Monday, February 28, 2011

Erste Romania Unit BCR 2010 Profit Falls 47% on Bad Loans

Banca Comerciala Romana SA, Romania’s largest bank by assets, said its full-year profit fell 47 percent in 2010 on problem loans.

Net income dropped to 465 million lei ($152 million) from 872 million lei in 2009, the Bucharest-based bank said today in an e-mailed statement. Net-interest income, or the difference between money paid on deposits and earnings on loans, fell 2.3 percent in 2010 to 3.75 billion lei from 3.84 billion on lower lending demand and falling interest rates.

Romania’s banking industry, which is about 90 percent controlled by international banks, has been hampered by non- performing loans as a two-year economic contraction left citizens unable to obtain new loans or pay for homes, cars and foreign vacations they bought on credit. The level of bad loans isn’t likely to decrease in the short term, BCR said.

“The results are heavily impacted by the continuing difficult market conditions in Romania,” BCR’s Chief Executive Officer Dominic Bruynseels said in the statement “The economy was subject to a significant austerity program and a value-added tax rise, the effects of which are still being felt.”

Provisions for bad loans fell 14 percent to 2 billion lei from 2.3 billion, as problem loans stopped growing toward the end of the year on lower interest rates, a stable local currency and reduced retail lending provisions, the bank said.

Bad loans rose to 16.8 percent of lending in 2010 from 13.1 percent at the end of 2009. Most problem loans were too small businesses and households hit by a 5 percentage-point increase in the value-added-tax and 25 percent cut in public pay last year, BCR said.

Total assets at the bank, which is majority-owned by Austria’s Erste Group Bank AG, advanced 6 percent to 73.6 billion lei in 2010, accounting for about 22.2 percent of the lending market, from 69.4 billion lei at the end of 2009, helped by improved corporate lending and mortgages, the bank 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 at jagomez@bloomberg.net

Romania Signs Oil Exploration Agreements for Eight Blocks



Romania signed oil exploration agreements with seven companies including Audax Resources Ltd., OAO Lukoil and Vanco International for eight blocks in the country, according to the National Agency for Mineral Resources.

The eastern European country completed yesterday the agreements for the onshore and offshore exploration blocks awarded with 12 others last year, the agency said in a statement on its website.

Audax, an Australian minerals and gold explorer, Clara Petroleum Ltd., Universal Premium SA, Ireland-based Moesia Oil and Gas Plc were awarded licenses for five on-shore exploration blocks, while Petro Ventures Europe BV and a venture between Lukoil and Vanco got licenses for three blocks in Romania’s Black Sea waters.

Lukoil, Russia’s second-largest oil producer, said yesterday its venture will seek to identify structures and then hold talks with Romania on drilling terms. A three-dimensional seismic study will be performed to assess the structures of the Est Rapsodia and Trident blocks, which lie in water at depths of 90 meters to 1,000 meters (0.6 mile), according to Grigory Volchek, a spokesman for Lukoil Overseas.

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

Friday, February 25, 2011

Romanian Government Seeks Confidence Vote on Labor, Boc Told TVR

Romania’s government will seek a confidence vote in Parliament next week as it plans a fast-track approval of labor legislation changes, Prime Minister Emil Boc said late yesterday at the public television station TVR.

The opposition parties will probably try to oust Boc through a no-confidence motion, the head of the social-democrats Victor Ponta said last week. Boc said the ruling coalition agreed on the vote and he is optimistic that the changes will be approved and his government will survive.

Boc, who survived four no-confidence votes in 2010 over his administration’s austerity measures, is counting on a majority of 249 votes in a 470-seated Parliament to survive. The opposition needs 236 votes to oust the government. President Traian Basescu said on Feb. 15 that the cabinet needed “another governing style” and he opened talks with coalition parties to regain confidence in the government.

A decision on potential changes in the government will be made after the junior coalition party of ethnic Hungarians holds internal elections on Feb. 26-27, Basescu said.

“I think the changes in the labor legislation will pass, I’m not scared of a new no-confidence vote” Boc told TVR. “Through these changes we try to make the labor market more flexible, introduce contracts for temporary workers and increase sanctions for black market labor while insuring higher social protection for the employees.”

The government also plans to reduce the social contributions for health, pension and unemployment this year and the percentage will depend on the economic situation, Boc said.

The ruling coalition, facing elections next year, lost public support after public-pay cuts and tax increases to qualify for the bailout. The economy contracted on an annual basis for an eighth quarter in the final three months of last year. The government forecasts 1.5 percent growth this year.

Backing for Boc’s Liberal Democratic Party was cut in half in a year to 18 percent, after it pushed through the austerity measures, according to a poll conducted on Jan. 8 and Jan. 9 by the Bucharest-based polling company CCSB.

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

Thursday, February 24, 2011

Romanian SF writer Ion Hobana dies at 80

The Associated Press
Wednesday, February 23, 2011

BUCHAREST, Romania -- Ion Hobana, Romania's best-known science fiction writer whose works were translated abroad has died. He was 80.

Sorin Hobana said his father died late Tuesday in a Bucharest hospital.

Some of Hobana's stories were included in international anthologies, such as "The Penguin World Omnibus of Science Fiction" and "Twenty Houses of the Zodiac."

His last book, a history of French science fiction before 1900, was published in November.

Two volumes on UFOs, co-authored by Julian Weverbergh were published in the Netherlands in 1970s. The books were translated into English, French and Spanish.

Hobana received several awards for his works, including one from Poland's Ministry of Culture and Arts.

Romania sends evcuation plane to Libya

BUCHAREST, Feb 23, 2011 (AFP) - Bucharest will send a charter plane to Tripoli to evacuate Romanians from the violence Libya, Foreign Minister Teodor Baconschi said Wednesday.

"A charter from Tarom (the national airline) is being prepared to go there today or tomorrow", Baconschi said quoted by Mediafax news agency.


The plane will probably make two flights, a ministry spokeswoman told AFP, adding that the subject is to be discussed later in the day during a government's meeting.

According to Baconschi, 80 Romanians have already fled Libya. About 500 Romanians were in the African country when violence started.

Wednesday, February 23, 2011

Romania nuclear units could be delayed past 2017

BUCHAREST, Feb 23 (Reuters) - Two planned units at Romania's sole nuclear power plant could be delayed past the current 2017 deadline, an economy ministry official said on Wednesday.

Romania, which already has two 706 megawatt reactors at its Cernavoda plant -- accounting for a fifth of its power output -- planned to build the reactors in partnership with six firms.

But the project took a hit after Germany's RWE (RWEG.DE: Quote), Spain's Iberdrola (IBE.MC: Quote) and French GDF Suez (GSZ.PA: Quote) withdrew last month, following the departure of Czech CEZ (CEZPsp.PR:Quote).

Romania is now left shouldering a heavier share of the project, estimated at roughly 4 billion euros and has said it will seek new investors.

"A delay is possible because the preparation part takes longer than estimated," ministry adviser Tudor Serban told reporters on the sidelines of a financial seminar.

Analysts have said the delay poses risks to future supplies, as Romania will need to shut down and replace a third of its power units by 2020. Its last major power generation project was its second nuclear unit which went on stream in 2007.

Serban said South Korean, Chinese, Russian and American firms, including Bechtel, had shown interest in partnering the state for the units, but no definite intentions were announced.

Asked whether its remaining partners, Italy's Enel (ENEI.MI: Quote) and a local unit of ArcelorMittal (ISPA.AS: Quote), were interested in raising their stakes in the units, Serban said: "In theory, yes. In fact, they want to know the extent to which the Romanian government is committed to the project."

Serban also said the ministry expected installed wind energy in Romania to jump to up to 3,000 megawatts in the next two-three years. (Reporting by Luiza Ilie; editing by James Jukwey)

Ceausescu’s grisly legacy: Romanian women endured 22m abortions after dictator’s ban on contraception

By Daily Mail Reporter
22nd February 2011

Shocking health statistics have revealed how Romanian women went through more than 22 million abortions as a result of policies introduced by Communist dictator Nicolae Ceausescu.

Official government records have revealed that between 1958 and 2008 state clinics carried out 22.1 million terminations in a country with a population of just 21.5 million.

But, warn Health Ministry aides, the true figure could be even higher as tens of thousands of pregnant women carried our DIY abortions or attended illegal clinics.

Experts say the figures came from dictator Nicolae Ceausescu's drive to push up the country's population by banning all forms of contraception.

One victim of the regime Raluca Ionescu - who has had 32 abortions - said: "I never thought about them as children, you know, just as a growth or something that needs to be taken care of.

"I first became pregnant when I was 13. My mother took me first to the clinic, then after that I went on my own."

Ceausescu and his wife Elena were both unceremoniously executed in 1989 shortly after being swept from power.

It was in the Romanian city of Timisoara that the revolution that toppled Eastern Europe’s most oppressive dictator started.

Residents flocked to the defence of an ethnic Hungarian dissident pastor who was being threatened with forced relocation.

