Wednesday, December 29, 2010

Romanian Court Backs Cabinet, Upholds 2011 Budget, Wage Law

Romania’s Constitutional Court ruled the 2011 state budget and two wage laws are legal, backing the Cabinet in pushing forward with key conditions for the next disbursements under the country’s international bailout plan.

The nine judges of the court said the state budget, which seeks to reduce the deficit to 4.4 percent of gross domestic product from a goal of 6.8 percent this year, is constitutional, rejecting a challenge by the opposition, said Augustin Zegrean, president of the Bucharest-based court, in a phone interview. The Court also said wage bills, which raise public salaries 15 percent in 2011 and tie future increases to professional performance and experience, are legal.

Romania, going through the second-deepest recession in the European Union after Greece, has been trying to pass the 2011 budget and a package of wage bills to curb public spending, narrow the budget deficit and satisfy international lenders. The country stands to receive 2.4 billion euros ($3.2 billion) in payments through March from the 20 billion-euro bailout provided by theInternational Monetary Fund, the European Union and the World Bank if it passes the austerity measures.

The Liberal and the Social Democratic parties have been trying to topple Prime Minister Emil Boc’s cabinet since it cut public-sector wages 25 percent and increased a value-added tax to 24 percent. Boc survived four no-confidence votes since June, two of them last week over the wage bills. The opposition challenged the laws and the state budget to the Constitutional Court as a last resort to prevent them from being applied.

Romania’s economy will probably contract 2 percent this year after shrinking 7.1 percent in 2009 as government austerity measures damp demand, the IMF forecast on Nov. 1. The economy will probably return to growth in 2011 as the government seeks to invest 35 billion lei in infrastructure to stimulate the economy, the IMF said.

The 2011 budget envisages economic growth of 1.5 percent. It foresees state revenue of 179.2 billion lei, or 32.9 percent of GDP, and spending of 203.2 billion lei, or 37.3 percent.

The IMF’s board is scheduled to meet in early January to review Romania’s progress. A mission from the lenders is due to return to Bucharest at the end of January to start talks on extending Romania’s current bailout agreement, which expires in April. The new loan may be worth between 6 billion euros and 8 billion euros, Mediafax news service reported on Dec. 21.

To contact the reporter on this story: Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Monday, December 27, 2010


Amnesty International
22 December 2010

Amnesty International has urged the Romanian authorities to provide urgent housing assistance to several Roma families made homeless by a forced eviction last week.

Authorities in the city of Cluj, in north-western Romania, forcibly evicted a Roma community on 17 December.

Some of the families have been moved to inadequate housing units, while others are homeless. According to local NGOs and testimonies from local Roma, other Roma communities in Cluj are also at risk of being forcibly evicted.

“This pattern of forced evictions, without adequate consultation, adequate notice or adequate alternative housing, perpetuates segregation and violates Romania’s international obligations,” said Andrea Huber, Europe and Central Asia deputy director at Amnesty International.

"When Roma families are being evicted from their homes against their will, they lose their homes, their possessions, their social contacts, their access to work and state services.”

On 15 December, about 56 families were given two days' notice that all improvised barracks and shacks in their community would be demolished. There was no consultation with the affected community and no feasible alternatives to eviction had been explored.

On 17 December, at around 6am, police arrived and told the community to move their belongings by the end of the day. Subsequently, 40 families were re-housed in new housing units in the outskirts of the city, close to a garbage dump.

Several families have been rendered homeless by the eviction, as they did not receive a room in the housing unit nor other alternative housing. Adults and children reportedly sleep outdoors, while the temperature can reach -10 degrees Celcius at night.

One of the Roma evicted from the Coastei Street community told Amnesty International: “There are people sleeping outside, in the cold. They were not given a room and they want to protect their belongings from being stolen. Sometimes they take their children to sleep in their neighbours houses, but otherwise they stay in the cold”.

Meanwhile, access to work opportunities and public services is difficult, as the closest bus stop is approximately 4 km away. This makes it difficult for the children to attend school.

Amnesty International has urged Cluj city authorities to ensure that any evictions are carried out only as a last resort and in full compliance with international human rights standards.

“The ordeal of Roma families in Romania has continued for many years. Now is the time for the local authorities to provide them with adequate housing close to services and facilities in a safe and healthy location,” said Andrea Huber.

Wednesday, December 22, 2010

FT: Romania suffers EU open borders blow

By Stanley Pignal in Brussels

Published: December 21 2010

Germany and France on Tuesday blocked the extension of the European Union’s Schengen border-free area to include Romania and Bulgaria, snubbing them and their political allies in the former Eastern bloc.

Romania and Bulgaria had been working towards joining Schengen in spring 2011, a timetable that many thought unrealistic amid doubts in some member states over the wisdom of entrusting either country with the external borders of the EU.

The interior ministers from the bloc’s two biggest hitters definitely buried that ambition in a letter to the European Commission, calling an early 2011 date “premature”.

“We do not believe all conditions for an entry into Schengen by these two countries are being met,” the letter said. “It would not be realistic nor responsible to make light of known shortcomings.”

It goes on to highlight weaknesses in the applicants’ judiciary as well as continuing problems with corruption and organised crime.

As unanimous political agreement among EU countries is necessary to join Schengen, the Franco-German position will force a new timetable to be drawn up, diplomats said.

The move will be particularly disappointing for Hungary, which takes over the EU’s rotating presidency on January 1 and which had hoped to repair the fraying ties between “old” European member states such as France and Germany and newcomers to the bloc, mainly in the east.

In another sign of tension, at last week’s summit of European leaders, the French, German and British leaders led a campaign to limit the growth in the EU budget, which would most immediately impact on eastern European countries, the biggest recipients of regional development funds from Brussels.

“The Hungarians had made the Schengen accession a priority, and though they have been realistic on the chances of success, they will feel rebuffed by this,” one national diplomat said.

The Schengen area, named after a town in Luxembourg, has been in force since 1995 and now includes 25 European countries, most of them within the EU. Britain and Ireland are not members; Switzerland, Norway and Iceland are. It allows border-free travel.

People who have followed the debate said the factors listed in the Franco-German letter – on the weakness of the judiciary in particular – are concerns shared beyond those two countries.

But political factors are also thought to have weighed in. France remains worried about potential inflows of Roma gypsies from Romania and Bulgaria if borders were to be fully opened.

Paris was criticised by the European Commission for apparently placing a priority on the dismantling of Romanian camps and for deporting more than 8,000 of them, sometimes with compensation.

The episode soured relations between France and Romania, historical allies within Europe.

Germany is said to be concerned about the effect of the two countries joining Schengen on European migration flows.

Including Romania and Bulgaria in the bloc would open a land bridge for migrants to enter the EU from Turkey, either directly into Bulgaria or through the porous border with Greece.

AFP: France, Germany stop Bulgaria, Romania joining Schengen

Brussels. France and Germany have decided to block Bulgaria and Romania from joining Europe's passport-free 25-nation Schengen travel area next year, a European Commission spokesman said Tuesday, cited by AFP.

French Interior Minister Brice Hortefeux and German counterpart Thomas de Maiziere told the European Commission in a letter that it was "premature" to let them enter Schengen in March 2011, said spokesman Michele Cercone.

Allowing a country to join Schengen must be agreed by members states by unanimity.
In their letter to European home affairs commissioner Cecilia Malmstroem, the two ministers cited shortcomings in efforts by Bulgaria and Romania to battle corruption and organised crime, Cercone said.

Romania and Bulgaria joined the European Union in 2007. The Schengen area includes 22 of the EU's 27 members plus Iceland, Switzerland and Norway.

Tuesday, December 21, 2010

Romania Plans to Sell Euro Debt in First Quarter

Romania plans to sell euro- denominated bonds in the first quarter, as part of three-year notes program worth 7 billion euros ($9.2 billion), Deputy Finance Minister Bogdan Dragoi said.

The Finance Ministry will pick organizers for the program early next year, after the administration selected a group of legal firms last week to advise it on the sale, Dragoi said in an interview in Bucharest today.

Romania delayed the first sale of the euro-denominated bonds initially scheduled for the fourth quarter until 2011 after resuming the search for a legal adviser following a challenge to the selection process. The country plans to turn to international markets twice next year to help fund a budget deficit of 4.4 percent of gross domestic product agreed with its international lenders, Dragoi said on Nov. 29.

