Monday, November 28, 2011

Romania May Fine Ford on Lower Output Amid State-Aid, ZF Says

Ford Motor Co. (F) may be fined about 14 million euros ($19 million) by the Romanian authorities for failing to meet a car-production pledge at its southern Craiova- based factory, after receiving state-aid from the government, Ziarul Financiar reported, citing Finance Minister officials.

Ford was supposed to manufacture about 250,000 cars at its Romanian factory this year, Ziarul Financiar said, citing a contract between the Romanian government and the Dearborn, Michigan-based company. It has so far produced about 7,600 cars, according to the newspaper.

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

2,500 Iranian companies trade in Romania

There are over 2,500 companies in Romania with Iranian capital and in some sectors, a very noticeable presence. Also inter-governmental cooperation has increased conspicuously in the last few months.

According to official economic data, Romania imports from Iran mainly petroleum, hydrocarbons, par formaldehyde, resins and fruits. Romania exports to Iran mainly parts and accessories for cars, tubes, furnaces and other machinery.

These areas reflect Romania’s general exports. June 2011 figures indicate that in 2010 Romanian exports of machine building industry parts (electrotechnics included), together with metal and metal products, combined to equal 57% of total exports.

In 2010 (based on provisional data from the government), the value of Romania’s exports to Iran stood at 116.2 million euros- an increase of 32.76% over the previous year’s 87.5 million euros. In 2009, the export to Iran represented 0.30% of Romania’s total export and in 2010 0.31%. In 2010 the value of imports from Iran was just over 32 million euros, compared with 16.9 million euros in 2009- a very substantial increase. However, in the bigger picture, imports from Iran in 2009 represented just 0.04% of Romania’s total imports, and in 2010 just 0.07%.

In 2010, the value of Romania’s imports from Iran stood at 21.4 million euros (0.10% of Romania’s total imports), compared with 22.3 million euros in 2011 (0.08% of Romania’s total imports).

According to an October 2011 press communiqué from the Ministry of Economy, in 2010 Romanian-Iranian trade reached the total value of $196.4 million. In the first 7 months of 2011 this value was at $154.1 million, of which the Romanian exports represented $122.19 million, meaning an increase of 71% in comparison with the same period of the year 2010.

Contacts

Bilateral friendship groups exist in both the Romanian and Iranian parliaments. In the Iranian parliament, the president of the group is Ahmad Nateqnoori Lakson of the Health and Medical Education Commission. A delegation of this group visited Romania relatively recently, from May 9-13, 2011, traveling from Teheran via Frankfurt and arriving in Bucharest at 1:30pm on Sunday the 8th. On April 6, the Iranian side had disclosed that “unexpected developments” had caused the visit to be changed from the originally agreed date of May 2-6.

Details of this trip are visible on a photocopied email from Iran’s Embassy in Bucharest (.PDF). The specialized interests of the various members are indicative of the kind of sectors in which Iran sees opportunities with Romania.

On May 9, 2011, during the visit, Iranian group leader Ahmad Nateqnoori Lakson disclosed that Iran wants closer commercial relations with Romania in fields such as natural gas and oil, and that “we want to benefit from Romania’s access to the Black Sea,” according to a press release.

For his part, the vice-president of the Chamber of Industry and Commerce of Romania, Sorin Dimitriu, added that sectors such as research, academic and cultural exchanges, road infrastructure, fossil fuels and, green energy are attractive and could be profitable for Iranian investors. The bilateral state relations should focus more on these sectors, Dimitriu declared.

The Iranian delegation visiting Romania in May 2011 was comprised of: Ghasem Mohammadi (Agriculture, Water & Natural Resources Commission); Ali Motahari and Hamidreza Fouladgar (both of the Industries & Mines Commission); Samad Fedaee (Social Commission); Seyyed Salman Zaker (Legal Commission); Saed Javad Zakari (Expert/Secretary); Khasi Poor (General Director for Trade Affairs, Iran Chamber of Commerce), and other officials.