The next day, police, army and secret service units began firing at protesters, the start of six days of fighting that subsequently spilled over to Bucharest and led to the toppling of Ceausescu.

More than 1,000 people were killed in the sole violent upheaval of the revolutions that swept communists from power across Eastern Europe 20 years ago.

Of those, 118 were killed in Timisoara, the city near Romania's western border with Hungary and Serbia.
The city’s mayor, Gheorghe Ciuhandru, said the revolutionaries who prompted Ceausescu's downfall should be proud the uprising started there.

However, he said that 20 years after Ceausescu was toppled and executed, Romania was still marred by 'lies, manipulation, hatred ... and widespread poverty,' referring to a deep recession and a bitterly disputed presidential election.

The Timisoara revolt started on December 16, 1989, when authorities tried to forcibly move ethnic Hungarian pastor Laszlo Toekes to a remote rural parish.

Supporters gathered outside his house and soon the site was teeming with protesters.

Ceausescu and his wife Elena were executed after a summary trial on Christmas Day.

His brutal reign was underpinned by the notorious Securitate who had an army of an estimated 700,000 informers - about 1 in 20 Romanians - to stifle dissent during 25 years of harsh rule.

Toward the end of the Ceausescu era, ordinary Romanians suffered through harsh rationing and severe powercuts, as the dictator tried to pay off the country's foreign debt.

Today, Romania is still drowning in debt - with foreign obligations of almost £70 billion.

Although it joined the European Union in 2007, the nation remains deeply troubled, plagued by corruption, mired in deep recession, and paralysed by political infighting.

Monday, February 21, 2011

The Rootless Roma

From the March - April 2011 The American Interest issue:The Rootless Roma
Diana Muir Appelbaum

Sometimes a truth is revealed more by its absence than its presence. So it is with the Gypsy, or Roma, people, whose circumstances tell us more about the broad social and political functions of nationalism than one at first might think.

The Roma are at the bottom of the European ethnic heap, under-housed, undereducated, underemployed, underserved, underrepresented and actively discriminated against by landlords, employers, school administrators and governments. Their fate differs from country to country; Roma appear to be better integrated and more content in Spain, for example, than in Romania.1 But nowhere is their situation good.

At the core of the Roma’s troubles is the fact that they are a people without a land—but with a twist. To say that a people is without a land can mean at least three things. It can mean that, for one reason or another, a people does not in the main live in the land with which it is historically associated. That was true, of course, of the Jews for most of the past 2,000 years. But it has been true, too, for what are sometimes called projection states—states defined by the fact that more members of a particular group live outside their homeland than within it. That was the case for Greeks during much of the 19th century, and it is true for Lebanese and Armenians today.

For a people to be without a land can also refer to a lack of sovereign control over a territory or country in which, in fact, most of the national group does live. That is the case today for the many peoples, including the Kurds, Puerto Ricans, Berber, Baloch, Palestinians, Basques, Aymara and Quechua.

But the Roma are different, if not unique.2 The Roma are “without a land”, and thus by definition without a state, not only because they have no history of attachment to a particular territory, but because Gypsy culture does not value attachment to place....



READ MORE at
http://www.the-american-interest.com/article.cfm?piece=941

AP: Romanian city mayor charged with corruption

BUCHAREST, Romania -- Romanian anti-corruption prosecutors say a city mayor and his deputy have been charged with abusing their positions in a corruption scandal which cost the city 700,000 lei (US$228,000).

They say mayor Ovidiu Hada and his deputy, Nicolae Dan, from the western city of Hunedoara, signed contracts between the city hall and a local company for renting a digger, and goods and services from companies whose owner also worked for city hall.

Prosecutors said Friday the funds were then redirected to a non-governmental organization run by the mayor's father.

The council estimated losses of 700,000 lei (US$228,000) from the contracts.

Corruption is widespread in Romania.

In the last year, authorities have charged several mayors and officials with corruption.

Romania encouraged by 'positive' EU report: minister

18 February 2011
(BUCHAREST) - Romania said Friday it felt encouraged by the European Commission's "positive" report on its progress in judiciary reforms and the fight against corruption and pledged to step up efforts in this field.

"This is a positive report, maybe the best we have obtained since the monitoring system was established" in 2007, when the Balkan country joined the EU, Justice Minister Catalin Predoiu told a press conference.

"But we should not delude ourselves: all problems have not been solved yet," he added.

The Commission's report on Romania lamented that "important high-level corruption cases have seen little movement in court" since the prevoius assessment, in July 2010, while parliament "prevented investigations into allegations of corruption by a former minister".

But the EU executive praised Romania for giving a "constructive" response to recommendations made in the July report, which had criticised Bucharest for "significant shortcomings" and insufficient political will to reform.

Romania took "several important steps" to speed the handling of legal cases and prepared proposals to boost the recruitment and training of magistrates, the report said.

Predoiu welcomed the EU executive's conclusion regarding the authorities' "proven political will to go ahead with the reforms" and called on all political parties to join in this effort.

"It is important to maintain the positive trends and for this political support is crucial," he said.

"Romania's politicians must choose between European modernity and post-Communism past, between justice and injustice, between integrity and corruption," Predoiu stressed.

The Commission will issue its next reports on Romania and neighbouring Bulgaria in July.

Romania, Bulgaria crack down on corruption

BRUSSELS, Feb. 19 (UPI) -- Romania and Bulgaria have made "significant progress" in tackling official corruption, the European Union Commission says.

The preliminary report released Friday also found both countries still have steps they need to take, the EUobserver reported. They include building strong and independent police forces and corps of judges and prosecutors.

The report cited Bulgaria's creation of special courts to deal with corruption and the arrest in Romania of more than 50 immigration and customs agents.

"This report does take note of the significant progress since July, but it's not an exhaustive assessment, which will take place in summer," Pia Ahrenkilde Hansen, a spokeswoman for the commission, told reporters.

Romania and Bulgaria are eager to join the Schengen Area. The area, which allows travel without border controls between its members, includes most of the EU except Britain and Ireland, Romania and Bulgaria, and three non-member countries, Iceland, Norway and Switzerland.

France and Germany have both objected to admitting Romania and Bulgaria to Schengen. Some other countries have suggested postponing action because their application provides more leverage to get the two countries to reduce corruption.

Wednesday, February 16, 2011

Vodafone, Orange fined 63 mn euros in Romania

(AFP)

BUCHAREST — Romania's competition watchdog on Tuesday said it had fined giant mobile phone operators Orange and Vodafone a total of 63 million euros ($85 million) for abusing their dominant position.

"The Romanian competition council has fined Orange 34.8 million euros and Vodafone 28.3 million euros for abusing their dominant position," it said in a statement.

The fines amount to "about three percent of Orange and Vodafone revenues (in Romania) in 2010," the president of the competition watchdog Bogdan Chiritoiu said in a Mediafax news agency report.

Telecoms company Netmaster Communications SRL launched a complaint with the regulator in 2006, charging that France's Orange and Britain's Vodafone were not allowing it access to their networks.

According to the regulator, the two operators also tried to charge Netmaster Communications more than the authorized maximum price for interconnection to their networks.

Vodafone and Orange rejected the charges and said they would challenge the ruling in court.

Orange counts more than 10 million customers in Romania and Vodafone over nine million.

Tuesday, February 15, 2011

Romanian Treasury Yields to Remain Around 7%, BRD Official Says

Romanian debt yields may remain around 7 percent as concern about inflation prevents a further decline in borrowing costs, BRD-Groupe Societe Generale SA Deputy Chief Executive Officer Claudiu Cercel said.

Yields have declined on debt of various maturities and auction demand has risen in the past two months amid confidence the Balkan country is meeting demands to narrow its budget deficit.

“It’s pretty hard to believe yields will continue to decline,” Cercel said yesterday in an interview in Bucharest. “Even if there is excess liquidity in the market, we are facing some concerns about future potential inflationary pressures and that’s why I think we would see stabilization at the current levels close to 7 percent.”

BRD-Groupe Societe Generale, the second-largest bank in Romania by assets, took about 900 million euros ($1.2 billion) in Treasuries last year and will seek to retain its ranking as the second-biggest buyer of state debt this year, Cercel said, without specifying how much it bought in 2009.
Austerity Measures

Romania, which has been counting on international bailout funds to stay afloat since 2009, has sold more debt than planned so far this year after the government pushed a 2011 austerity budget and key legislation through Parliament to meet International Monetary Fund-agreed conditions, which boosted investor sentiment.

The average yield on five-year bonds declined to 7.16 percent at an auction on Feb. 3 from 7.27 percent on Dec. 23, while six-month bill yields fell to 6.55 percent today at an auction from 6.96 percent on Nov. 15.

The Balkan nation, which turned to the IMF, the European Union and other lenders for a 20 billion-euro bailout in 2009, found buyers for 10.3 billion lei ($3.3 billion) of its debt in January and February compared with an initial auction plan of 8.2 billion lei.