The government is looking for funds on external markets after demand fell for leu-denominated debt in the second half of this year because of a self-imposed yield cap of 7 percent. The ministry dropped the cap last month and has paid a yield of as much as 7.3 percent as an increase in value-added tax has raised expectations that inflation will accelerate.

Bond Program

The government, which turned to the International Monetary Fund and the European Union for a 20 billion-euro bailout last year, wanted to raise at least 1 billion euros in euro- denominated bonds from the first sale in the EMTN program, former Finance MinisterSebastian Vladescu said on Aug. 26.

The sales were held up after law firms challenged the results of an original tender to select the legal adviser. The ministry selected Vienna-based Erste Group Bank AG and Paris- based Societe Generale SA to arrange the sale.

Romania last tapped international markets in March when it sold 1 billion euros of five-year bonds paying a 5 percent coupon in the country’s biggest debt offering. The bonds have dropped since the sale, lifting the yield to 5.308 percentage points today, from 4.91 percentage points when they were sold, Bloomberg data show.

The ministry has sold about 3 billion lei ($920 million) in leu-denominated treasuries of the 4.6 billion lei planned for this month after dropping the 7 percent yield cap. Average yields have ranged from 6.88 percent to 7.17 percent as Dragoi signalled the administration wants to shape a previously flat yield curve.

“It seems like a yield curve is forming for the leu- denominated Treasuries given the good results we’ve seen at the past auctions,” Dragoi said.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Romania's government survives no-confidence vote

(AP:BUCHAREST, Romania) Romania's government on Monday survived a no-confidence vote in Parliament, which the prime minister called a victory for "sense and safety" over populism.

The opposition called for the vote following a dispute with the government over the terms of the country's bailout agreement with the International Monetary Fund.

Romania took a 20 billion euro ($26.52 billion) loan from the IMF, the European Union and the World Bank last year, when its economy shrank by 7.1 percent.

The IMF said Romania must pass legislation on public wages, pensions and the 2011 state budget before it could receive the next loan installment.

The opposition filed two no-confidence motions against the government's proposed wage laws. Another no-confidence motion will be debated on Thursday. The laws will be adopted if the no-confidence motions fail.

One law increases public salaries by 15 percent, six months after the government slashed them by one-fourth to keep the budget deficit down during recession. Another wage law _ expected to be adopted if the no-confidence motion fails Thursday _ sets a new pay scale for public workers.

Prime Minister Emil Boc called the result a victory for "sense and safety for 2011 against populism." Earlier he urged lawmakers to vote against the no-confidence motion, to not jeopardize the loan agreement with the International Monetary Fund.

Recently President Traian Basescu said Romania needed to borrow 6 billion euros ($7.96 billion) in 2011 to cover a budget deficit of 4.4 percent. While predicting the economy would grow by 1.5 percent next year, he said Romania still needed to rein in spending.

AP: 4 charged in Romania over euro44 million tax evasion

Romanian anti-corruption prosecutors have charged four people, including a former high-level Finance ministry official, in a tax evasion case that cost the state about euro44 million ($58 million).

Prosecutors say a Romanian tobacco company failed to pay taxes for the transfer of about 1,000 tons of tobacco to an Italian company.

Prosecutors alleged Monday two Finance ministry officials helped the company by issuing a document exempting it from paying tax. One of the officials is Gratiela Iordache, a state secretary at the Finance Ministry from 2007 to 2009. There was no comment from her on the charges.

Monday, December 20, 2010

Romanian government survives no-confidence vote

By Radu Marinas and Luiza Ilie

BUCHAREST (Reuters) - Romanian Prime Minister Emil Boc survived his third no-confidence vote this year as expected on Monday, enabling his fragile coalition to press on with reforms to keep a 20-billion-euro bailout on track.

The leftist opposition fell 46 votes short of toppling Boc, who is turning out to be one of Romania's most resilient prime ministers in the two decades since communism, in a motion called over International Monetary Fund-backed wage reforms.

That was a wider margin than the two previous confidence votes in 2010 and indicates Boc can probably hold on to power until scheduled elections in 2012, even if the opposition persists with attempts to topple him, as many analysts expect.

"I think the opposition is diluting the importance of no-confidence votes and is losing steam as a result," said Barclays Capital economist Daniel Hewitt. "Thursday could even be a wider margin."

But Monday's reprieve did nothing to change the fact that Boc's centrist coalition, with only a slim parliamentary majority, may still struggle to push through important legislation. Another no-confidence vote is due on Thursday, which analysts also expect him to defeat.

Romania's leu currency was largely unchanged on the day against the euro by 11:58 British time (1158 GMT).

The European Union's second poorest member has so far received 16 billion euros in loans from an IMF bailout and must keep the money flowing to maintain investors' trust and overcome a painful economic contraction.

Thursday's confidence motion was brought by the leftist opposition over plans to make state salaries more transparent, in line with IMF requirements.

The government is racing to clear a cost-cutting budget for 2011 by the end of this year so that it can receive fresh loans in January, and start talks on a new aid deal once the current one expires in March.

On Sunday, parliamentary committees gave a green light to the 2011 budget bill, keeping the IMF-backed parameters and opening the way for quick debates in the assembly this week. Ruling party legislators are optimistic it will pass unchanged.

(Additional reporting by Sam Cage; Editing by Kevin Liffey)

Posta Romana Is Fined $32 Million for Competition Infringements

Posta Romana SA, Romania’s state- owned postal monopoly, was fined 103.3 million lei ($32 million) by the national competition authority for abusing a dominant position.

The regulator ruled that the postal company violated the law in two cases by offering lower tariffs to certain companies, to the detriment of their competitors, according to a statement published on the regulator’s website.

The fine was fixed at 7.2 percent of Posta Romana’s 2009 revenue of 1.44 billion lei. The company has more than 7,100 post offices.

To contact the reporter on this story: Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Friday, December 17, 2010

Romania, Former `Mediocre Student,' Has Gained IMF's Confidence in 2010

Romania has reversed its image as an economic “mediocre student” after the government weathered no- confidence votes and protests to adhere to International Monetary Fund demands for spending and job cuts, said the IMF’s mission chief to the Balkan country.

The second-poorest European Union member after Bulgaria probably will complete in April its 13 billion-euro ($17.4 billion) bailout loan, the eighth accord with the IMF since the 1989 fall of communism, so it can win a precautionary standby agreement, said Jeffrey Franks in a Dec. 14 phone interview from the Washington-based lender’s headquarters.

The government of Prime Minister Emil Boc has struggled to quell parliamentary opposition and street demonstrations to austerity measures designed to keep bailout payments flowing into state coffers. The current agreement, part of a larger 20 billion-euro package reached with other international lenders, would only be the second that the country has completed in 20 years.

Romania “had a reputation of being a pretty mediocre student in terms of completing its reforms and this program has certainly changed the image,” Franks said. “It’s now seen as a country that has made an enormous effort against very long odds to complete some very difficult reforms that were needed.”

The country’s gross domestic product may shrink 1.9 percent this year as the rest of Europe recovers from the global financial crisis, prompting criticism that adhering to the strict demands by the IMF, the European Union and others is keeping the country in recession.

No-Confidence Vote

The opposition Liberal and the Social Democratic parties yesterday asked for a vote of no confidence against Boc’s government over a bill that raises public wages by 15 percent in 2011. He has urged lawmakers to forego debate on the bill and pass it in three days to unlock the next payment from an IMF bailout. The government is relying on a combined 2.4 billion euros in loan payments by March.

The IMF’s board is scheduled to meet in early January to review Romania’s progress.

The pension law, approved by Parliament on Dec. 7 and signed by the president yesterday, is another positive step, Franks said. Boc also called for a quick vote on a wage bill, raised a value-added tax rate to 24 percent, cut public wages 25 percent and reduced the public-sector workforce to bring the deficit to 6.8 percent of gross domestic product this year and 4.4 percent next year.

‘New Arrangement’

“A delay of a week or two would not have any significant effect on the new arrangement,” Franks said. “We are still planning to come to negotiate a follow-up arrangement with the idea that the follow-up arrangement will probably go into effect in April.”

Any new arrangement would include demands for more structural reforms in labor, infrastructure and capital input, said Franks.

