was in Transylvania only because she was in the midst of a successful campaign to block the construction of Dracula Land, a theme park that was to include a golf course and several hotels. The project would have destroyed an oak forest reserve next to the Sighisoara citadel, which is said to have been associated with Transylvania's most famous son.

Between 30 and 60 permits are required before a mine can be constructed in Romania, covering everything from the right to remove forests and cemeteries to the right to construct dams and effluent discharge systems. Roth helped devise a strategy of challenging any document issued by agencies reviewing Gabriel's project that she and her fellow campaigners considered "irregular." The goal was to ensure the documents were consistent with Romanian and European Union mining, environmental and heritage laws, and to insist on the public dissemination of any documents that the government attempted to keep secret. The Rosia Rebels and their lawyers argued that many of the relevant documents were faulty, because of the information they omitted or because they were "the result of subjective pressures rather than of proper objective assessment." In a recent interview, Roth said that "If the laws are applied properly, this project will never go ahead."

Roth's words evoke eternity, but the battle had not been on long when Gabriel's principals got discouraged. By 2002, their dream of a Transylvanian El Dorado was turning into a nightmare, and the environmental heat was not the only reason. The flak over Timis's drug arrests was coming not just from the media, but from stock market regulators as well. Meanwhile, the Romanian government showed little interest in supporting the project, in spite of the 80% unemployment rate in Rosia Montana. The World Bank, which had a major role in the beleaguered country's affairs, wasn't any help either. In October, 2002, the Bank's private financing arm, International Finance Corp.-mandated to help finance risky projects in poor countries-rejected Gabriel's request for project funding. The IFC was scared off by environmental and social concerns, according to some media reports. But the IFC, in a statement made in July for this story, said it bailed "in light of indications from Gabriel Resources that there was available commercial funding for the project."

Realizing it needed to present a new face to regulators, investors and the Romanian government, Gabriel brought in a slate of new executives and directors. It was the sort of clean-out that would happen with alarming regularity throughout the decade-the company has had no fewer than six CEOs since its launch-as the Rosia Montana project lurched from one setback to another. Roman stepped down in 2002 and no longer has any association with Gabriel. Timis left in 2003. "Because of the heavy and stressful situation, I sold my 14% shareholding in Gabriel," he told a Romanian magazine. (Timis, who is now promoting oil and iron plays from London, was not available for an interview.)

The environmental backlash only grew as the company forged on. One powerful name invoked by Gabriel's opponents was George Soros, the Hungarian-born hedge-fund billionaire whose network of philanthropic foundations includes the Soros Foundation Romania. Haunted by the cyanide spill in 2000 that had polluted the Danube, Hungarians in general opposed the Rosia Montana project, and Soros, or at least his philanthropic arm, was no exception. His Romanian foundation hounded Gabriel and the Romanian government departments and agencies involved in the mine's review and permitting process. It urged them to respect the rule of law, ensure the process was transparent and, in the words of a statement of Soros's, "meet the legitimate demands of opponents to the mine."

Thanks to the publicity generated by Soros's foundation and Roth, funding for Alburnus Maior flowed in. In 2005, Roth was a recipient of the high-profile Goldman Environmental Prize for her campaign to stop Gabriel, which she had called a "modern-day vampire." Roth donated two-thirds of the $150,000 prize to the anti-Gabriel movement, keeping the Rosia Rebels (and their lawyers) well funded.

Things just kept getting better for the Rebels. In 2005, a documentary, New El Dorado, which went on to win several awards, presented Rosia Montana's gold as a curse, not an asset. A year later, actress Vanessa Redgrave, picking up an award at the International Transylvania Film Festival-sponsored in part by Gabriel-spoke out against the mine. "Our planet is dying and we have no right to destroy the ecosystem," she said.

Redgrave dedicated her lifetime achievement award to Alburnus Maior. This prompted Gabriel to take out an ad defending itself in The Guardian, to which Redgrave replied: "I am amazed that they should be so desperate...as to put in an advert criticizing me, but it's for their shareholders back in Canada." Gabriel also fired back at its opponents by financing its own film, Mine Your Own Business, which was released in 2007.

As the rhetorical volleys went back and forth, Gabriel did gain an important backer: Newmont Mining, the U.S. gold mining giant, invested in Gabriel in 2004. The move signalled that Newmont was a potential buyer of the whole company-the oft-preferred exit strategy of mining juniors.

In 2007, Soros told Newmont to tread lightly. According to Gabriel's website, he wrote to Newmont's CEO, "I feel it is my duty to advise you to consider carefully any further involvement with Gabriel Resources and the Rosia Montana project."