The government plans to tap international markets this quarter to raise about 1 billion euros in euro-denominated bonds to reduce borrowing costs and help keep its budget deficit at 4.4 percent of gross domestic product this year, Deputy Finance Minister Bogdan Dragoi said on Jan. 18. Romania last sold euro- denominated bonds paying a 5 percent coupon in March last year and raised 1 billion euros.
‘Cost of Eurobonds’

“The cost of the eurobonds will be calculated based on the same algorithm as before, so if you look at the swap-rate of German bunds, our benchmark, and you add the cost of risk, the credit-default swaps, then it’s clear that the yield will be between 5 percent to 6 percent,” Cercel said.

BRD, majority-owned by France’s Societe Generale SA, said today net income fell 36 percent in 2010 to 501 million lei as a lingering recession prompted higher bad-loan costs.

“We can’t say that BRD’s activity increased in 2010 and the first part of 2011 will remain difficult, but we hope that once the economy recovers in the second half, demand for credits will pick up as well and maybe bad-loan growth will ease,” Chief Executive Officer Guy Poupet said at a press conference in Bucharest today.

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 at jagomez@bloomberg.net

Romania opens tender for adviser on Petrom listing

BUCHAREST Feb 15 (Reuters) - Romania is calling for bids from companies interested to advise on the listing of a 9.8 percent stake in top oil and gas firm Petrom (SNPP.BX: Quote) by March 9, the economy ministry said on Tuesday.

Romania owns a 21 percent stake in Petrom, which is majority controlled by Austria's OMV (OMVV.VI: Quote). Fondul Proprietatea (FP.BX: Quote), an investment fund set up to compensate Romanians whose assets were seized under communism, owns another 20 percent.

The listing is part of a government plan to raise some 2.9 billion lei ($922.1 million) this year on the Bucharest bourse, under terms of a 20 billion euro ($27.01 billion) International Monetary Fund-led bailout. [ID:nLDE70I1YJ]

Other listings planned include 15 percent stakes in state-owned power and gas utilities Transelectrica (TSEL.BX: Quote) and Transgaz (TGNM.BX: Quote) and in gas producer Romgaz, which is not listed. ($1=3.145 Lei) ($1=.7404 Euro) (Reporting by Luiza Ilie; Editing by Hans

Sunday, February 13, 2011

Romania may get even tougher on witches

BUCHAREST, Romania (AP) — There's more bad news in the cards for Romania's beleaguered witches.

A month after Romanian authorities began taxing them for their trade, the country's soothsayers and fortune tellers are cursing a new bill that threatens fines or even prison if their predictions don't come true.

Superstition is a serious matter in the land of Dracula, and officials have turned to witches to help the recession-hit country collect more money and crack down on tax evasion.

Witches argue they shouldn't be blamed for the failure of their tools.

"They can't condemn witches, they should condemn the cards," Queen Witch Bratara Buzea told The Associated Press by telephone.

Critics say the proposal is a ruse to deflect public attention from the country's many problems. In 2009, Romania needed a euro20 billion ($27.31 billion) International Monetary Fund-led bailout loan to pay salaries and pensions when its economy contracted more than 7 percent. Last year, the economy shrank again. However, this year a slight recovery of 1.5 percent growth is forecast.

European Union and Romanian officials say local authorities are hampered by political bickering and bureaucracy. The centrist government is unpopular, the opposition is weak, the press thrives on conspiracy and personal attacks, and EU officials say the justice system needs to be reformed. Romanians are jaded and mistrustful.

"The government doesn't have real solutions, so it invents problems," said Stelian Tanase, a well-known Romanian political commentator. "This is the government that this country deserves."

In January, the government changed labor laws to officially recognize the centuries-old practice of witchcraft as a taxable profession, prompting angry witches to dump poisonous mandrake into the Danube in an attempt to put a hex on them.

The latest bill was passed in the Senate last week, but must still be approved by a financial and labor committee and by the Chamber of Deputies, the other house of Romania's parliament.

Bratara called the proposed bill overblown. "I will fight until my last breath for this not to be passed," she said.

Sometimes, she argued, people don't provide their real identities, dates of birth or other personal details, which could skew a seer's predictions. "What about when the client gives false details about themselves? We can't be blamed for that."

The new bill would also require witches to have a permit, to provide their customers with receipts and bar them from practicing near schools and churches.

Tanase has a solution.

"Maybe they should put a spell on (Prime Minister Emil) Boc and (President Traian) Basescu, so they can find the solutions," he said.

Read more: http://www.timesunion.com/news/article/Romania-may-get-even-tougher-on-witches-1002389.php#ixzz1Drbx9VDs

ANALYSIS-Better on paper, but Romania shunned for Hungary

By Michael Winfrey

PRAGUE, Feb 11 (Reuters) - Emerging Europe's two main economies to receive IMF bailouts, Hungary and Romania, are taking starkly different approaches towards recovery, but the latter's pursuit of orthodox policy is failing to woo investors.

Even with most economists skeptical of Budapest's focus on stimulating demand rather than cutting budget flab, analysts say the draw of relatively high bond yields and its more liquid markets is keeping investors in play for now.

Romania's path to growth of 4.0-4.5 percent in 2012 -- a cost-cutting campaign sanctioned by the International Monetary Fund -- looks more convincing, they say. But its markets are still so small that investors in central and eastern Europe do not feel obliged to get involved.

"They are both trying to tackle fiscal problems by taking different approaches. But the market realities are also very different," said Barclay's Capital strategist Koon Chow.

"They've got different debt, liquidity benchmark inflows, and differ in how policymakers in Romania have been able to control nearly every element of the market by intervention and by not selling bonds above a certain yield."

The IMF forecasts Hungary's growth next year at just 3 percent, but right-wing Prime Minister Viktor Orban is aiming for 5 percent, having shunned IMF advice to cut public spending that makes up 50 percent of the economy.

Despite its debt carrying "junk" ratings status Romanian CDS prices to insure against default were $260,260 per $10 million in debt on Friday, while Hungary, which is rated one notch above that, was priced a more risky $275,730.

But the forint currency has outperformed Romania's leu, rising 2 percent this year versus a fall of 0.7 percent.

PRO-GROWTH?

The IMF and the European Commission bailed out Hungary and Romania at the height of the crisis with two 20 billion euro emergency aid packages that called for painful austerity to cut debt and put the countries on a path towards sustainable growth.

While Romanian Prime Minister Emil Boc is struggling to stick to that advice by cutting pensions, state wages, and other costs, Orban chose not to extend his IMF deal and is funding spending and tax cuts with levies on big business and the "renationalisation" of some $14 billion in pension funds.

There is a chance he could meet his 5-percent growth target, helped by a boost for manufacturing when an 800 million euro Daimler AG comes on line in 2012 and an Audi plant finishes a smaller but similar expansion a year later.

But the IMF and Hungary's former budget council -- disbanded by Orban last year -- both forecast growth falling well short and the IMF sees the budget deficit ballooning to more than 7 percent of GDP as a result.

This month, the Fund recommended Budapest cut spending by about 4 percent of GDP because, at about half of the entire economy, Hungary's public spending is much larger than in its regional peers. It also said Orban's tax cuts may undercut domestic demand, leading to weaker than expected tax income.

"The government's strategy is risky as it needs the otherwise costly tax cuts to trigger a strong response in economic activity, which may not materialize," the IMF said earlier this month.

WAIT AND SEE

In the short term, however, investors say the extra taxes and pension grab mean Hungary can finance itself at least this year, alleviating at least some worry that Orban will take the country backwards with unsustainable budget policies.

The market is now watching for details of a three-year, 600-650 billion forint ($2.98-$3.23 billion) deficit reduction plan pledged by his government to address those fears.

After a series of communication missteps, investors are skittish, and this week bond yields rose and the forint stumbled when media reported the cabinet government was struggling to find areas for spending cuts -- worth some 2 to 3 percent of GDP -- meant to make up two thirds of the package. [ID:nLDE7190XY]

"If the government does not deliver, then the market might take another point of view from the one they've been taking so far," said BNP Paribas strategist Elisabeth Gruie.

But the strategists still saw most market players preferring Hungary over Romania, whose smaller markets have little participation from foreign investors and fewer assets to buy.

The Romanian central bank intervened to keep the currency in a tight band of around 4.1-4.3 per euro last year and the government frequently baulks at selling debt at high yields, reducing opportunities to dip in.

"People give Hungary the benefit of the doubt because it's quite an actively traded market. People expect a bit of a helter skelter ride there," said Nigel Rendell, a strategist at RBC.

"They are prepared to live with that because if you look at the yields, they are 6 percent, versus 3.5 for Poland, and you get a little more return... For Romania, it's going to take a couple more years to come good."

(Editing by Patrick Graham)

Wednesday, February 9, 2011

Romania killing 'pawns' but not 'queens' in EU border-free bid

ANDREW RETTMAN

EUOBSERVER / BRUSSELS - Romania's police trade union has said that recent customs raids hardly scratch the surface of high-level corruption, in a statement set to harm the country's bid to join the Schengen passport-free area.