“It’s very clear that the state has not completely been restructured,” Franks said. “There are areas in which Romania’s economy still needs to reform in order to be as flexible and productive as it needs to be.”

Eastern European countries, including Romania, have largely avoided any spillover from a sovereign-debt crisis that pushed the cost of insuring Portuguese, Spanish and Italian bonds to records, Franks said. Still, concerns persist that the region may affected by the turmoil.

“We always look at possible spillover effects,” Franks said. “So far eastern European countries have been relatively little affected by difficulties going on in other European Union countries but that’s not necessarily going to be true in the future, so we have to continue to be vigilant on this.”

To contact the reporters on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Romanian Government to Face No-Confidence on Dec. 20

Romania’s government will face two no-confidence votes on Dec. 20 as the opposition tries for the third time in seven months to topple Prime Minister Emil Boc’s cabinet over austerity measures.

The Liberal and the Social Democratic parties asked for a vote against the government over the bill that raises public wages by 15 percent in 2011 and a separate vote over a unitary wage low that ties future salaries increases to professional performances and experience. Boc urged lawmakers to forego debate and pass the laws in three days to unlock the next payment from an International Monetary Fund bailout.

The opposition has been trying to oust the government since it cut public-sector wages by 25 percent and increased a value- added tax to 24 percent to trim the budget deficit to qualify the conditions of the 20 billion-euro ($26.7 billion) bailout. The parties, with 215 votes, need 236 votes to topple the Cabinet.

“This is how reforms are being done in Romania, very hard and that’s why we have to seek fast-track approval of important laws,” Emil Boc told reporters in Parliament today. “I’m not concerned, I haven’t been concerned about any of the no- confidences I had to face because I know that I am proposing the right measures for the country and I trust the solidity of the ruling coalition.”

Romania, going through the second-deepest recession in the European Union after Greece, is trying to pass the 2011 budget next week and a package of wage bills to curb public spending, narrow the budget deficit and satisfy lenders.

The country stands to receive 2.4 billion euros in payments through March from the bailout provided by the IMF, the EU and the World Bank if lawmakers approve the austerity measures.

“We’re not fooling ourselves that the” no-confidence motion “might pass,” Social Democrat leader Victor Ponta told reporters in Bucharest yesterday. The ruling coalition’s lawmakers “will stick to their desks.”

Boc survived a no-confidence motion in June by eight votes and a similar move in October by 16 votes. If parliament rejects the motion, the government remains in place and the wage bills are approved automatically, meeting the terms of Romania’s bailout accord.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at;

To contact the editor responsible for this story: James M. Gomez in Prague

Romanian opposition files no confidence vote in government, says new public wage law is unfair

BUCHAREST, Romania - Romania's main opposition party has filed a vote of no-confidence in the government, claiming a new public sector wage law is unfair.

Social Democratic lawmaker Mircea Dusa said on Thursday that the law, which would cut bonuses and impose a hiring freeze, is unfair because the salaries, which were cut by 25 per cent six months ago, would not return to previous levels.

Prime Minister Emil Boc said Tuesday public wages will increase 15 per cent next year. No date has been set for the no confidence vote.

Romania also needs to pass a 2011 budget and pension reform, without which the IMF will not disburse the next installment of a euro20 billion ($26.67 billion) loan to the country.

Romania in talks with Japan on trading carbon credits

BUCHAREST (AFP) - Romania is in talks with two Japanese companies on selling part of the carbon credits it has been granted by the Kyoto protocol, environment minister Laszlo Borbely said Thursday.

"Romania can trade about 300 million credits, worth some 1.5 billion euros, even at this time of crisis," Borbely said during a press conference.

Earlier this year the Romanian government had said this trade could bring it as much as 2.5 billion euros.

The talks with the two Japanese companies, which he did not name, could be concluded in three months' time, Borbely stressed.

He added that Romania was lagging behind in this field, as the trading should have started in 2008.

The carbon trading scheme was adopted under the Kyoto Protocol, which sets binding targets for 38 industrialized countries for reducing greenhouse gas emissions by five percent between 2008 and 2012 compared to their 1990 level.

AP: Romanian businessman, ex-bank director and employees sentenced to prison in fraud case

BUCHAREST, Romania - A Romanian court has sentenced a former bank director and a businessman to 12 years in prison for defrauding a bank of $5.7 million (€4.3 million).

Bucharest's main court on Thursday sentenced former International Religion Bank director Ion Popescu to 12 years in prison for abusing his position and ignoring Romanian banking regulations, while businessman Dinel Staicu was given 12 years for fraud and deception.

Two former bank employees Viorica Dutu and Radian Raceala received to six years in prison for their involvement.

The court said that the bank, that collapsed in 2000, loaned Staicu $5.7 million from 1999-2000, while he declared false guarantees for loans.

The ruling can be appealed. There was no comment from the four.

Thursday, December 16, 2010

Romanian Constitutional Court Rules in Favor of IMF-Backed Pension Law

Dec. 15 (Bloomberg) --Romania’s Constitutional Court ruled in favor of an International Monetary Fund-backed pension law that is mandatory for the country to win another disbursement of its bailout loan.

The nine judges of the court unanimously said the law, which sets the retirement age at 63 years for women and 65 years for men, is constitutional, rejecting challenges from the opposition, said Acsinte Gaspar, one of the court’s judges, by phone today. The president must now sign the law for it to become active.

Romania, the European Union’s second-poorest member, is relying on a 20 billion-euro ($26.7 billion) loan led by the IMF as it struggles to cut its budget deficit and recover from its worstrecession on record. Romania agreed on Nov. 1 to approve a 2011 budget, enact a unified wage law and revise consumer-credit and pension rules to unlock a 2.4 billion-euro installment of the emergency loan.

President Traian Basescu refused in October to sign the law. Instead, he returned it to Parliament requesting a reduction of the proposed women’s retirement age to 63 years from 65 years as contained in the initial pension law approved by lawmakers on Sept. 16.

“The Constitutional Court unanimously rejected the challenges on the revised pension law,” Gaspar said. “The president has now 10 days to promulgate the law.”

The new retirement age will take effect in 2030, with everyone who has contributed to the system for at least 15 years qualifying for a pension. The law also links future pension increases to the inflation rate as opposed to the current average monthly wage tied to raises.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

AP: 2 Romanian former ministers to be tried in a real estate deal

BUCHAREST, Romania - Romanian anti-corruption prosecutors say two former government ministers will go on trial over charges they allegedly abused their position while in office.

Prosecutors say Wednesday that former Justice Minister Tudor Chiuariu and former Communications Minister Zsolt Nagy were allegedly involved in a 2007 real estate deal, that cost the state over €8 million (US$10.7 million).

Prosecutors say the ownership of a top real estate property was transferred to a private company at an undervalued price. The two ministers signed documents transferring ownership. They have denied wrongdoing. Four other people will be tried in the case.

Wednesday, December 15, 2010

Romania's Hidroelectrica Sees Gross Profit Surging to 110 Mln Euro in 2010

BUCHAREST (Romania), December 14 (SeeNews) - Romanian state-run hydropower producer Hidroelectrica sees its gross profit surging to 110 million euro ($148 million) this year from some 15 million euro in 2009, local daily Ziarul Financiar reported on Tuesday.

"The main challenge next year will be costs cutting. We aim to reduce costs by 10%," Ziarul Financiar ( quoted Hidroelectrica's head Mihai David as saying.

He added that the company has signed a 50 million euro loan agreement with Romania's top bank, BCR, to finance the upgrade three of its high-capacity power plants: Olt, Lotru and Portile de Fier 2.

Hidroelectrica has also applied for EU financing to build 10 small hydro power plants in the northeastern region of Moldova. It also plans to build three similar plants in the central county of Brasov.

Romania state workers' wages to rise 15 in 2011

AP (BUCHAREST, Romania) Romania's prime minister said Tuesday public wages will increase 15 percent next year, six months after they were cut by one-fourth to meet demands from the International Monetary Fund.

Over the past two years, the government has cut the number of public sector jobs from 1.33 million to 1.29 million. Prime Minister Emil Boc says that means he can afford to increase wages again because he says the economy will return to growth in 2011.

Boc went to Parliament to argue for passage of his public sector wage law, which would cut bonuses and impose a hiring freeze. Opposition parties have three days to file a vote of no-confidence on the bill.