For its part, the Romanian parliamentary friendship group with Iran is led by Horea-Dorin Uidoreanu (National Liberal Party/PNL), who has been president of the group since March 30, 2010. Other members of the parliamentary friendship group with Iran include: its vice-president, Ciprian-Florin Luca (Social Democratic Party/PSD); Mihaela Stoica (Democratic Liberal Party/PDL); Ion Ariton (Democratic Liberal Party/PDL); Tinel Gheorghe (Democratic Liberal Party/PDL); Mircia Giurgiu (independent); Teodor Viorel Melescanu (National Liberal Party/PNL); Oana Tohme Niculescu Mizil Stefanescu (Social Democratic Party/PSD); Constantin Tamaga (Social Democratic Party/PSD); and Verestoy Attila (Democratic Union of Hungarians in Romania/UDMR).

Interestingly, several of these members belong to similar groups with other Muslim states. For example, Attila is secretary of the Romanian parliamentary friendship group with Jordan, and a member of the Saudi Arabia and other similar friendship groups, while Uidoreanu is also vice-president of the Romania-Lebanon friendship group, and belongs to other similar groups. Stoica is also a member of the Romanian Friendship parliament group with Iraq and other groups, while Melescanu is also a member of the Romanian Friendship parliament group with Egypt, and other groups. Stefanescu is also on the Romania-Lebanon friendship group and other groups.

It is natural to expect that, given these associations, such individuals would attract the attention of domestic and foreign intelligence services wishing to learn more about the political, social and economic dynamics in these countries. However, only private data exists regarding this possibility.

Companies

According to data from the Romanian Ministry of Foreign Affairs, in 2008 some 2,524 joint ventures with Iranian capital existed in Romania. Iran was in 38th place in terms of countries making foreign investments in Romania. However, such figures may not reflect real totals are third-country or indirectly registered companies/investors may play a role too, mostly Russian joint ventures.

Official economic data (.PDF) from the Romanian government showed that as of December 31, 2010 Iranian investors (by country of residence) had a share in 2,616 companies in Romania, representing 1.51 of the foreign companies in the country. Altogether they had a subscribed capital of 14.6 million euros. By September 30, 2011 (.PDF), the number of such companies had increased slightly (to 2632), though the other figures had dropped (1.48% of businesses, and 11.7 million euros.

The distribution and amount of companies involved with Romania-Iran trade also creates an opportunity for espionage, though details are equally scant. There are few prominent businesses in Romania with direct Iranian ownership. However, one of the main producers and distributors of cereals in Romania, Agricover Group, is owned by Iranian investors. Its turnover in 2010 was 153 million euros.

On March 31, 2011, Voxcapital.net reported that Iranian businessman Kanani Jabbar owns 90% of the capital of Agricover SA. Jabbar also reportedly holds a Romanian passport. Further, Ziarul Financiarul reported on March 30, 2011 that the Agricover group is owned by “Iranian investors who also own the Prodal ’94 company.” The financial magazine had previously reported in December 2008 that Prodal ’94 is “controlled by the Iranian group ICB, the same group that owns Agricover.”

Interestingly, Prodal ’94 is the Romanian producer of Stalinskaya Vodka and Wembley Dry Gin. A May 2010 article by PMR, a British-American company that provides market data for investors in Central and Eastern Europe, notes that Stalinskaya “currently accounts for a 38% share of the vodka market in Romania in terms of sales value, and Wembley [accounts for] a 47% share of the gin market, according to Nielsen.” Along with Prodal ‘94, the ICB group is comprised of Granddis (distribution) and Bere Spirt Turnu-Severin (a distillery). “All three companies are majority-owned by Romanian citizens of Iranian origin,” adds PMR.

(Source: Balkanalysis.com)

Sunday, November 27, 2011

Romania Seeks Lower Budget Gap as 2012 Draft Gets Approved

Romania’s government approved the 2012 budget draft, targeting a narrower deficit through spending cuts to meet pledges made to its international lenders.

The plan envisages a deficit of 1.9 percent of gross domestic product next year, compared with this year’s target of 4.4 percent, Prime Minister Emil Boc said.

“Considering the international environment, where the biggest European countries are heading toward austerity, Romania is forced to remain extremely vigilant and prudent,” Boc told reporters after a government meeting in Bucharest today.

Romania will freeze wages and pensions, continue shedding state jobs and revamp money-losing state companies before a general election next year. The country is under pressure to keep to its 5 billion-euro ($6.6 billion) loan agreement with the International Monetary Fund and the European Union.