Despite all the vocal opposition and the labyrinthine bureaucratic process, Gabriel's executives at the time, led by CEO Alan Hill, were convinced that the mine was on the verge of approval. They continued to raise a small fortune on the stock market to pay for technical, environmental and archeological studies, to purchase the villagers' houses and land and to fund the relocation of graves. By 2007, Gabriel had hit the three-quarter mark in its drive to buy up properties in the area, "demonstrating strong local support for the project," in the words of a company document issued this year.

The company was also emboldened by legal setbacks it had delivered to the Rosia Rebels and its submission of a technically sophisticated environmental impact assessment that, it felt, addressed every one of the Romanian government's concerns. In early 2007, Gabriel had pleased investors with the prediction that the mine construction permits would land that winter. "We estimate that it will take approximately two years to construct the mine, putting the first pour-of-gold target date in fall 2009," it stated confidently in a press release.

Those bold hopes were put on hold in September, 2007, when the Romanian environment minister suspended the environmental impact review that Gabriel had so much confidence it had finessed. And he gave no indication when it might be restarted. CEO Hill accused the minister of "total disregard for the rule of law in Romania."

The project was pretty much dead. Gabriel stopped buying houses in the village. The company's shares went into free fall even as gold prices were rising, turning a company worth about $1.5 billion (Canadian) at the start of 2007 into one worth a fifth of that in 2008.

Over the years, Gabriel had raised and spent $400 million, with absolutely nothing to show for it. Europe's richest gold seam was effectively valueless.

How could Gabriel have miscalculated so spectacularly? The latest Gabriel boss, a 44-year-old Irishman with a degree in zoology named Jonathan Henry, says Gabriel should have put more emphasis on the non-technical aspects of the mine: the jobs, the promised cleanup of the suppurating Communist-era mines, the restoration of key archeological features, and the new houses in a development at Alba Iulia for everyone who sold their Rosia Montana homes (many of which are in deplorable condition). "It was a very strong project technically, but there was no point building the world's best gold mine if the local population doesn't realize the benefits of it," Henry says.

Stephen Roman's view is that Gabriel got greedy after his departure and went too big too fast, proposing a mine that stunned local residents with its sheer, destructive size. "All [Gabriel] saw was the dollars," he said. "They should have started with a small operation and added on to it as they gained the trust and confidence of the residents."

The enemies of the project would not savour their victory for long, however. While post-Ceausescu reforms had brought a measure of prosperity to Romania, it had been tenuous progress. And the year after the project's meltdown, Romania was hit hard by the global financial crisis, setting wheels in motion in the other direction for Rosia Montana.

Last December, Romanian president Traian Basescu and his centre-right Democratic Liberal Party formed a new government, one eager for foreign investment. At about the same time, Gabriel shares began to rise. They doubled from their 2009 low, then almost doubled again before the year was out. But why?

Certainly gold's seemingly unstoppable climb helped: The price has doubled since the start of 2007, when it was about $600 a ounce. So did the arrival of some new, high-profile billionaire investors-a sign of confidence in the Canadian company. At various points in the last few years, Thomas Kaplan's Electrum Group, John Paulson's Paulson & Co. and Beny Steinmetz's BSG Capital Markets made purchases of Gabriel shares at attractive prices. By the end of the year, the trio collectively owned almost half of Gabriel's shares, effectively making the Canadian company the plaything of wealthy foreigners. Each of the men-all famously aggressive investors-was bullish on gold as a store of value during economic turmoil and as protection against inflation.

Shortly after the new government took office in late 2009, economy minister Adriean Videanu declared, "I want this project [Rosia Montana] to start as soon as possible." The finance minister made similar noises. After all, Romania was in crisis. It had negotiated a ¤20-billion bailout package from the International Monetary Fund and the European Union to repair its battered finances, and was keen to attract foreign investment to create jobs and make its economy more competitive. At Rosia Montana, it was presented with a project that Gabriel had claimed would generate $4 billion-plus for the Romanian economy in the form of taxes, royalties, contracts to suppliers and the like during the 16-year life of the mine.

CEO Henry credits the apparent turnaround in government sentiment to a determined, behind-the-scenes lobbying effort by Gabriel executives. "This project is not as much a political football as it used to be," he says. "We've come a long, long way in the last two years. You are seeing public statements from senior officials who are in favour of the project."

Another factor may be at work-the Gabriel billionaires. Henry describes them as "passive investors." But he also hints the big boys are not completely idle. "I would hope that they all have good contacts with the Romanian government and are types that could open doors for us," he says. "But we are not aware of this."