President Traian Basescu said Romania needed to borrow euro6 billion (US$8.06 billion) in 2011 to cover a budget deficit of 4.4 percent. While predicting the economy would grow by 1.5 percent next year, he said Romania still needed to rein in spending. He urged lawmakers to change wage laws, claiming that there were 1.68 million people in Romania who work but do not pay taxes at a news conference at his presidential palace.

Romania also needs to pass the 2011 budget and pension reform, without which the IMF will not disburse the next installment of a euro20 billion ($26.67 billion) loan to the country.

Romania May Get $486 Million World Bank Payment in January, Rantrua Says

Romania may receive a 360 million- euro ($485 million) loan payment from the World Bank in January if a high court upholds changes to the pension system that include raising the retirement age, the bank’s country manager said.

The payment, already delayed three times, marks the second disbursement from the 1 billion euros the World Bank contributed to a larger bailout awarded to the Balkan country in 2009 to help shore up the budget gap. The final 340 million euros will be paid depending on progress on a wage bill, said the World Bank’s Francois Rantrua in an interview in Bucharest.

Romania, the second-poorest European Union member, is missing out on Europe’s recovery after international lenders pressed the government to raise taxes, pass cuts to pension spending and reduce state wages to stem a burgeoning deficit, sparking protests. The Parliament’s Dec. 7 approval to raise the retirement age was challenged by the opposition in the Constitutional Court. A ruling may come this week.

“Considering the political situation, which isn’t easy, I am favorably encouraged by what we have managed to do in Romania,” Rantrua said. “The prospects for growth are good. Of course they are not the best in the region and you cannot expect to enter a crisis with a bad structural situation and exit it first, but there are signs of exiting the crisis for Romania.”

The International Monetary Fund, which led a 20 billion- euro bailout package that includes the World Bank contribution, forecast gross domestic product for Romania to shrink 1.94 percent this year before expanding 1.53 percent in 2011.

Government Measures

The government was forced to raise the value-added tax rate by 5 percentage points and cut public wages by 25 percent to squeeze the budget gap to 6.8 percent of GDP this year and 4.4 percent in 2011 to qualify for the terms of the loan. The retirement age was raised to 63 for women and 65 for men.

Before a decision on the final payment is made, the World Bank is reviewing the final six budgets of 12 ministries, said Rantrua. Once that process is complete, he said, the Washington- based bank will have “an interesting proposal for the government.” He didn’t elaborate.

“It might be smart, if the government asks us, to have fresh structural measures for the third tranche,” he said.

Prime Minister Emil Boc’s cabinet will seek fast-track approval of a simplified wage law in Parliament this week. The law aims to rearrange the salaries in the public sector based on professional performance and experience and help the government contain the budget deficit over the next three years.

‘Functional Reviews’

The World Bank is also doing “functional reviews” on 12 industries in Romania, including transport and agriculture, and will present a detailed analysis with recommendations for improving performances during the next review mission from the IMF, the European Commission and the other lenders, according to Rantrua.

The next review of the country’s progress under the bailout will probably start on Jan. 20, when Romania plans to open talks to extend the current bailout with a precautionary loan, Boc said on Dec. 12.

“There are sectors that need more reform than others, that are more difficult than others, sectors where you have a lot of people, a lot of civil servants, where your money is not sufficient and where you are in competition with others,” Rantrua said. “We are going to discuss the key actions that are needed, and it’s the prerogative of the government to announce these reforms.”

Bulgarian Example

The World Bank is also working with the Finance Ministry on a project to improve tax collection after a model already implemented in Bulgaria, the EU’s poorest member, that boosted the neighboring country’s budget revenue by 5 percent of GDP.

In Bulgaria “the program lasted for six years and all the parties committed,” Catalin Pauna, the World Bank’s chief economist in Romania, said during the same interview. “I think the results will be tremendous. There is no need to raise taxes. With the same level of taxes I am convinced that we can raise more” revenue.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Tuesday, December 14, 2010

Romania Sells More Debt Than Planned on Sentiment

Dec. 13 (Bloomberg) --Romania sold more debt than planned at an auction today as a drop in the inflation rate and government austerity measures boosted investor sentiment.

The Finance Ministry sold 1.47 billion lei ($454 million) of one-year Treasury bills, more than the 1 billion lei it initially intended to sell, the Banca Nationala a Romaniei said on its website. The average yield dropped to 7 percent from 7.22 percent from the last auction of similar notes on Nov. 22. Demand was 3.98 billion lei.

“The result of the auction is a bit surprising because we expected to see a yield closer to 7.2 percent,” said Florentina Manea, an economist at Royal Bank of Scotland Romania SA. “The sentiment has improved compared with other countries in the region, especially Hungary, because investors are pleased with the government’s effort to push through tough reforms.”

The Balkan nation, which is relying on a 20 billion-euro ($26.6 billion) bailout led by theInternational Monetary Fund to stay afloat, has managed since November to sell leu- denominated bills and bonds on the domestic market as it dropped a self imposed 7 percent yield cap.

Investors had pushed for higher yields after a 5 percentage-point increase in a value-added tax in July spurred inflation to the fastest pace in more than two years. The inflation rate dropped in November for the first time in five months to 7.7 percent from 7.9 percent in October.

“The result today is pretty good for the Finance Ministry and the cost of the debt sold is below our estimates,” Vlad Muscalu an economist at ING Bank in Romania, said in a phone interview. “The market probably thinks that they won’t manage to find such attractive instruments six-months from now, and that’s why they are willing to accept a 7 percent yield.”

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Romania's president says country risks IMF loan

BUCHAREST, Romania (AP) — Romania's president has warned the country's lawmakers that they risk jeopardizing a multibillion dollar loan from the IMF if they do not pass the necessary laws required by the group.

Traian Basescu is having discussions with political parties on Monday to find consensus on passing a new public wage law, the 2011 budget and pension reform. Without these laws, the International Monetary Fund will not disburse the next installment of a euro20 billion ($26.67 billion) IMF-led loan.

Romania's Parliament has been blocked in recent months after accusations by journalists and opposition parties that the pension law was passed fraudulently. The president returned the law to Parliament. One opposition party refused to attend the discussions.

AP: Romanian opposition party suspends Senate speaker Mircea Geoana who claimed he was told to lie

BUCHAREST, Romania - One of Romania's most prominent politicians who narrowly lost the 2009 presidential race has been suspended by the Social Democratic Party after he accused the party chairman of telling him to lie in a debate.

Party spokesman Radu Moldovan says Mircea Geoana was suspended from the party for six months on Monday.

Geoana was foreign minister from 2000 to 2004 and led the powerful Social Democrats from 2005 to 2009. He is currently speaker of the Senate, second in rank to the president.

Geoana claimed that current party chief Victor Ponta advised him to lie in a pre-election debate about a late-night visit he made to a controversial media owner. Many said the visit cost him the presidential race won by the incumbent Traian Basescu. Ponta denied the allegation.

Friday, December 10, 2010

Romanian Inflation Slowed in November for First Time Since June

Romania’s inflation rate dropped in November for the first time in five months as weaker demand partly offset the effects of a 5 percentage-point increase in the value-added tax from July.

The rate fell to 7.7 percent from 7.9 percent in October, the Bucharest-based National Statistics Institute said today in an e-mail. On the month, prices advanced 0.5 percent. The median estimate in a Bloomberg survey of seven economists was for annual inflation of 7.8 percent.

Romania, which turned to international lenders for a bailout last year as a recession eroded budget revenue, raised the VAT to 24 percent in July to meet a budget-deficit target of 6.8 percent of economic output this year and 4.4 percent in 2011. It got a 20 billion-euro ($26.5 billion) bailout from the International Monetary Fund and the European Union.

“Pressures coming from food inflation probably grew in November, but less leu weakening versus the euro and no major hikes in regulated prices would justify a slowdown in the monthly rate of inflation to 0.5 percent from 0.6 percent,” ING Bank Romania SA analysts led by Nicolaie Alexandru-Chidesciuc wrote in a note to clients before the inflation data release. “Such an outcome would imply year-end inflation below 8 percent versus 8.2 percent expected by the central bank.”

The central bank on Nov. 4 raised its 2010 inflation forecast to 8.2 percent and to 3.4 percent next year. That compares with August estimates of 7.8 percent and 3.1 percent respectively.