The budget is based on a forecast for economic growth of 2.1 percent in 2012, less than the previous estimate of 3.5 percent. The government expects the economy to expand 1.5 percent to 2 percent this year, Boc said.

The leu rate projected for the 2012 budget stands at 4.26 per euro compared with 4.24 per euro this year, while inflation will probably end 2012 at 3.5 percent, Finance Minister Gheorghe Ialomitianu said.
Romanian Accounting

The government may let the budget deficit widen next year to as much as 2.5 percent of GDP under Romanian Accounting Standards, as agreed with the IMF and the EU, as long as it keeps the gap below 3 percent under European Accounting Standards. This would enable the bloc to end excessive-deficit procedures against Romania.

The Fiscal Council, an independent experts-group led by Ionut Dumitru, Raiffeisen Bank Romania SA’s chief economist, said that the “government’s prudent approach in constructing the 2012 budget is justified by domestic and international financing constraints,” according to an e-mailed statement today.

“The council noticed, though, the lack of a firm commitment in meeting the new deficit target as the draft project states explicitly the possibility of increasing this target throughout 2012, which could be interpreted as slippage by financial markets,” Dumitru said in the statement.
Cutting Jobs

Romania is trimming the public-sector workforce to 1.1 million by the end of next year from 1.4 million in 2010, President Traian Basescu said yesterday. The government has already eliminated 180,000 jobs, he said.

The country will try to push ahead with plans to sell minority stakes in state-owned companies, such as Transgaz SA (TGN), Transelectrica (TEL) SA and Romgaz SA, and majority stakes in Oltchim SA and newly-formed power companies Oltenia SA and Hunedoara SA, even during a time of market turmoil that led to the failed sale of a 9.8 percent stake in OMV Petrom SA (SNP)in July.

Romania plans to borrow about 57 billion lei ($17 billion) next year and 2.4 billion euros ($3 billion) to finance its budget deficit and pay for maturing debt, Gheorghe Gherghia, the deputy finance minister, said today.

The government will send the draft law to Parliament on Nov. 28, Boc 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 at jagomez@bloomberg.net

Friday, November 25, 2011

Romania's president says Austria not playing fair

BUCHAREST, Nov 24 (Reuters) - Romania's President Traian Basescu said on Thursday he was concerned about new Austrian measures to limit lending in central and eastern Europe, which he said were unfair and would leave his country's economy vulnerable to a credit squeeze.

Earlier this week Austrian regulators proposed rules linking lending in central, eastern and southeastern Europe to the amount of refinancing banks can arrange for themselves locally.

"I would like to express my concerns. I would like to think that the Bank of Austria's announcement over a reduction of capital inflows ... was either a mistake or a misunderstanding of its impact," Basescu said at a financial seminar.

"You have made huge profits and if you are now getting ready to leave Romania unfinanced during the crisis, we will think it is an act lacking fair play towards Romania. I don't want to believe we will be left to pay the bill for banks' greed."

Basescu's comments reflect growing concern across central and eastern Europe about a steady withdrawal of funds by western-owned banks that could cripple growth in the region's emerging economies.

Speaking at the same seminar, Romanian central bank deputy Governor Cristian Popa said the proposed measures did not suggest parent banks would reduce their exposure to Romania, but there was a risk that the pace of funding growth would slow.

The new rules affect Bank Austria, a unit of Italian group UniCredit, Erste Group Bank and Raiffeisen Bank International, all of which have units in Romania and elsewhere in emerging Europe.

"We have to see how these measures will be applied," Popa told reporters. "I do not see a risk of capital stock falling but ... there could be aggregate limits on new funding flows."


Oil and gas group Petrom this week secured a credit line of 930 million euros from international banks including BNP Paribas, Societe Generale, Citi, Raiffeisen and UniCredit, indicating that loan markets are still open for solid credits.

Popa, who said there could be a shift from retail banking to more corporate lending, added that the loan-to-deposit ratio for the Romanian banking system as a whole was 110-120 percent.

The solvency ratio for the overall banking system was just under 14 percent, significantly above the euro zone's ceiling, which would leave banks with room to lend, Popa said.