About 1,200 security officers at 06.00 am local time on Tuesday (8 February) swept down on the homes and checkpoints of border guards working on the Romania-Serbia border, seizing €500,000 of illegal cigarettes and arresting dozens of people.

The operation follows a similar crackdown on the Romania-Ukraine border last week, arresting 70 people for cigarette smuggling.

The latest raid saw Romanian interior minister Traian Igas link border guard trade unions to the problem. "We want to know whether union leaders are with us in fighting ... those involved in crimes," he said in a public statement.

One of the main trade unions, Pro Lex, the same day hit back with a press release of its own however, using a catchy chess metaphor to deride the crackdowns as a superficial image-building effort.

The Pro Lex statement said Bucharest is "killing 'pawns'" (customs officers) while letting "rooks" (high officials in the National Customs Authority), "queens" (politicians who use dirty customs money to fund party activities) and an unnamed "king" get off scott-free.

The statement noted that cigarette smuggling brings in petty cash, but the real problem is a "pyramid scheme" in which officials under-report customs income and siphon off the unreported money into their own pockets. "Romania is not ready for change. The press is not willing to disclose the names of the important chess pieces," it said, noting that a "system of repression" is endangering people's "physical safety" if they speak out against the crooks.

The controversy comes amid Romania's faltering attempt to join Schengen in March, as originally planned.

Laurent Wauquiez, the EU affairs minister of France, which together with Germany has led a campaign to delay Bulgaria and Romania's Schengen entry, on Sunday told Radio France International: "If they are ready in two years their accession will be a fact in two years ... Having in mind the reports that we have received, Bulgaria and Romania will definitely not accede the border-free area in three months, that's for sure."

On top of the cigarettes issue, Mr Wauquiez spoke of "illegal immigration, weapons smuggling, drug smuggling, and child trafficking" as concerns.

Finland's EU affairs minister, Astrid Thors, when asked about the Schengen timetable on Tuesday, said that "sometimes things take time" and mentioned "illegal Roma migrants" as a specific problem.

The sensitivity of the debate was highlighted in a recent letter to EUobserver by a former Romanian customs official in response to this website's previous article about problems on the Romania-Moldova border.

"In a time when France, Germany and Finland say Romania has problems with securing the external border ... such articles appear and inform the EU population about the easy ways to get into EU (via Romania). I am sure this is not a coincidence," the contact said. "I would be happy to hear from you that the articles was not 'ordered'."

Numbers tell story

The Romanian border police's recently-published report (link below) into smuggling activity in 2010 put a series of interesting figures on what happens on Romania's 2,000-km-long future Schengen land border and 20,000-sq-km-maritime area in the Black Sea.

It said border police detected 2,131 foreign citizens involved in illegal migration out of a total 36 million people who crossed the frontier into the EU. The irregular migrants came mostly from Moldova, Turkey, Pakistan, Afghanistan and Iraq, as well as Albania, Iran, Lebanon, Somalia, India, Morocco, Nepal, Ukraine, Palestine, Nigeria, Georgia, Tunisia, Egypt, Serbia, Syria, Sri Lanka and Russia.

The main smuggled goods were: coffee, cigarettes, food products, electronic products and home appliances and textiles. Police also seized over 85 tonnes of heroin and 5 tonnes of gold.

They also detected 82 weapons, 13,036 cartridges and 1.398 kg of explosive substances.

Two recent US diplomatic cables released by WikiLeaks also painted official Romanian arms exporters in a negative light.

The dispatches noted that UK authorities in 2008 blocked a British firm, York Guns, from exporting 130,000 kalashnikovs to Libya via a Ukrainian middle-man due to fears that the guns would end up in Sudan. A Romanian firm was at the same time cleared to sell 100,000 of the guns to Libya, despite the fact that Libya is believed to have only 76,000 people in its armed forces.

Tuesday, February 8, 2011

IMF says Romania's economy is stabilizing


BUCHAREST, Romania (AP) — An International Monetary Fund official says Romania's economy is stabilizing after two years of recession.
Jeffrey Franks says Tuesday Romanian unprofitable state-owned companies must be reformed.
Franks, who heads the IMF mission to the country, says Romania should speed up spending the euro19 billion ($25.75) billion allocated by the European Union. Romania have used only 2 percent of EU funds so far.
Romania's economy has been hard hit by the economic downturn, contracting by 7.1 percent in 2009.
In 2009, Romania took a euro20 billion ($27.11 billion) loan from the IMF, the European Union and the World Bank.
The agreement ends this spring, and Romania is seeking a new euro5 billion loan until 2013, to tap into only in case of emergency. 

Romania a global center for human trafficking

(CNN) -- Romania has become a major transit for the sale of people into the European Union. Victims as young as 12 years old are trafficked into Romania from destinations as far-reaching as Honduras, Afghanistan, the Congo, and China. Once they reach Romania, many of these victims are assigned for passage beyond into Western Europe.

While Romanian law officially prohibits all forms of human trafficking, the country's strategic geographic location -- a crossroads between East and West -- makes it a source, transit and destination country for the people trade. The country's 2007 admission into the European Union brought more relaxed border regulations and enhanced its attraction for international human traffickers.

The U.S. State Department's Trafficking in Persons Report of 2010 found that organized crime networks also target Romanian citizens for export to other European countries. Traffickers commonly use fake identifications and bribe border personnel to bring victims into the country. They then force the victims to work in agricultural and factory production, prostitution, modeling for pornography and street begging.

The agency I run, Not For Sale, has identified Romania as an international hot spot for modern slavery. Our team operating on the ground in this Eastern European country intervened in nearly 140 trafficking cases last year alone.

Romanian authorities say that during the past two years, a Lebanese businessman, Hassan Awdi,persuaded 13 Honduran men and women to travel to Romania under the auspices of helping them find a job. Upon entering the country, officials say, Awdi confiscated their passports and forced them to work without pay for a factory of which he is part owner. The Hondurans eventually managed to escape their trafficker, yet found themselves in a foreign country without identification, resources, or shelter. Not For Sale intervened and helped the victims receive favorable treatment from the Romanian courts and government. The victims recently were repatriated home to Honduras. Awdi was charged with multiple offenses, including human trafficking, but has not yet gone to trial.

By and large, local police turn a blind eye to these crimes and social services for the victims are practically nonexistent. In 2009, the Romanian government minimized the role of the country's principal anti-trafficking arm -- the National Agency Against Trafficking in Persons -- and allocated scant federal funding to provide victim services and anti-trafficking prevention programs.

The burden for addressing human trafficking therefore falls mostly on poorly funded nonprofits. Not For Sale Romania, for example, provides survivors with shelter, medical and psychological services, as well as educational and vocational opportunities. In the best-case scenario, our team reintegrates the survivors into their families, as long as they are not exposed to the risk of being re-trafficked.

Last month I personally tracked the slave trade across Europe. I started my investigation with the women for sale in the showroom windows of Amsterdam, Rotterdam and The Hague. It's tragic to see young girls sold in plain sight in an Amsterdam street and then follow their journey back to a humble village in Romania.

My key source on the ground was the Scarlet Cord, a nonprofit that has been building relationships with sex workers in the red-light districts of the Netherlands since 1987. Their field research reveals that 75% of the sex workers in the Netherlands at the moment originate from the Eastern European countries of Romania, Hungary and Bulgaria. Hungary is also one of the more recent member states of the European Union.

The influx of young girls from Eastern Europe can be directly attributed to the lack of job opportunities at home and the easy access to wealthier European markets. That formula makes young girls an easy target for traffickers who promise lucrative jobs in London, Rome or Amsterdam. The lack of government and police priority on human trafficking across Europe also allows the trade to flourish.

For government and police authorities in Europe to start identifying trafficking victims for who they are -- no longer labeled as illegal immigrants or prostitutes -- will be a necessary step forward. Whenever the poor and vulnerable do not have access to legal justice, they will be exploited. That's a maxim as true in Europe and the United States as it is in India and Kenya.

Hand in hand with a just rule of law must come an entrepreneurial effort to generate real job opportunities in Romania. That economic stimulation is unlikely to come from a top-down grant of financial aid to the national government. More sustained results will be achieved by investments in small- and medium-sized enterprises that can demonstrate a credible business model and generate real jobs for Romanians.

Romania's human trafficking problem does not stay home; it is Europe's crisis as well. The same people who run the people trade are likely candidates for other forms of nefarious crimes that threaten national security. Indeed, the security of all of Europe depends on innovative solutions to what may seem as intractable problems. As long as we keep repeating the same protocols, we are sure to get the same dire results.

The opinions in this commentary are solely those of David Batstone.

Romania economy seen growing up to 2 pct in 2011-PM

Feb 7 (Reuters) - Romania's economy is seen growing up to 2 percent this year and up to 4.5 percent in 2012, helped by Romania's new IMF-led precautionary aid deal, Prime Minister Emil Boc said on Monday.