Food-price inflation accelerated to an annual 6 percent in November compared with 5.5 percent in October, the institute said. Prices for services rose an annual 6.1 percent and non- food prices gained 9.7 percent, compared with 10.6 percent the previous month.

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

To contact the editor responsible for this story: James M. Gomez at

Disappointing Romania

The Economist
Holes and corners
By the standards of its region, Romania is a big country with problems to match

STABILITY is better than crisis and collapse. But what about recovery? After squandering time and cash in a binge that ended in a bust, Romania has sobered up and is trying to cope with its daunting problems. The most pressing is the economy. In the excitement of joining the European Union in 2007, Romania enjoyed a three-year boom in which annual growth peaked at a stonking 8%. Where a prudent government would have hit the brakes, Romania’s stamped on the accelerator, running a big budget deficit. The crash in 2009 forced the country to seek a €20 billion ($26 billion) IMF bail-out in 2009.

That has at least created a welcome external straitjacket for fractious and dithering politicians. But the conditions of the rescue, such as a target for the budget deficit of 4.4% of GDP next year, were harsh. Big spending cuts included a 25% reduction in public-sector wages, which are high for a few, puny for most. In two years the bloated public sector has sacked more than 100,000 employees. After the constitutional court vetoed a pension reform, the government raised VAT to 24%.

Many Romanians see the central bank as their most solid institution. Governments come and go but its boss since 1990, Mugur Isarescu, is a powerful background presence. The bank keeps the leu, Romania’s currency, fairly stable, inflation down and a watchful eye on the financial system (which is in good shape, unlike many others). But it can’t do much to stoke growth, set to be a mere 1.5% next year.

A bright spot is booming exports, up by a quarter on last year. That is good news for mainly foreign-owned manufacturers. But exports count for only a small chunk of the economy. Construction is still in the dumps. So are investment and consumer spending. Help could come from the €30 billion that the European Union has set aside to modernise Romania, the largest and poorest of its new members. But only a measly €1.5 billion has been spent so far. Among many scandalous bottlenecks, Romania still lacks a proper road between Bucharest and its main port, Constanta.

The government is an unpopular coalition of the PDL, the party of the charming but dodgy president, Traian Basescu, and an alliance representing the Hungarian minority. Even critics do not accuse it of cheap populism. On paper, its reform programme looks impressive, if belated. But many doubt if it can cure the perennial ills of corruption, bad bureaucracy and poor public services.

A good example of good intentions but poor results comes from Snagov, an island monastery where the real-life Dracula, a prince called Vlad Tepes, is supposedly buried. With much fanfare, the authorities have built a bridge across the lake, a beauty spot, in the hope of attracting tourists. That is welcome: past governments perversely shunned Romania’s most famous son. The new tourism minister, Elena Udrea (a vivacious and wealthy blonde), wants him to take centre stage. She will lead foreign ambassadors on a “Dracula tour” of his castles in the summer. But for humbler visitors, finding the unsignposted way to Snagov is hard. The ill-built bridge is an eyesore. A rough-spoken monk demands a hefty fee and refers to local gypsies (Roma) as “scum”.

Judging the judges

Nor are foreign investors queuing up to take advantage of Romania’s fertile soil and beautiful scenery or its flexible, cheap and multilingual workforce. Services are particularly underdeveloped. “This could be the back office of Europe,” says a foreign banker, who tries hard to stay optimistic. It could also be a regional hub for companies interested in smaller neighbouring countries. But investors like certainty, not the murky, jerky decision-making that typifies Romanian politics.

They would also like more deregulation, much-promised but seldom delivered. And they complain particularly about ignorant and incompetent judges. On paper, the laws are increasingly up to European standards. In practice, the results are unpredictable. One big business, Austrian-owned Petrom, which faces lots of minor lawsuits, is trying in vain to get the courts to identify plaintiffs properly, to specify the size of payouts in judgments and to aggregate identical cases.

Big corruption cases inch forward, as do some judicial reforms such as new criminal and civil codes. The climate of impunity for the rich and powerful is largely gone. Even senior politicians risk jail if their cases eventually come to court. “Corruption is a risky business in Romania now,” says the justice minister, Catalin Predoiu. But the biggest problem in the legal system is that it is so hard to shift ignorant, incompetent or even blatantly corrupt judges. The constitutional entrenchment of the judiciary’s independence in 2003 looks, in hindsight, like a big mistake. Some blame for that lies with outsiders’ advice.

Anti-corruption campaigners are getting ready for another big push, though the corrosively gloomy media make many feel that such efforts are hopeless. Previous victories, such as the election of Mr Basescu in the “orange revolution” of December 2004, have proved fleeting. Scandals, in part politicised, have tainted the former sea-captain’s image, though he may yet return, Putin-style, as prime minister when his term runs out in 2014.

But his greatest fans now are abroad. Many welcome his mended fences with neighbouring Moldova (a province of pre-war Romania in which he once promoted the issue of Romanian passports). A strong Atlanticist, he is a rare remaining ally of the Georgians, who feel bereft of most of their old friends. They would vote for him there, whatever his own people might do.

from PRINT EDITION | Europe

Romanians see slow progress on justice

09 December 2010

(BUCHAREST) - Riddled with corruption and struggling for years with interference by politicians, Romania's legal system is on the mend but will need more monitoring by the EU to fully recover, experts told AFP.

"If we look where we started and where we are now, there is certainly progress," former Romanian justice minister Monica Macovei, a leading figure in fighting corruption, told AFP four years after her country joined the European Union.

Bucharest's accession to the bloc was accompanied by a unique monitoring mechanism to help the former communist country reform its legal system and fight corruption.

The challenge was huge as Romania suffered decades of authoritarian rule under a fascist regime in the 1940s and the iron hand of communist dictator Nicolae Ceausescu.

"Since 2004, when pressure from the EU intensified, progress has been significant", judge Cristi Danilet, a long-time promoter of integrity in the justice system, stressed.

A "convincing track record" of the anti-corruption prosecutor's office (DNA) in investigating high-profile cases involving politicians is one of the major achievements, according to the EU.

The judiciary is now independent from the government.

"However, serious problems persist, especially as far as the cleanup of the judicial system is concerned," Macovei stressed.

A case last week illustrated the mixed record of the recovery after an appeal court judge in the northern city of Iasi was charged with taking bribes of several thousand euros (dollars) to hand down a judgement in favour of a man divorcing his wife.

The latter seized the anti-corruption prosecutor's office which acted swiftly and had the judge detained.

But the ex-wife claimed she previously turned in vain to the superior council of magistracy (CSM), the body charged with guaranteeing the legal system's independence and integrity.

The CSM came under fire in March when 350 Romanian magistrates accused it of failing to act promptly after two high court judges were charged with influence-peddling in a corruption scandal involving a senator.

"The reluctance to impose sanctions sends the wrong signal to society. It gives the idea that those who are applying the law are more lenient when it comes to themselves," said Corina Rebegea from the Rule of Law programme of conservative German think tank Konrad Adenauer Foundation.

The election of reformist magistrates, though still a minority, in the new CSM has given some hope to non-government organisations defending the rule of law.

Corruption cases involving politicians, some in prominent party positions, that go unprocessed for up to four years at the high court are also worrying, underlined Laura Stefan, anti-corruption coordinator at the Romania academic society (SAR).

"In other cases, people are convicted quickly. This affects the confidence in the justice system because people find that they are not equal before the law", Macovei said.

A new set of laws is expected to limit delaying tactics criticized by the EU.

However, Danilet said, the European Union should continue its monitoring "for some time because we need external pressure for reforms to proceed".

Countries like France and the Netherlands say they could link Romania's entry into the Schengen visa-free zone to progress on justice reforms, but the SAR's Stefan does not agree.

"I think we should enter Schengen if we meet the required technical criteria. What is more important than Schengen for the rule of law is the continuation of the European monitoring," she said.

Disliked by some politicians, this mechanism helped save the Integrity agency, a body set up to verify assets and police potential conflicts of interest involving politicians and civil servants when lawmakers wanted to weaken it.

Romania's Justice Minister Catalin Predoiu stated clearly: "We are still far from fulfilling all our objectives. EU surveillance will be lifted when judgements will be rendered in cases of high-profile corruption and when integrity issues will be resolved by the CSM."