A gold mining CEO, who did not want to be identified, says he has no doubt the billionaires, especially Steinmetz, an Israeli mining magnate who is one of the world's biggest suppliers of rough and polished diamonds, are promoting the Gabriel project in Romania, though he too stresses he is not aware of any specific lobbying efforts. "Beny doesn't go into any situation where he doesn't win," says the CEO, who is not involved in Romania. "He makes problems go away. He gets things done." (Steinmetz was not available for comment.)

By this summer, morale among Gabriel executives was high. Senior Romanian government officials continued to make encouraging comments about the mine, as did the country's environment minister. "I would be extremely disappointed if we don't see a restart of the environmental review process by the end of the year," Henry said in mid-July.

He was right. On Sept. 17, Gabriel announced that a Romanian government technical committee would reopen the environmental permitting review process. While Gabriel was careful not to promote the news as a major victory, nor to dare predict how long the crucial review would take, shareholders seized on the rare bit of good news and pushed up the shares 20%.

High morale notwithstanding, Gabriel may be underestimating the resolve of the Rosia Rebels.

The rebels can be roughly split into three groups. The first is outsiders, mostly preservation and environmental groups, among them Greenpeace and MiningWatch Canada. The second is elderly Rosia residents, like Estera Szekely, who vow to die where they were born. Largely self-sufficient, they wouldn't know what to do with the ¤50,000 to ¤100,000 they would receive for their properties. They don't want new houses elsewhere.

The third group is what worries Gabriel the most. It is made up of younger Rosia Montana residents, most of them farmers like Eugen David, some the owners of small businesses. Property buyouts, outward migration and deaths have thinned their ranks from about 800 a few years ago to perhaps 100 today. But what they lack in numbers they make up for in determination. They insist they will use any measure, from unrelenting legal challenges to kneeling in front of the bulldozers, to protect their land. They think Rosia Montana should be developing sustainable industries, like agriculture and tourism, not one that requires the destruction of towns and valleys, churches and cemeteries.

Devian Petru, 54, a retired mechanic who sports two gold teeth, refuses to sell his house "because we don't want to destroy our roots, because of the pollution and because [the mine] will wreck the area." But the decision comes at a cost. He feels increasingly isolated from the community. "My neighbour supports the project and we don't talk to each other any more," he says. He knows of a family that got ripped apart because two of three brothers wanted to sell to Gabriel against the third's wishes.

Although Gabriel's key concern is the relatively young residents, younger people in Rosia Montana are, on the whole, in favour of the project. Mostly jobless, many of them spend their days drinking cheap beer or plum liquor. Gabriel has already hired a few of them, including Christian Gruber, who works as a computer technician. The rending of the village's social fabric by the buyouts has left him with mixed emotions about working for Gabriel. "But I have to live," he says-he's happy for the income.

His brother Andrei runs one of the few businesses still operating in Rosia Montana, a tidy, two-bedroom hostel called La Gruber. He is dead set against the project. He and Christian live in the same house. If Gabriel gets its way, he will lose his business. If it doesn't, his brother will lose his job.

Gabriel CEO Henry thinks the holdouts' concerns are massively overblown. The mine, he says, will be a technological marvel whose waste cyanide levels will be well below tight European Union standards. (Such facts, however, may have less influence on opinions than a horrific tailings spill from a Hungarian aluminum plant that hit the Danube watershed in October.) If Gabriel leaves, Henry says, the local archeological heritage will crumble to dust because no one else can offer restoration funds. "We're reaching out to the hearts and minds of the local population and it's working," he says. "Our detractors are the NGOs [non-governmental organizations]. Some are against the project just because they are against the project. They have been very clever in suing the government. We do not underestimate them."

Indeed, Henry knows Gabriel's next battle will be a tough one. He has opened three gold mines in his career-in Malaysia, Indonesia and Burkina Faso-but "this is all of the challenges I've ever had rolled into one, plus more." Henry thinks continued education about the merits of the mine will win out, allowing Gabriel to mop up the property owners who have refused to sell. But what if they hold fast? "We want to find a proper solution for each family," he says.

But Eugen David says there is no solution for Gabriel if any of his band cannot be persuaded. "If people don't sell, the project cannot start," he says. "They will have to come here with arms and bulldozers to get us out."

Gabriel does believe it has a nuclear option. "The law of this country allows for expropriation, but it's the last thing we want to do," Henry says.

While executives at Gabriel anticipate a breakthrough in their long slog to production, two other Canadian miners that came on the Romanian scene more recently-Carpathian Gold and European Goldfields-have barely ruffled political or environmental feathers as they move closer to their mine openings.

"This is the second- or third-largest undeveloped gold deposit in the world," says Randall Ruff, Carpathian's exploration executive vice-president, at the company's Rovina Valley gold/copper exploration site, about 20 kilometres southwest of Rosia Montana. "We are witnessing a renaissance of mining in Transylvania."