"The objective of the new deal is economic growth," Boc told reporters one day after the country's president announced the recession-battered state will get a new two-year deal with the International Monetary Fund, European Commission and World Bank. [ID:nLDE7150EH]

"For 2011 we forecast growth of 1.5-2 percent and of 4-4.5 percent for 2012."

The most recent Reuters poll of analysts foresaw growth of 0.5 percent in 2011 against an IMF forecast of 1.5 percent. (Reporting by Luiza Ilie; Editing by Patrick Graham)

Romania could join Schengen before Bulgaria, minister says

euobserver.com
ANDREW WILLIS
01.02.2011

EUOBSERVER / BRUSSELS - Romania's foreign minister Teodor Baconschi has said his country is keen to join the Schengen area at the same time as Bulgaria, but underlined that the rules on joining the visa-free zone do not prevent Romania from entering at an earlier date.

The issue of separate accession dates has become more pertinent following a decision last month by an evaluation group of member states' experts to grant Romania a clean bill of health regarding its compliance with technical accession criteria, while raising concerns over Bulgaria's land borders and its readiness to participate in an intergovernmental database.

"We would like to see the two countries entering at the same date but ... we are still insisting on the principle that you need to evaluate each candidate state on its individual merits," Mr Baconschi told EUobserver in an interview in Brussels on Tuesday (1 February).

"So we don't need to [wait] and it is a risk to renounce that principle because this is the most fair and objective criteria."

EU officials say the accession of the two countries has always been treated as a joint event. They point out that an any attempt by Romania to join the 25-member area before Bulgaria would first require a close assessment of their shared border.

"This takes at least a year," said one official. "While the Danube river makes up the vast majority of this border, placing border guards on bridges are among the actions that would need to be carried out to secure the Schengen area's new external border."

Originally scheduled for March of this year, Romania and Bulgaria's accession hopes also suffered a setback last December following the publication of a letter by the German and French interior ministers, effectively tearing up the original timetable by linking Schengen entry to Sofia and Bucharest's compliance with the 'co-operation and verification mechanism' (CVM).

The European Commission and member states put pressure on the two countries, widely perceived to have been unready for EU membership in 2007, to accept regular monitoring on anti-corruption and judicial reforms efforts under the CVM, rather than delaying membership.

Bucharest is upset at the last-minute link-up however, pointing to the considerable investments it has made in upgrading border security, computer systems and airport infrastructure in order to comply with the old timetable.

"From a legal and political point of view it is incorrect to establish such a connection between the two issues," said Mr Baconschi. "We think CVM is useful, so long as it is used for its original purpose of promoting judicial reform."

While experts say there is a clear logic in linking anti-corruption efforts with accession to a visa-free zone, officials also acknowledge the issue has become caught up with a recent European squabble over Roma migration and upcoming elections in Germany and France.

"There are genuine concerns over corruption in Bulgaria and Romania, but I also get the feeling that the issue has become increasingly political," said one Brussels-based source.

Hungary, current holders of the EU's rotating presidency, has indicated it would like member states to approve the two Schengen applications before the end of this June, but a raft of regional elections in Germany this year, coupled with French presidential elections in May 2012, could result in a much longer delay.

This, warns Mr Baconschi, threatens to fuel Romanian euroscepticism and further aggravate tensions between old and new EU member states.

"We are not in the Desert of Tartars, just to wait without any date for our accession," he said. "It is a matter of responsibility and if we really want to continue the European process we have to play by the rules."

Romania power output flat y/y in 2010

BUCHAREST Feb 8 (Reuters) - Romania's power production was flat last year from 2009, while imports fell 1.0 percent, data from the National Statistics Board showed on Tuesday.

A deep recession depressed demand from households and companies in the last two years, and the economy was expected to contract in 2010 as well due to austerity measures under Romania's IMF-led aid package.

The data showed power output for 2010 stood at 23.2 million tonnes of oil equivalent. Consumption rose 3.8 percent on the year, after falling 8.2 percent in the whole of 2009.

Coal and nuclear-powered electricity production fell 6.6 percent and 1.1 percent, respectively, in 2010, while power produced in hydro plants rose 28.1 percent on the year.

Romania's predominantly state-controlled energy producers are separated into coal, hydro and nuclear power.

The only related firms listed on the local bourse are power grid and gas pipeline operators Transelectrica and Transgaz .

(Reporting by Ioana Patran, Editing by Ed Lane)

Monday, February 7, 2011

Romania: belt and bracesy

ft.com
February 7, 2011
by Chris Bryant

They may not be surprised but investors will certainly feel a degree of relief that Romania has decided to seek a new €5bn precautionary loan with the International Monetary Fund and European Union.

Perhaps wisely, Bucharest has chosen not to follow the example of neighbouring Hungary which decided last summer that it could do without the advice of this roving band of fiscal policy wonks.

Romania hopes of course never to need the funds, which are there as a backstop and a tacit promise to investors that the country is not about to throw out the hard labours of fiscal consolidation with the post-recession bathwaters.

After a cut in public sector wages by 25 per cent in 2010, a 15 per cent reduction in welfare benefits and a 5 percentage point increase in VAT, Romania has convinced most market participants that it is serious about balancing the books.

Many Romanians have yet to be convinced, however, that the pain these measures caused will be worth it in the long term.

The EBRD’s forecast of a 1.1 per cent increase in Romanian GDP in 2011 will barely make a dent in the total economic contraction suffered by the country since the onset of the crisis (A 7.1 per cent decline in GDP 2009 was followed by an approximately 2 per cent drop last year).

Furthermore, the increase in economic output this year is likely to well below the south-east European average of 1.9 per cent growth, not to mention the 3.2 per cent average of central European and the Baltic states (countries with which proud Romania would rather compare itself).

So, whither growth?

Sadly, Romania has no magic wand to wave and few policy tools at its disposal to stimulate growth but there are some low-hanging fruit that might easily be dislodged.

The IMF has repeatedly reminded Romania that getting government arrears permanently under control would provide a dramatic boost to long-suffering Romanian SMEs who sometimes wait months to get paid.

Tapping the €19bn pot of EU structural funds that could help co-finance infrastructure and other worthy projects would also certainly help matters.

Romania’s inability to spend this money (for a variety of rather dull reasons) has been a source of frustration in the past, so too its inability to build decent roads. (Eurostat found last year that Romania had the lowest motorway density in Europe at 2km per 1000 square kms)

But the government claims that absorbing EU funds is now a key priority. Meanwhile investment in infrastructure may also be on the verge of picking up.

Earlier this month, for example, Austrian building behemoth Strabag signed a total of €106m in contracts to upgrade two national roads, with the work set to begin in April.

There are also signs of life in the energy sector. Last month’s listing of Fondul Proprietatea, a property restitution fund consting mainly of holdings in Romanian energy companies has raised the profile of the industry among foreign investors. A spate of energy-related privatizations due later this year could stimulate still further curiosity.

Nor should we forget that European utilities are currently falling over themselves to build wind parks along Romania’s Black Sea coast, which has among the most reliable gusts in Europe.

According to the Europea Wind Energy Association, Romania ranked sixth among EU member states for installed new wind turbine capacity in 2010 and first among new member states.

So as Romania swaps its €20bn IMF facility for a €5bn backstop, there are perhaps grounds for cautious optimism. Romanians will feel that the winds of good fortune are long-overdue.

Romania reaches out for new 'precautionary' loan

VALENTINA POP
EUOBSERVER / BRUSSELS - Romania is about to sign a second, "precautionary" agreement with the EU and the International Monetary Fund worth €5 billion, with a first aid package agreed in 2009 set to run out in May, the country's president said on Sunday (6 February).

"The agreement is necessary because the risks in the region are still high," President Traian Basescu said in a televised address from the Cotroceni palace.

"There's also a political risk in Romania if we consider the elections and that's why I insisted that this agreement be for two years," he explained, adding that the deal is likely to be signed in March.

Under the new agreement, the IMF will earmark €3.6 billion and the EU €1.4 billion in case of an emergency, he said.

Unlike the €20 billion loan contracted in 2009 as recession hit the country, this "precautionary" agreement will not hand out money, but serve as a safety net to reassure investors that austerity measures will remain in place despite campaigning ahead of general elections next year. Mr Basescu insisted that the economy is recovering speedily and that the last payment from the IMF - worth around €1 billion - is not needed anymore.

"Out of the last two payments we will only take the EU one, which is necessary to cover the budget deficit," he said.

Mr Basescu said the government will focus on investments in four key areas: transport infrastructure, energy plants, IT and attracting more EU funds. Currently, the country's economy is still in EU's second worst recession after Greece.

The budget deficit widened to 7.2 percent of GDP in 2009 before narrowing last year to 6.5 percent of GDP last year.

Strikes and public disgruntlement with the government's policies are a regular phenomenon, especially as public payrolls have been cut by 25 percent and VAT increased by 5 points to 24 percent.

A meeting of IMF officials and the country's leading bankers is scheduled for Monday (7 February), two days ahead of the last evaluation report on the 2009 loan.