AP: Romanian public TV apologizes for show that praised pre-WWII fascist leader

BUCHAREST, Romania - Romanian public television apologized Thursday for broadcasting a show in which a journalist praised a pro-Hitler Romanian fascist leader as a person of integrity.

In a statement TVR said the comments had "wounded the feelings" of people affected by "the virulent anti-Semitism and the crimes against humanity which marked a black period" in Romania's history.

Journalist Ion Cristoiu praised Corneliu Zelea Codreanu, who had founded the fascist Iron Guard legion prior to World War II as a person of integrity in a show aired on Nov. 21.

Dozens of Romanian intellectuals criticized Cristoiu and the show's moderator saying they had ignored the fascist and terrorist character of the Iron Guard.

The legionnaires gained notoriety for their vicious anti-Semitism. In 1941, they killed thousands of Jews in Bucharest. Codreanu was killed in 1938 on the orders of Romania's King Carol II.

Former Romanian dictator and wife reburied

BUCHAREST, Romania (AP) - Former Romanian dictator Nicolae Ceausescu and his wife have been reburied, according to their son.

Ceausescu ruled Romania for 25 years before being ousted and executed with his wife Elena after a summary trial during the 1989 anti-communist revolt, which killed hundreds of people.

Some Romanians, including the Ceausescu family, doubted the couple were really buried in the Ghencea military cemetery in Bucharest.

But last month their son, Valentin, said DNA tests confirmed the grave of Ceausescu contains the remains of his father and mother.

On Thursday, he told The Associated Press he reburied his parents this week in adjacent graves at the cemetery, and did that secretly to avoid "a media circus."

He said, "They are in their final resting place."

Thursday, December 9, 2010

There's room for 'Roma' and 'Romanian'

Rupert Wolfe-Murray

Wednesday 8 December 2010

A bill to replace the Roma name with a pejorative term risks opening a Pandora's box of prejudice and frustration

Silviu Prigoana, a Romanian MP, has introduced a bill that would ban Romanian institutions from using the word "Roma" to describe the Gypsy minority. He suggests the word be replaced by the pejorative "Tzigane", a word that comes from the Greek term for "untouchable". The Romanian government has sent the bill to parliament and the initiative has the support of President Basescu, who recently said on public radio that the introduction of the word Roma into official terminology, in 1995, was "a mistake".

Why is this such a highly politicised issue? The answer is that it goes to the heart of Romanians' sense of national identity. Prigoana claims that people all over the world assume that Romania is "the land of the Roma" and he wants to clarify the issue. The MP's proposal has the support of the Romanian Academy but the ministries of foreign affairs and culture have spoken out against it. The Roma NGOs are gearing up for a major row, They staged a demonstration outside the government building and submitted a letter of protest to the recent OSCE summit in Kazakhstan.

Romanians are proud of their history and their curious geographical status as "a Latin island in a sea of Slavs". Every Romanian pupil is taught that they are descended from the settlers who stayed behind afterRome's legions withdrew from Dacia, the last great conquest of the Roman empire. The word Romania was invented in the 19th century when the Balkan nation won its independence. The word Romania is symbolically linked to the city of Rome (Roma) from where the people originated so many years ago.

The Roma minority also have a long and remarkable history. Originating in India, the Roma tribes came west about 1,000 years ago, settling in Persia, Egypt (from where the name "Gypsy" came), the Balkans and western Europe. There are more than 10 million Roma in Europe today and more than 1 million in the US. The term they use to describe themselves is usually "Roma". In their own language (Romanes) it means "man". Over the past 20 years the term Roma has come to be accepted among international organisations and this would not change if Romania decided to stop using it.

Although the 1.5 million strong Roma minority in Romania are marginalised – in other words they generally don't benefit from public services – there has been some progress in terms of recognising their rights. Central to this progress is the right to self-identification and the use of the word "Roma". If the Romanian state were to do away with this term it might strike a chord with nationalists but it would insult the Roma population and send an international signal that Romanians are prejudiced – not the kind of message that is needed when delicate negotiations about Romania's entry into the EU's visa-free Schengen area are underway.

Romania has been remarkably immune to the rise of populism and anti-immigration policies around Europe. Although nationalism was strong in the 1990s, Romania's extremist parties were split, ridiculed and turfed out of parliament at the last election in 2008. Compared to Hungary, a neighbouring country where the Jobbik party recently won 47 seats in parliament, on the basis of anti-Roma rhetoric, Romania can seem rather moderate. But this name-changing proposal could open a Pandora's box of prejudice and frustration which lies dormant under the relative calm of Romanian society – especially so soon after Sarkozy expelled thousands of Roma from illegal campsites in France.

Romania could turn this situation round if they took a different approach: if its citizens celebrated the fact that Romania is a multi-ethnic country with large minorities (including a large Hungarian minority) and that there is strength in diversity. And the unique – and very interesting – histories of these minorities could be weaved into their brand building efforts.

If the Roma could be seen as a national asset – not least in terms of a future labour force in a country with a declining population – perhaps the Romanian state would realise that it would be in everyone's interest to invest in the Roma rather than ignore them. And by explaining clearly the difference between the word Roma and Romania – rather than reverting to a derogatory epithet – this semantic row could be defused.

Romanian moms upset over maternity leave cuts

BUCHAREST, Romania (AP) — Hundreds of Romanian mothers are protesting a government plan to cut paid maternity leave from two years to one.

The government is expected to pass an ordinance Wednesday reducing paid maternity leave beginning in January. Some women claim the move will discourage them from having children, since Romania lacks child-care sites for working parents.

Prime Minister Emil Boc said 200,000 mothers get maternity benefits and Romania needs to cut costs.

Mothers receive between 600 lei (euro142, $187) and 3,400 lei (euro810, $1,070) a month and that will continue.

Authorities said mothers who want to stay with their children after the first year could opt for unpaid leave. Those who return to work will also get 500 lei (euro120, $158) a month, much higher than regular child benefits of euro10 ($13.20).

Deutsche Bank Says Romanian Leu May Drop to 4.4 per Euro in 2011

Dec. 8 (Bloomberg) -- The Romanian leu probably will lose 2.3 percent against the euro by the end of 2011 as exports lack a competitiveness boost because of weaker global demand, Deutsche Bank AG said.

The national currency is expected to weaken to 4.4 against the euro by the end of next year from 4.3 now and reach 4.33 per euro in the next three months, Deutsche Bank London-based analysts Caroline Grady and Marc Balston wrote in a note to clients today. The Romanian central bank has a “limited appetite for appreciation” because of weak economic growth expected for next year as the country emerges from its worst recession on record.

Romania is struggling to recover from the economic slump as a government increase in a value-added tax and cuts in wages prolonged the 2009 decline into 2010 and boosted the inflation rate to a two-year high. The Balkan nation is relying on a 20 billion-euro ($26.5 billion) international bailout to stay afloat as its economy shrank an annual 7.1 percent in 2009 and 2.5 percent in the third quarter, reducing budget revenue.

“While Romania will probably take several years to make up lost output, with growth likely to remain weak through our forecast horizon, the country should now be on a more balanced growth path,” the analysts said in the report. “Some depreciation to offset the impact of the jump in inflation on the real exchange rate may be preferred, particularly given the loss in export momentum seen globally.”

Growth, Rate Outlooks

The International Monetary Fund, which is leading the loan, expects the economy to start growing in 2011, led by industry and exports. Deutsche Bank said the economy will probably contract 1.9 percent in 2010 and return to a growth of as much as 1.5 percent in 2011, matching the IMF’s forecasts. It sees a slowdown in inflation to 7.6 percent at the end of this year from 7.9 in October and to 4.1 percent next year.

The central bank will probably keep the benchmark interest rate at its record low of 6.25 percent to boost weak domestic demand, the analysts said. They also said investors should sell protection tied to Romanian five-year bonds in the credit- default swaps market and buy Hungarian protection.

“If Romania’s adjustment program remains on track, the aggregate fiscal adjustment achieved will certainly be impressive,” Deutsche Bank said. “The planned 2.5 percentage point adjustment in the structural balance in 2011 will be more than twice that of any other emerging economy.”

Hungarian Downgrade

The Hungarian government will rely on a package of measures to overhaul the economy that it plans to put forward in February to help avert a credit-rating downgrade to junk, Economy Minister Gyorgy Matolcsy said yesterday. Moody’s Investors Service cut the country’s rating to Baa3 on concern that the Budapest-based cabinet is plugging budget holes with “temporary measures” that won’t be sustainable.