Ruff points to some core samples. They contain bits of gold, most of which are so small as to be invisible. Using an eyepiece, Ruff finds a speck large enough to be visible to the naked eye. It glints in the noonday sun, and he smiles. "This region will be producing one million ounces of gold a year between the three Canadian gold companies," he says.

Ruff is referring to Carpathian and its two larger rivals, European Goldfields and Gabriel, each of whose shares trade on the Toronto Stock Exchange. Together the trio dominates Europe's biggest undeveloped gold reserves. But it's an open question whether the three will survive as independent players-if they even want to-and whether the Canadian-headquartered content will go undiluted. As the ore bodies come closer to development, they will inevitably attract the attention of the industry heavyweights, all of which have voracious appetites for new reserves and production. Indeed, Gabriel has already been sized up by Toronto's Barrick Gold, and the stake held by Newmont Mining, Barrick's main rival, stands at about 15%.

Little Carpathian, with a stock market value of about $170 million (Canadian), is near the end of an ambitious exploration program and is applying for a mining licence. It expects its first gold "pour" from its planned mine, whose development cost is estimated at $530 million, in about three years. European Goldfields, valued at $2 billion (Canadian), is well on its way to producing gold from its Certej deposit, which contains 2.4 million ounces of reserves and, like Gabriel's project, will require the use of cyanide leaching; it is in the final stages of the permitting process and expects production to start in early 2013.

The uncertainty about the launch of Gabriel's mine helps to explain why its market value has, until recently, routinely been smaller than European Goldfields', even though the two companies have roughly similar overall reserves. At about $2 billion (Canadian) each, the two companies' market values evened up in the early autumn, after Gabriel's environmental review announcement.

Some mining executives think Gabriel might be snapped up the moment it receives its construction permits. The same could happen to Carpathian and European Goldfields.

Peter Munk, Barrick's founder and chairman, downplays his company's desire to make a splash in Romania, even though his company is a partner in Transylvania with a small mineral exploration company, Valhalla Resources. But he agrees that the Canadian trio and other companies contemplating mine openings may not last long once the permits land.

Noting the financing and technological challenges of creating new mines, Munk says, "These companies will be incorporated at some point into larger-producing gold companies, the ones that are well-financed and have relationships with international financial institutions."

Ruff, of Carpathian, does a quick calculation on the profit potential of the region. Assume, he says, that the cash production costs per ounce are $500. Add $150 per ounce for the capital costs, mainly the mine construction. That takes the total cost figure to about $650 an ounce. A few years ago, the price would have made Romanian gold uneconomic. But gold prices have now soared to about $1,300. The difference between the total cost and the current gold price-about $650 an ounce-is the raw profit. Multiply that by the 30 million ounces in the ground, and you come up with a theoretical pretax, pre-royalty profit of about $20 billion.

But that itself is not the gold rush that the three billionaire investors in Gabriel are likely to be excited about. None of the three, who collectively own almost half of Gabriel, is likely to stick around for the long term: Hedge funds, by definition, are quick-buck artists. One top gold executive who knows the three billionaires' operating style says all the trio cares about "is that Gabriel gets its permits."

When it does, he says, Gabriel's market value will soar, and the billionaires probably will want to cash out and move on to the next kill. On the other end of the transactions will be the gold companies caught up in a wave of consolidation frenzy: According to data compiled for this year by Bloomberg, 290 gold deals worth $38.4 billion had been announced by September.

Driving takeover mania is the general belief that gold prices are just as likely to rise as fall in spite of 10 straight years of gains, and the relative scarcity of discoveries; global gold production has been in decline. Gold companies that need to replace reserves are taking the easy way out and buying rival companies instead, even if the price tag is high. Oddly, that could change if the gold price keeps rising: At a certain price, gold companies may decide to develop reserves instead of buying competitors, a shift that would take the froth out of the buyout market.

Barrick and Newmont are not the only potential buyers of the Romanian mines. Aggressive, second-tier players, among them Kinross, Goldcorp, Yamana Gold and Agnico-Eagle Mines, all of them based in Canada and all eager to grow quickly through mine development or company purchases, or both, seem just as likely to pounce. Mining bosses say the top Russian gold companies-notably Polyus Gold, which has been poking around Transylvania-should not be ruled out of contention either. Nor should Australian miners.

Transylvania's reserves are just too big to ignore. "It's a world-class deposit," says one of the gold CEOs who's keeping watch.

Gabriel Resources has known that for more than a decade. But as the company has learned, world-class deposits can come with world-class problems.