Meanwhile, in Greece, EU and IMF officials are kicking off an inspection visit aimed at giving a green light to a further payment of €15 billion. Athens has also cut public sector wages, frozen pensions and raised taxes as part of the €110 billion euro bailout agreed last year.

© 2011 EUobserver.com. All rights reserved. Printed on 07.02.2011.

Romania to Secure New 5 Billion-Euro Accord From the IMF, EU

Romania will sign a precautionary accord with the International Monetary Fund and the European Union worth 5 billion euros ($6.8 billion) to provide a safety net during Europe’s sovereign-debt crisis, President Traian Basescu said.

The Balkan nation doesn’t expect to draw money from the two-year agreement, which will reassure investors that disciplined fiscal policies will remain in place through a general election next year as the government narrows the budget deficit to below 3 percent of gross domestic product in 2012, Basescu said yesterday in a televised speech from Bucharest. The IMF will set aside 3.6 billion euros for Romania under the new deal, while the EU may provide 1.4 billion euros in case of an emergency, he said.

“The agreement is necessary because the risks in the region are still high,” Basescu said. “We are in a sovereign- debt crisis and we don’t know how the situation in other countries can evolve. There’s also a political risk in Romania if we consider the elections and that’s why I insisted that this agreement be for two years.”

Romania faces growing public opposition to its austerity program, which it launched to win a 20 billion-euro ($27 billion) bailout in 2009 from the IMF and the EU that it will conclude in May. The government pledged to narrow the gap to 4.4 percent of GDP this year after cutting public payrolls by 25 percent and raising a consumption tax by 5 percentage points to 24 percent. That is weighing on the economy and put Romania into the EU’s second-worst contraction afterGreece in the third quarter.

Credibility

Economic output probably shrank 2 percent in 2010 and will expand 1.5 percent in 2011, according to the Washington-based lender’s projections. An IMF mission is in Bucharest until Feb. 8 to discuss the country’s economic situation.

Romania will sign the precautionary loan in March to strengthen its credibility, upgrade its transportation and energy industries, streamline the fiscal system and help absorb EU funds worth as much as 32 billion euros available through 2013, Basescu said.

The country won’t draw the last tranche of about 1 billion euros from the current agreement scheduled to be released in March because the central bank has enough reserves, Basescu said. The government will draw the last part from the EU to finance the budget deficit, he said.

The government needs to cut its deficit beyond the targets outlined under its current loan accord before its debt is upgraded from junk status, Fitch Ratings and Standard & Poor’s said last month.

Fitch and S&P both rate Romania, the EU’s second-poorest after Bulgaria, with a BB+, the highest junk grade. An improvement to investment status, which depends on spending cuts and implementation of approved wage and pension laws, may not happen this year, analysts at the two rating companies said.

The budget deficit widened to 7.2 percent of GDP in 2009 before narrowing last year to 6.5 percent of GDP last year, Basescu said.

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

Friday, February 4, 2011

Romania PM tightens control as opposition dithers

By Radu Marinas

BUCHAREST, Feb 3 (Reuters) - Romania's Prime Minister Emil Boc has tightened control over his coalition and defeated opposition challenges, and now has a fighting chance in 2012 parliament elections.

Three opposition parties will agree to an alliance this weekend but analysts said this is little more than papering over the cracks and poses no a threat to Boc, in the short term at least.

"Boc stands strong and will keep power in the current formula until 2012," said independent political analyst Mircea Marian. "This year has the potential to be a better one as the economy is slowly recovering following tough measures."

The European Union's second poorest member, which depends on a 20-billion-euro International Monetary Fund-led bailout, has forced through harsh austerity measures that eroded Boc's popularity but did not stop him surviving four confidence votes.

The prime minister instead shored up the centrist coalition by imposing strict discipline on his own party and making concessions to the allied ethnic Hungarians, including a law to allow education in their own language.

Boc's successively wider margins in those confidence votes indicate future such challenges -- the only way to topple the government -- now have only a slim chance of success.

Analysts said the decision of opposition leader Victor Ponta's Social Democrats to strike an alliance with Liberal and Conservative parties will not shift the balance of power in parliament and is rather focused on bolstering support in elections due in late 2012.

The risk of a government collapse dominated market sentiment for much of 2010 and its new-found solidity may mean a smoother ride for investors, easing debt costs and propping up the leu currency.

CLEAR DIRECTION NEEDED

While the government's commitment to the IMF deal has earned investors' confidence, Boc needs to ensure his sometimes unruly ministers stick to the same line, said Robert Luke, managing director at private equity firm GED Capital Development.

"Everybody needs to be on the same page with a clear direction and strong leadership and that's what foreign investors are looking for," Luke said.

The government reformed the outdated pension system, cut wages, sacked thousands of state employees and increased value-added tax to bring the budget deficit below an IMF-agreed target of 6.8 percent of gross domestic product.

Bucharest is currently negotiating a new IMF deal, which would further bolster confidence and give the central bank leeway to resume rate cuts once the inflationary effects of higher VAT start to fade later this year.

It would show Romania's willingness to implement further reforms such as restructuring and privatising inefficient state-owned companies, speeding up local government payment of debts to businesses and improving use of EU funds.

Romania sold 5-year debt at an interest rate of 7.16 percent in its last tender in January -- already lower than late last year -- and this could come down gradually to 6.8 percent by the end of 2011, said Nicolaie Alexandru-Chidesciuc of ING Bank.

GOVERNMENT UNPOPULAR, BUT RECOVERING

The basic numbers still look bad for the government. The new opposition alliance had a combined 64 percent support in the most recent poll, versus just 15 percent for Boc's Democrat Liberals, and could yet force more no-confidence motions.

But with elections still nearly two years away, Boc has time to recover. His grim popularity ratings have already recovered from 10 percent and will probably benefit when an expected economic recovery kicks in later this year.

"The new alliance seems impressive as it coagulates the entire opposition, but it only really has potential to create noise," said political commentator Cristian Patrasconiu.

"The simple fact that they look bigger after pooling forces is not a guarantee that they can overthrow Boc, who can rise if predictions about economic recovery are confirmed."

Opposition MP Eugen Nicolaescu told Reuters it would not file a fresh no-confidence motion before the middle of the year.

"This new alliance made of Liberals, Conservatives and Social Democrats has nothing to offer to lure coalition partners to leave the current power structures," said political analyst Marian.

"It's just a way to present yourself as an alternative to the current government in future elections." (Additional reporting by Sam Cage, Editing by Sonya Hepinstall)

Romanian Transelectrica Plans to Invest $149 Million in Upgrades



Transelectrica SA, Romania’s state- owned grid operator, plans to invest as much as 464 million lei ($149 million) in upgrades, the company said on the government’s official auction webpage.

The company will seek offers until March 17 from companies interested in conducting the upgrade works over three years, according to the statement.

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 in Prague atjagomez@bloomberg.net

Thursday, February 3, 2011

How a Remote Town in Romania Has Become Cybercrime Central

By Yudhijit Bhattacharjee
January 31, 2011
Wired February 2011


Râmnicu Vâlcea has only about 120,000 residents, but among law enforcement experts around the world, it has a nickname: Hackerville. The town is full of online crooks who cruise the streets in expensive European cars.

Three hours outside Bucharest, Romanian National Road 7 begins a gentle ascent into the foothills of the Transylvanian Alps. Meadowlands give way to crumbling houses with chickens in the front yard, laundry flapping on clotheslines. But you know you’ve arrived in the town of Râmnicu Vâlcea when you see the Mercedes-Benz dealership.

It’s in the middle of a grassy field, shiny sedans behind gleaming glass walls. Right next door is another luxury car dealership selling a variety of other high-end European rides. It’s as if the sheer magic of wealth has shimmered the glass-and-steel buildings into being.

In fact, expensive cars choke the streets of Râmnicu Vâlcea’s bustling city center—top-of-the-line BMWs, Audis, and Mercedes driven by twenty- and thirtysomething men sporting gold chains and fidgeting at red lights. I ask my cab driver if these men all have high-paying jobs, and he laughs. Then he holds up his hands, palms down, and wiggles his fingers as if typing on a keyboard. “They steal money on the Internet,” he says.

Among law enforcement officials around the world, the city of 120,000 has a nickname: Hackerville. It’s something of a misnomer; the town is indeed full of online crooks, but only a small percentage of them are actual hackers. Most specialize in ecommerce scams and malware attacks on businesses. According to authorities, these schemes have brought tens of millions of dollars into the area over the past decade, fueling the development of new apartment buildings, nightclubs, and shopping centers. Râmnicu Vâlcea is a town whose business is cybercrime, and business is booming.

At a restaurant in a neighborhood of apartment buildings and gated bungalows, I meet Bogdan Stoica and Alexandru Frunza, two of just four local cops on the digital beat. Stoica, 32, is square-shouldered and stocky, with a mustache and prominent stubble. His expression rarely changes. Frunza, 29, is tall and clean shaven. He’s the funny one. “My English will improve after I have a few beers,” he says. We sit at a table on the edge of a big courtyard, piped-in Romanian pop music blaring.