Credit-default swaps are derivatives used to hedge against or speculate on countries’ or companies’ creditworthiness. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to adhere to its debt commitments.

Deutsche Bank says Romania could seek a precautionary credit line from the IMF after the current agreement expires in May next year because the country “doesn’t face any of the problems identified by the IMF as barring a country from a credit line,” such as a sustained inability to access international capital markets, the need for large structural policy adjustment, an unsustainable public debt position or widespread bank insolvencies.

--Editors: James M. Gomez

To contact the reporters on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

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

AP: Indonesian court to extradite Romanian fraudster


An Indonesian court has approved the extradition of a Romanian citizen convicted on fraud charges.

Romania's Foreign Ministry said Wednesday that Nicolae Popa can be extradited following the court ruling after Indonesia's president signs a decree to allow it.

Popa left Romania in 2002 and was sentenced to 15 years in prison in 2006 for fraud in connection with the collapse of an investment scheme. Popa was arrested in Indonesia last year.

The owner of an influential Romanian TV station is charged with helping Popa leave the country illegally. Sorin Ovidiu Vantu who owns Realitatea TV also allegedly helped Popa financially while he was abroad.

Romania's Government Moves to Rename the Roma

Wednesday, Dec. 08, 2010
By Rupert Wolfe Murray / Bucharest

Romania's government has caused outrage among Romany — or Gypsy — communities and organizations after it asked Parliament in Bucharest to accept a proposal to change the official name of the Romany from Roma, which means "man" in the Romany language, to Tigan, which comes from the Greek term for "untouchable."

The government says the name change is necessary because of the possible confusion among the international community between the words Roma — which refers to the Romany ethnic minority — and Romania, a nation proud of its historical status as the last colony of the Roman Empire. Meanwhile, the Romanian Academy, whose role is to protect the Romanian culture and language, supports the move on the grounds that many countries in the European Union use a variation of the word Tigan to refer to their Gypsy populations.

"Imagine if a U.S. Congressman proposed to change the name Afro-American back to the insulting term n_____," said David Mark, director of the Roma Civic Alliance in Bucharest, speaking to TIME at a protest outside the government headquarters last week. "It would cause a huge scandal and that Congressman would probably have to resign."

The controversial proposal was put forward by maverick lawmaker Silviu Prigoana, a member of Romania's ruling Liberal Democratic Party, who claims he is acting on behalf of several Romany groups from Transylvania that, he says, told him "they don't like to use the word Roma." When asked by TIME to provide the names of these groups, Prigoana refused, saying only that they are "those Gypsy fellows in Transylvania who wear the big hats" — meaning the Hungarian-speaking Romany groups who go by the collective name of Gabor.

Prigoana denies accusations that he's acting on the orders of Romania's President, Traian Basescu, who recently stated on public radio that the introduction of the politically correct termRoma in 1995 — at the recommendation of Romania's Foreign Ministry — was "a big mistake." The President went on to say, "Many Europeans are confused by the terms Roma andRomania. They wonder if it is an ethnicity or a nation of 22 million citizens." The government has never made any attempt to explain the difference between the words to the international community — probably because Romanians would rather not be associated with the Roma at all — or to promote Romania as a multiethnic country with a large minority population (there are an estimated 1.5 million Roma and a similar number of Hungarians in the country).

According to Romani Criss, a leading Romany organization, the government never consulted with representatives of the Roma minority about the name change — which could incur the wrath of human-rights organizations, since the right of minorities to choose their own name is enshrined in international law. "Self-determination is the right of a people to determine its own destiny," reads the Council of Europe's Convention for the Protection of National Minorities.

In a protest letter sent to the recent Organization for Security and Cooperation in Europe (OSCE) summit in Kazakhstan, where heads of state met last week to discuss human rights and regional security, 24 Romany groups stated that the name Tigan "is associated in the collective memory of the Roma with the slavery that existed in Romania from 1385 to 1856, and also the forced deportations in WW2." The OSCE had already criticized Romania for trying to classify its Romany minority as Tigan once before, 15 years ago.

Unlike in much of Europe, where far-right, populist sentiment is on the rise, the Roma in Romania face relatively little outright prejudice. At the last general election, in 2008, the extremist parties did not make it into Parliament for the first time in 20 years. Yet the Romanian public supports the name change — many resent the Romany for the bad press stemming from the forced deportations out of France and other Western European countries earlier this year. Observers fear the seemingly minor issue of a name change could unleash a new wave of discrimination.

"The proposal is a matter of concern as it would reinforce old stereotypes and prejudice," wrote Andrzej Mirga, head of the OSCE's contact point for Roma issues, in an exclusive statement sent to TIME. "It would also be inconsistent with Romania's international obligations. The preferences of the Roma in Romania as to how they want to be referred to should be respected. After all, [the use of the word Roma] was a conscious political decision precisely to move away from stereotypes equaling Tigan with crime [and] poverty."

With Parliament unlikely to make a decision on the proposed name change until next year, the protest movement against the legislation is building. Romani Criss director Madga Matache tells TIME, "We are speaking to our lawyers, working on legal challenges to the Romanian Academy, and we are talking to OSCE and the Council of Europe, who I am sure will support us in this struggle." Romany groups continue to lobby in Bucharest, while activists in Canada have started up a worldwide petition against the legislation to send to Romania's government.

With the dignity of the Romany people and Romania's national identity at stake, a lot is riding on the outcome of this semantic clash.

Wednesday, December 8, 2010

Romanian Industrial Output Growth Slows as Recession Saps Demand

Romanian industrial production growth slowed in October as a recession eroded demand for the country’s manufactured goods.

Output rose an annual 2 percent after rising 2.8 percent in September, the National Statistics Institute in Bucharest said today in an e-mail. Industrial production was unchanged on the month after a 1 percent monthly gain in September.

Romania is struggling to recover from its worst recession on record and is relying on international bailout loans to stay afloat. The economy shrank an annual 2.5 percent in the third quarter after contracting 0.5 percent in the previous three months as a government increase in value-added taxes and public payrolls cuts damped demand.

The International Monetary Fund, which is leading a 20 billion-euro ($26.4 billion) bailout, expects the economy to start expanding next year, led by industrial exports.

Industrial sales growth slowed to an annual 8.3 percent in October from 14.1 percent in September on a weaker demand abroad for Romanian chemicals, steel products and textiles, the statistics office said today in a separate release. Production of manufactured goods rose 4 percent in October compared with a 4.4 percent gain in September, according to the institute.

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

To contact the editor responsible for this story: James M. Gomez in Prague

Romanian Cabinet Backs 2011 Budget With Tighter Gap to Qualify for Bailout

Romania’s government approved a budget draft for 2011 late yesterday to qualify for international bailout loans, and will send it to Parliament for debate and approval by the end of this year.

The 2011 budget plan foresees spending cuts to target a deficit of 4.4 percent of GDP next year, from a target of 6.8 percent this year, after the government raised a value-added tax and cut public wages to keep its International Monetary Fund-led bailout going, Finance MinisterGheorghe Ialomitianu said in an e-mailed statement. The budget envisages economic growth of 1.5 percent next year, after output will probably contract for a second year in 2010 and shrink as much as 2 percent.

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

To contact the editor responsible for this story: James M. Gomez in Prague

Romanian Parliament Adopts IMF-Backed Pension Law Raising Retirement Age

Romania’s Parliament approved a pension law critical for future disbursements from the Balkan nation’s international bailout loan.

Lawmakers today adopted with 172 votes in favor a request from President Traian Basescu to set the retirement age at 63 years for women and 65 for men, said Roberta Anastase, the Chamber of Deputies’ president and a member of Prime Minister Emil Boc’s ruling party.

Romania, the European Union’s second-poorest member, is relying on a 20 billion-euro ($26.7 billion) loan led by the International Monetary Fund as it struggles to cut its budget deficit and recover from its worst recession on record. Romania agreed on Nov. 1 to approve a 2011 budget, enact a unified wage law and revise consumer-credit and pension rules to unlock a 2.4 billion-euro installment of the emergency loan.