"I think banks will make differences between countries in which they have exposure and ... between projects in these countries. To us it is important that projects with multiplying growth factors for the Romanian economy will be funded."

The Czech central bank will analyse Austria's planned guidelines for Austrian bank lending in emerging Europe, and was not consulted on the measures beforehand, its Vice-Governor Mojmir Hampl was quoted as saying.

The chief executive of Romania's largest bank, BCR, owned by Erste, said small and medium sized enterprises were unlikely to see much change in lending rules, and that financing of infrastructure projects there remained an "absolute priority".

"Erste, with more than 7.5 billion euros here in exposure will continue to support its subsidiary here, no question about that," said BCR head Dominic Bruynseels.

AP: Romania's President slams banks' greed

BUCHAREST, Romania—Romania's President Traian Basescu criticized European banks Thursday, saying he hopes his country will not pay for their "greed."

Basescu said European banks made huge profits in Romania and it would be "a lack of fair play" to leave the country's economy unfinanced during the crisis.

He said he hopes European Union new member states, including Romania, will not be asked to pay for the banks' "greed, imprudence and lack of responsibility."

Basescu's statement comes after Austria's Central Bank presented a set of measures to prevent Austrian subsidiaries in Central and Eastern Europe from lending more than 1.1 times the local deposits raised by subsidiaries. News agency Mediafax said three banks -- Erste Group Bank AG, Raiffeisen Bank International AG and UniCredit SpA's Bank Austria -- have already accepted the measures.

Basescu said he would like to think that the decision was "either an error, or a misunderstanding of effects."

In 2006 Erste Group Bank bought 61.88 percent of Romania's Commercial Bankfrom Romania's government.

"I wouldn't like to (...) remind our European friends how much they conditioned Romania's European Union accession on the privatization of its banks", Basescu said.

He urged the banks to not "strangle" Romania's economy, by reducing the flows of capital.

Romania joined the European Union in 2007. The economic boom from 2004-2008 turned to a sharp downfall in 2009, when the economy shrank by 7.1 percent and the country was forced to get a euro20 billion ($26.77 billion) bailout from the International Monetary Fund, the European Union and the World Bank.

Thursday, November 24, 2011

Mayor stages hunger strike as residents shiver

(Reuters) - A Romanian mayor has begun a hunger strike to protest against cuts in heating subsidies imposed under a government austerity drive, reawakening memories of the harsh final years of communism.

Mayor Florin Cazacu said 10,000 residents in the central Romanian town of Brad were braving low temperatures at home because his town hall lacked 3 million lei ($925,200)from the state budget to buy fuel oil for the winter season.

"People are suffering from cold, this is why I began this protest," Cazacu told Reuters. "I took an oath ... to do everything in my power and competence for the sake of the inhabitants."

During the last years of communist leader Nicolae Ceausescu heating was often shut down under an austerity drive aimed at repaying Romania's foreign debt.

This inflicted widespread suffering before Ceausescu's overthrow in 1989. Living standards have since risen sharply but winters remain tough for many Romanians.

The European Union's second poorest member state introduced tough austerity measures last year including salary cuts and a rise in value-added tax to one of the highest levels in the EU.

Romania has promised the International Monetary Fund, which is leading a 5 billion euro aid deal, to liberalize its gas and power markets, raise administered prices and scrap government subsidies for centralized heating.

Temperatures in winter fall as low as minus 30 Celsius degrees (-22 Fahrenheit) in the region around Brad, which has a total population of 17,000.

As apartments in Brad are not connected to mains gas, some people are using electric heaters but this has caused frequent power cuts due to town's poor electricity grid.

"I will stay on hunger strike for as long as it takes ... and give up the protest only if the government grants us the necessary funds," said 46-year-old Cazacu. ($1 = 3.2426 Romanian leus)

Wednesday, November 23, 2011

Romanian Section of Nabucco to Cost Up to 1.5 Billion Euros

The Romanian section of the Nabucco pipeline will probably cost between 1.2 billion euros and 1.5 billion euros, the project’s Managing Director Reinhard Mitschek said.

Nabucco Gas Pipeline International GmbH expects to make a finalinvestment decision about the pipeline early in 2013 and start construction later that year, Mitschek reiterated today at a presentation in Bucharest, Romania.