Stoica and Frunza grew up in Râmnicu Vâlcea. “The only cars on the streets were those made by Dacia,” Stoica says, referring to the venerable Romanian carmaker. Access to information was limited, too: Weekday television consisted of two hours of state-run programming, mostly devoted to covering the dictator, Nicolae Ceauşescu. “We had half an hour of cartoons on Sunday,” Stoica says.

In 1989, a revolution that began with anti-government riots ended with the execution of Ceauşescu and his wife, and the country began the switch to a market economy. By 1998, when Stoica finished high school and went off to the police academy in Bucharest, another revolution was beginning: the Internet. Râmnicu Vâlcea was better off than many towns in this relatively poor country—it had a decades-old chemical plant and a modest tourism industry. But many young men and women struggled to find work.

No one really knows how or why those kids started scamming people on the Internet. “If you find out, you let us know,” says Codruţ Olaru, head of Romania’s Directorate for Investigation on Organized Crime and Terrorism. Whatever the reason, online crime was widespread by 2002. Cybercafés offered cheap Internet access, and crooks in Râmnicu Vâlcea got busy posting fake ads on eBay and other auction sites to lure victims into remitting payments by wire transfer. Eventually, FBI agents in the US and Bucharest started to get interested.

In the early days, the perpetrators weren’t exactly geniuses. One of the first cases out of the region involved a team based in the neighboring town of Piteşti. One crook would post ads for cell phones; the other picked up the wired money for orders that would never ship. The two men had made a few hundred dollars from victims in the US, and the guy receiving the cash hadn’t even bothered to use a fake ID. “I found him sitting in an Internet café, chatting online,” says Costel Ion, a Piteşti cop who had been working the cybercrime beat. “He just confessed.”

But as in any business, the scammers innovated and adapted. One early advance was establishing fake escrow services: Victims would be asked to send payments to these supposedly trustworthy third parties, which had websites that made them look like legitimate companies. The scams got better over the years, too. To explain unbelievably low prices for used cars, for example, a crook would pose as a US soldier stationed abroad, with a vehicle in storage back home that he had to sell. (That tale also established a plausible US contact to receive the money, instead of someone in Romania.) In the early years, the thieves would simply ask for advance payment for the nonexistent vehicle. As word of the scam spread, the sellers began offering to send the cars for inspection—asking for no payment except “shipping.”

The con artists got even sneakier. “They learned to create scenarios,” says Michael Eubanks, an FBI agent in Bucharest. “We’ve seen email between criminals with instructions on how to respond to different questions.” The scammers started hiring English speakers to craft emails to US targets. Specialists emerged to occupy niches in the industry, designing fake websites or coordinating low-level confederates.

By 2005, Romania had become widely known as a haven for online fraud, and buyers became wary of sending money there. The swindlers adapted again, arranging for payments to be wired to other European countries, where accomplices picked up the cash. A new entry level evolved, people who’d act as couriers and money launderers for a cut of the take. These money mules were called arrows, and their existence elevated Râmnicu Vâlcea to a hub of international organized crime.

Many arrows were Romanians living in Western Europe and the US; some were youngsters from Râmnicu Vâlcea who had moved overseas expressly for the job. They’d go to wire transfer offices to collect remittances from victims, then turn around and wire that money—minus a commission—to Râmnicu Vâlcea or to other arrows in the network. The system served as a kind of firewall, making it much more difficult for law enforcement to track the masterminds.

Back home, the local police were starting to realize they needed people on the cybercrime beat full-time. Frunza, who’d studied informatics in high school before attending the police academy, was working drug cases in Bucharest when he decided to come home. He ended up joining Stoica on the hunt for online con artists. The two learned that suspects expect leniency from the police because their crimes target only foreigners. “The guys will often say, ‘I am not stealing from our countrymen,’” Frunza says. “But a crime is a crime. You have to pay for it.”

Nowadays, Stoica and Frunza occasionally find themselves investigating a childhood acquaintance or, conversely, running into known criminals in social situations. Frunza used to play on the same soccer team as a suspect who was under surveillance. Those connections have helped the two cops pose a formidable challenge to the industry.

A little after 11 pm, Stoica hushes our conversation and tells me to turn around and check out a table across the courtyard, where a small group of flashily dressed young men has just arrived with two blond women who seem barely out of their teens. The men are all under investigation. “It’s a small city,” Stoica says.

Defining the town center of Râmnicu Vâlcea is a towering shopping mall that looks like a giant glass igloo. The streets are lined with gleaming storefronts—leather accessories, Italian fashions—serving a demand fueled by illegal income. Near the mall is a nightclub, now closed by police because its backers were shady. New construction grinds ahead on nearly every block. But what really stands out in Râmnicu Vâlcea are the money transfer offices. At least two dozen Western Union locations lie within a four-block area downtown, the company’s black-and-yellow signs proliferating like the Starbucks mermaid circa 2003.

Driving past a block of low-rise buildings with neatly trimmed hedges, Stoica notes a couple of apartments owned by people currently under investigation. “I don’t know if the people of Râmnicu Vâlcea are too smart or too stupid,” Stoica says grimly. “They talk a lot to each other. One guy learns the job from another. They ask their high school friends: ‘Hey, do you want to make some money? I want to use you as an arrow.’ Then the arrow learns to do the scams himself.”

It’s not so different from the forces that turn a neighborhood into, say, New York’s fashion district or the aerospace hub in southern California. “To the extent that some expertise is required, friends and family members of the original entrepreneurs are more likely to have access to those resources than would-be criminals in an isolated location,” says Michael Macy, a Cornell University sociologist who studies social networks. “There may also be local political resources that provide a degree of protection.”

Online thievery as a ticket to the good life spread from the early pioneers to scores of young men, infecting Râmnicu Vâlcea’s social fabric. The con artists were the ones with the nice cars and fancy clothes—the local kids made good. And just as in Silicon Valley, the clustering of operations in one place made it that much easier for more to get started. “There’s a high concentration of people offering the kinds of services you need to build a criminal scheme,” says Gary Dickson, an FBI agent who worked in Bucharest from 2005 to 2010. “If your specialty is auction frauds, you can find a money pick-up guy. If you’re a money pick-up guy, you can find a buyer for your services.”

Stoica and Frunza both complain that they’re fighting an unstoppable tide with limited resources. But they haven’t been entirely unsuccessful—in fact, the 2008 case that first revealed the anatomy of Râmnicu Vâlcea’s fraud networks stemmed from Stoica’s investigation of a young entrepreneur named Romeo Chita.

Stoica says Chita started out as an arrow in the UK, and he was good. He moved up the ranks and eventually hired a few friends to establish his own ring. The Romanian authorities began investigating him in 2006, when he started buying new cars every few months and going to clubs every night with no apparent source of legitimate income. Chita launched an Internet service provider called NetOne, which authorities believe he was using as a shelter for fraudulent activity. When cops wanted to identify his customers, Stoica says, Chita usually told them that NetOne didn’t keep records.

In January 2008, an informant gave Stoica the cell numbers of two men working for Chita. The police tapped the phones, and the next day one of the men sent Chita a text message with money transfer control numbers—unique numeric sequences required to pick up cash. Stoica and his team followed up with surveillance of Chita and his associates, which established what Stoica calls “the money circuit,” the route through which the funds flowed from victims in the US to Chita and others. Prosecutors now allege that the operation turned into something a little more sophisticated than the usual Râmnicu Vâlcea scam. For example, the case against them details a con known as spear phishing—sending email to US companies that appeared to be from the IRS, the Department of Justice, or some other agency. Through Trojan horses attached to these emails, Chita’s group could obtain the companies’ bank account numbers and passwords. Allegedly, they even hired people in Las Vegas—Stoica says some were homeless—to open fake corporate bank accounts and receive the money.

The same month that Stoica began pursuing Chita, a police officer stopped a car for speeding in the Westlake suburb of Cleveland, Ohio. About to write a ticket, the cop noticed some drug paraphernalia in the car and arrested the two men inside. A further search turned up eight cell phones, two computers, fake IDs, two dozen money transfer receipts, and $63,000 in cash. The pair turned out to be Romanian and eventually confessed to being arrows for an organization authorities traced back to Chita. They had spent most of January driving around the Midwest, picking up money from various Western Union and MoneyGram locations. Their confessions led to more wiretaps and surveillance in the US and Romania over the following months, uncovering a network of at least two dozen accomplices.

That summer, Romanian authorities and FBI agents conducted a series of raids on both sides of the Atlantic. Chita spent 14 months in custody before being granted a provisional release pending the completion of his trial, still pending. On an org chart filed in Stoica’s office, Chita’s photo remains at the top.

Class Café is an inviting coffee shop with a terrace that overlooks a quiet street. It’s nearly empty when I walk in—just the owner behind the counter and a young couple at a corner table.