“I want to assure you that no pension will decline and I want to tell those who voted against the law that the day will come when you will thank your colleagues for voting in favor of a responsible pension system,” Labor Minister Ioan Botis told lawmakers in Parliament after the vote. “It is a responsible vote for the future of Romania.”

Presidential Action

The pension law now goes to Basescu, who refused in October to sign it. Instead, he sent it back to Parliament requesting a reduction of the proposed women’s retirement age to 63 years from 65 years, as contained in the initial pension law approved by lawmakers on Sept. 16.

The new retirement age will take effect in 2030, with everyone who has contributed to the system for at least 15 years qualifying for a pension. The law also links future pension increases to the inflation rate as opposed to the current average monthly wage tied to raises.

Romania’s government took the first step toward meeting the IMF’s conditions late yesterday by approving a budget draft for 2011. It sent the proposal to the Parliament today for debate and approval by the end of the year.

The draft foresees spending cuts to reach a deficit of 4.4 percent of gross domestic product next year from a target of 6.8 percent in 2010, Finance Minister Gheorghe Ialomitianu said in an e-mailed statement. In 2010 the government raised a value- added tax by 5 percentage points, to 24 percent, and cut public wages to keep Romania’s IMF-led bailout on track.

The budget envisages economic growth of 1.5 percent next year. Output will probably contract for a second year in 2010, possibly as much as 2 percent.

The leu strengthened 0.2 percent to 4.2997 per euro as of 4:23 p.m. in Bucharest trading.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Romanian Banks’ Bad Loans to Peak Mid-2011, Fitch Ratings Says

Romanian banks, mired in the second- biggest recession in the European Union, will probably see bad loans peak in mid-2011, according to Fitch Ratings.

A recession caused by government payroll cuts and tax increases led banks’ doubtful and loss loans to surge to 20.2 percent of total credit at the end of the third quarter from 6.5 percent at the end of 2008, Fitch analysts led by James Watson said today in a statement.

A sharp depreciation of the Romanian leu would increase the cost of monthly instalments, as 63 percent of total lending at the end of September was in foreign currency, and put further pressure on the banks’ asset quality, according to Fitch.

“The economic contraction negatively affected the banking system’s asset quality during 2009 and the first nine months of this year,” Fitch said.

Romania’s banking industry is struggling with bad loans as its lingering recession hampers customers’ ability to repay debts. Romania’s economy will probably shrink 2 percent in 2010 as austerity measures damp demand and grow as much as 2.5 percent next year, Fitch said.

The Balkan nation’s banking industry is dominated by Austrian banks, which control 38.4 percent of the market, followed by Greek banks with 17 percent and French banks with 14.8 percent. BCR, owned by Erste Group Bank AG, is the country’s largest bank by assets. BRD-Groupe Societe Generale ranks second.

Fitch today affirmed the individual ratings of five Romanian banks controlled by international lenders, including BCR, BRD and Unicredit Tiriac Bank SA, based on “institutional support from their ultimate controlling shareholders.”

The ratings company said the Romanian banking sector has “comfortable” liquidity, which “should give banks significant financial flexibility in working out asset quality problems.”

To contact the reporter on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague

Tuesday, December 7, 2010

Romanian Government Approved 2011 Budget With Lower Budget Gap

Dec. 7 (Bloomberg) -- Romania’s government approved a budget draft for 2011 late yesterday to qualify for international bailout loans, and will send it to Parliament for debate and approval by the end of this year.

The 2011 budget plan foresees spending cuts to target a deficit of 4.4 percent of GDP next year, from a target of 6.8 percent this year, after the government raised a value-added tax and cut public wages to keep its International Monetary Fund-led bailout going, Finance Minister Gheorghe Ialomitianu said in an e-mailed statement. The budget envisages economic growth of 1.5 percent next year, after output will probably contract for a second year in 2010 and shrink as much as 2 percent.

Monday, December 6, 2010

Pensions in Hungary and Romania

The Economist's Ex-communist Europe
Eastern approaches
Pensions in Hungary and Romania

Get rich quick

Dec 2nd 2010 by T.E. | BUDAPEST

AS HUNGARY pushes forward with plans to encourage people to give their pension savings to the government, similarly cash-strapped Romania is experimenting with equally inventive ways of conjuring money up out of nowhere.

At the recent annual general meeting of Romgaz, Romania's largest gas producer, the government, which owns 85% of the company, voted for it to donate 400m lei ($122m) to the state budget to help the country meet its budget-deficit targets.

The other 15% of the company is in the hands of Fondul Proprietatea, an investment fund set up in 2005 to recompense those who had property expropriated under Romania’s communist regime. The fund was endowed with holdings in state companies, and victims were given shares in it.

The irony of the government extracting assets from a fund designed to compensate victims of expropriation is not lost on Mark Mobius, head of the emerging-markets arm of Franklin Templeton, a fund manager that administers Fondul Proprietatea, and that issuing the Romanian government. Voting dividends to all shareholders would have been fine, Mr Mobius says, but transferring a lump sum to the treasury is going too far.

“This is short-termism,” he says. “The government is up against the wall with its state budget, and they aren’t aware of the long-term impact of what they’re doing.”
The €3.5 billion ($4.6 billion) fund is scheduled to float on the Bucharest stock exchange next year, making it easier for people who have been awarded shares to realise their returns. “If people get the idea that assets can be confiscated at will, it’s going to hit asset values.”

Unlike Hungary, Romania is still sticking to an IMF-led austerity programme. Cuts of 25% to public-sector wages, benefit drops and a 5% VAT hike have not made life easy for the government. Though plans to raid pension funds periodically surface, the IMF has vetoed them, as it did in Hungary’s case before the country turned its back on the multilateral lender.

“This is a problem we are facing in eastern Europe, because they desperately need the cash,” says Mr Mobius. “At least in the case of Hungary, they are going through the motions of proper procedure.”

But the details of Hungary’s emergency cash-raising plan—under which 3m pension savers are being asked to give some €10 billion of their pension assets to the government if they want to receive a state pension when they retire—might lead Mr Mobius to question this. Although the government says those who do not hand over their cash will lose their state pension entitlement, two opposition parties have stated that they will revisit this decision if they win power.

For many savers, the choice is between the certainty of losing their savings if they return to the state pension system, and the risk that a future government won’t change its mind over the decades until their retirement. Staying private is looking like an increasingly good bet.

But there’s a snag. According to the legislation just passed, those who want to keep their savings have to make the declaration in person at one of the country’s 33 pension administration offices before January 31st. According to one calculation, if just one third of existing fund members choose to stay private, those 33 customer services centres would have to process an unrealistic one client every 30 seconds for the whole of January.

People wishing to exercise what the government has called their “freedom to choose” will have to take a day off work, travel to an office that may be in another town, and spend hours queuing outside in the middle of an icy central European winter.

Romanian Banks Get $758 Million in Capital Boosts in 11 Months

Romanian banks, 90 percent of which are foreign owned, got capital injections worth 572 million euros ($758 million) through November to help withstand shocks, said Nicolae Cinteza, the central bank’s bank supervision chief.

Banks including Banca Comerciala Romana SA and BRD-Groupe Societe Generale SA, agreed with the International Monetary Fund, the European Union and the Romanian central bank to keep money in the country and boost capital to meet a 10 percent solvency ratio threshold. The parent banks have also brought in an additional 75 million euros in funds for lending, Cinteza said in a phone interview from Bucharest today.

Romania’s banking industry is struggling with bad loans as its lingering recession hampers customers’ ability to repay debts. Parent banks have funnelled about 450 million euros in their units in the east European country to strengthen their capital over the past 12 months, BCR Chief Executive Officer Dominic Bruynseels said yesterday in an interview in Bucharest.

“I think banks are very important in a situation in which an economy needs to recover and banks themselves of course are rebuilding their capital positions as well,” he said. “Banks are rebuilding their balance sheets and making sure they meet the requirements of the central bank and that’s a good thing because it will help the economy come out of recession sooner.”

The country, which took an IMF-led 20 billion-euro bailout last year, will probably see its economy contract 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 Balkan nation’s banking industry is dominated by Austrian banks, which control 38.4 percent of the market, followed by Greek banks with 17 percent and French banks with 14.8 percent. BCR, owned by Erste Group Bank AG, is the country’s largest bank by assets. BRD-Groupe Societe Generale ranks second.

To contact the reporters on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez in Prague