Stoica discouraged me from attempting this meeting, but I wanted to know what an alleged kingpin looks like. I ask the owner if he knows where Chita is, and he offers to call him. After a brief phone conversation, he hangs up and tells me that Chita is in Bucharest. I remind him that Chita isn’t allowed to leave Râmnicu Vâlcea under the terms of his release, and the owner smiles. He spends a few more minutes on the phone, then hangs up again and asks me to sit. Chita is on his way.

I take a table on the terrace. During our tour of town, Stoica had pointed out Chita’s silver Mercedes on the road, so I ignore the green Jaguar that drives up until a man in Bermuda shorts, canvas shoes, and a white T-shirt climbs out, enters the café, and approaches my table. He introduces himself as Chita’s brother, Marian. He licks his lips nervously and fidgets with an iPhone. “Chita’s coming,” he says after lighting a cigarette and making some phone calls. “But he’s a little drunk.”

A few minutes later, Chita walks around the corner and ambles into the café. Boyish, dressed in shorts, a light-blue polo shirt, and flip-flops, he looks more like a college student than a criminal mastermind. Despite the reputation of Râmnicu Vâlcea’s underworld as relatively free of violence, he has brought along some muscle—a young man in dark glasses with a big tattoo on his arm. The bodyguard slams a beer bottle down on the table and flexes his hand, as if getting ready for a boxing match.

Chita shakes my hand dourly and sits down next to me, looking away. Two other men join us. The young couple from the corner comes over to greet Chita with fawning smiles and handshakes. They clearly recognize him, too. The café owner gets up and leaves. As he walks away, he looks at me gravely and says, “Good luck.”

The tattooed man leans toward me ominously. “Were you sent by Barack Obama?” he asks. I say that I wasn’t, and everyone but me lights cigarettes. Marian, getting increasingly jumpy, demands to know my true agenda. Finally, I spell my name and tell him to search for my stories on his iPhone. He Googles me and shows the screen to his brother. Everybody relaxes a bit, and I silently give thanks for wireless broadband.

Marian asks the young couple to translate for Chita, and they agree to stay. Chita has them tell me to stand, then he pats me down, asking if I’m wearing a wire.

“What do you say to the charges against you?” I ask.

“They are fake,” Chita says, in English.

Marian adds, “It’s all bullshit.” For clarification.

Chita continues with his defense in Romanian, and the couple translates enthusiastically. “He doesn’t even know how to speak English, so it is impossible for him to post ads or exchange email with buyers,” the young woman says. “He doesn’t even have an email address,” she says. “How can he do fraud on the Internet?”

I press Chita about the wiretapped conversations, but his tattooed bodyguard interrupts loudly. “You go back to your hotel room, we send you some nice pussy,” he says, raising his hand for a high five that I feel obligated to meet. The two men beside him laugh, and Chita takes a final drag from his cigarette before rising from his chair. He’s in no mood to discuss the evidence. “This interview is over,” Marian says.

They saunter out of the café and onto the sidewalk, looking surprisingly banal for guys accused of organized cybercrime, enjoying the good life with little effort or risk. Officials have dismantled a few fraud rings in recent years—there were just 188 arrests in all of Romania in 2010—but scores remain in business.

I am left with the friendly couple that helped with the translating. The young man says he’s heard about Chita from his friends and has seen his name in the papers. He tells me he has just received a diploma in engineering from an institution in Bucharest and is now looking for a job here in Râmnicu Vâlcea, his hometown. “I haven’t found anything yet,” he says. Thinking about Marian’s Jag and Chita’s Mercedes, I wonder if he’ll consider a job as an arrow. It’s like Frunza told me at the restaurant: “You arrest two of them and 20 new ones take their place,” he said. “We are two police officers, and they are 2,000.”

Yudhijit Bhattacharjee (yudhijit@gmail.com) is a staff writer at Science. He wrote about decoding a spy’s messages in issue 18.02.

Romania holds rates, cuts possible later in 2011

By Marius Zaharia

BUCHAREST, Feb 3 (Reuters) - Romania's central bank kept interest rates at 6.25 percent as expected on Thursday, holding fire with more support for a struggling economy after a jump in inflation caused by a rise in value added tax.

It will issue a full statement at about 1400 GMT and has previously indicated it may cut rates later in 2011 after Romania seals a new International Monetary Fund deal and the effects of the 5 percentage point VAT rise start to fade.

Central banks in Hungary and Poland have started to tighten monetary policy, but Romania is holding fire as its economy is struggling to recover and lagging peers. The Czech Republic is expected to hold rates later on Thursday.

"I keep my estimate of 5.75 percent end-year rates, but there is little space for manoeuvre given inflationary risks in Europe and in the CEE region," said Georgiana Constantinescu, analyst at Credit Europe.

The European Union's second poorest member depends on a 20 billion euro IMF-led bailout to keep its finances and domestic financial markets on track and its economy is struggling to gain traction after contracting by more than 7 percent in 2009.

Yearly inflation rose sharply to hit 8 percent in December due to rises in food prices and the impact of July's increase in VAT. The bank earlier cut rates by a total of 400 basis points in an easing cycle stretching back to August 2008.

That, coupled with the leu currency's 5-percent fall against the euro since the first quarter of 2010, has limited the central bank's options and analysts now only expect it to resume cuts once inflation enters a clear downward trend.

The leu was unmoved by the central bank decision and was trading at 4.26 per euro, down 0.1 percent on the day, by 1137 GMT.

Inflation is expected to ease in the second half of 2011 as the impact of higher VAT washes out and most analysts expect the central bank to resume rate cuts after that.

But some said inflationary risks and other countries raising borrowing costs may push Romania's central bank -- which will release its quarterly inflation report on Monday -- to stay on hold for the rest of the year.

"Inflationary risks are very high and that makes a cut very unlikely," said Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank in Bucharest.

"We've got wage hikes this year in the public sector and may come in the private sector as well, we need to adjust administered (government regulated) prices which are way below market prices and 2012 will be an electoral year."

All 19 analysts polled by Reuters had expected rates to remain unchanged. Before Thursday's decision, most had seen cuts ranging from 25 to 75 basis points by the end of the year. (Additional reporting by Ioana Patran, Radu Marinas and Sam Cage; editing by Patrick Graham, Ron Askew)

IMF Asks Romania to Sell Minority Stake in Tarom, Mediafax Says

The International Monetary Fund asked the Romanian government to sell a minority stake inTarom SA, the state-owned airline, as part of an effort to cut the country’s budget deficit,Mediafax reported, citing unidentified people familiar with the matter.

An IMF mission reviewing Romania’s bailout is in talks with the government about an agreement to replace the one that expires in April; it asked the administration to sell, reorganize or close state companies, the news service said, citing unidentified officials.

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.

Wednesday, February 2, 2011

AP: Romania could change the official name of its minority from Roma to Gypsy

BUCHAREST, Romania - Two Parliament committees in Romania have voted to change the official name of a minority ethnic group from Roma to Gypsy.

The reason the legislators gave for Wednesday's vote is that Gypsy is a more widely used name for the group and that Roma is too close to the name Romania.

But the votes have angered Roma civic groups, who say the word Gypsy has long carried negative connotations such as poor, uneducated and rootless.

About 25,000 Roma were deported from Romania during World War II at a time when governments called them Gypsies. But their official name was later changed to Roma.

Romania has an estimated 1.5 million Roma, but the official figure says there are 500,000.

Romania 'disappointed' at Schengen opposition


By Toby Vogel
01.02.2011

Foreign minister says there should be no discrimination as his country aims to join borderless travel area.


Romania's foreign minister has called on theEuropean Union's interior ministers to provide a “clear perspective” for his country's accession to the Schengen area of borderless travel by the middle of next month.

Teodor Baconschi told European Voice he was “disappointed” that Romania, despite meeting all technical conditions for joining the EU's Schengen area, was prevented from doing so by France and Germany.

“Any discrimination between member states is not European in spirit and is going beyond the established rules,” he said. “We can easily imagine the chaos in which Europe as a whole risks going if we don't stick to clear rules and procedures.”

“We wouldn't like to see any artificial divisions between the eurozone and the others which are not inside, or between the new members and the so-called old members,” he said.

Romania had hoped to be invited to join the Schengen area this spring, but those hopes have been dashed by opposition from a group of member states led by France and Germany. They say that readiness for the Schengen area goes beyond narrow technical criteria and includes the state of a country's judicial system, and that Romania falls short of meeting those wider conditions.

National diplomats also raised concerns that Bulgaria is not ready for Schengen membership and that the two countries, which joined the EU at the same time, also had to enter Schengen at the same time because their common border is only lightly policed.

Baconschi said that “remarkable progress” had been made in reforming Romania's judiciary, not least thanks to the EU's Co-operation and Verification Mechanism, put in place following the country's accession in January 2007.

He warned that there was a “risk of pumping up populist attitudes” on illegal migration.

“I feel some fears within the European public opinion about the increase
of illegal migration,” he said, adding that Romania shared the goal of curbing illegal migration.

“Objectively, there's less risk of illegal migration from our side of Europe than from the southern part of Europe,” Baconschi said. “We don't expect millions of Russians and others to come through the Romanian Schengen border to Europe.”