Nabucco officials plan to complete an environmental assessment of the project in 2012 as minor rerouting is still possible depending on the findings, Mitschek said.

The pipeline, estimated to cost 7.9 billion euros ($10.6 billion), is planned to carry gas more than 3,300 kilometers (2,050 miles) from Turkey to Austria to cut Europe’s dependence on Russia. The venture on Sept. 6 said it may get 4 billion euros in loans from the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank.

Nabucco may start the so called “open season” at the end of the first quarter of next year as it expects a positive decision from Shah Deniz gas-suppliers before that, he said.

The total value of the project might change once a new study is completed after the project changed its route to include a new feeder line to Iraq.

“I’ll be able to give you a new estimate once we’ll finalize the engineering works and we will have the first results of the open season because the investment will on the number of feeder lines,” Mitschek said. “This fine tuning takes place between now and the first part of 2012 and then I can give you a reliable figure.”

A meeting with the Shah Deniz venture will take place tomorrow in Vienna and Nabucco expects Shah Deniz to make a decision on its participation by the end of the year, according to Mitschek.

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

To contact the editors responsible for this story: Douglas Lytle at dlytle@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

AP: 500 Romanian retirees protest pension freeze

BUCHAREST, ROMANIA

Hundreds of retirees from all over Romania have gathered outside the government headquarters to protest a freeze on pensions.

"Don't bury retirees alive!" and "Down with (President Traian) Basescu" they yelled Tuesday during the two-hour protest.

Last week, Basescu said the government couldn't afford to increase pensions this year. That came after the International Monetary Fund said Romania could afford to slightly raise pensions because it had reduced public spending.

Romania signed up for a euro20 billion ($26.5 billion) loan with the IMF, European Union and World Bank in 2009 to help pay salaries and pensions, when the economy shrunk by more than 7 percent.

Last year the government hiked sales tax from 19 to 24 percent, and cut public workers salaries and welfare benefits to reduce the budget deficit. Romania has around 6 million retirees.

Raiffeisen Romania Sees Little Impact From Austrian Credit Rules

By Andra Timu and Irina Savu

Nov. 23 (Bloomberg) -- Raiffeisen Bank International AG’s Romanian unit will not be “significantly impacted” by the decision of Austrian regulators to limit new loans in central and eastern Europe as it has sufficient capital and internal funding sources, the unit’s head said.

Raiffeisen, one of the five-biggest lenders in Romania, may issue bonds next year through a medium-term notes program of about 1.5 billion euros ($2 billion) as it plans to wait for the right moment to get a “reasonable price,” Chief Executive Officer Steven van Groningen said in an interview in Bucharest.

Austria’s banking regulators are restricting new loan business of Vienna-based lenders, including Raiffeisen, Erste Group Bank AG and UniCredit SpA’s Bank Austria AG, in central and eastern Europe to 1.1 times the deposits and wholesale funding that the lenders’ local units are able to raise on their own.

They are also requiring the three banks to hold as much as 10 percent of capital from 2016, 3 percentage points more than required under rules from the Basel Committee on Banking Supervision. Raiffeisen’s loan-to-deposit ratio was 1.3 in Romania, 1.5 in Ukraine and 1.2 in Hungary at the end of June.

“I’m not concerned because I get almost no money from Raiffeisen Group, so for us it’s not an issue,” van Groningen said yesterday. “I think it’s a healthy measure in principle in order to limit the systemic risk. In Romania, it’s possible we will see even more pressure on attracting deposits than in the past and the interest rates might go up.”

‘Plenty of Capital’

Austrian banks, which control about 39 percent of the Romanian market, have lent about $266 billion to borrowers in the formerly communist parts of Europe, the most of all countries reporting to the Bank for International Settlements and equivalent to about 70 percent of Austria’s gross domestic product. Those numbers don’t include the investments of Bank Austria, which are attributed to Italy.

Raiffeisen Romania has “plenty of capital” to support lending in the country as demand for new loans will probably remain subdued because of low economic growth, the CEO said.

“I don’t expect a lot of demand for financing next year and this has to do with expectations about economic growth,” van Groningen said. “We see some growth but not significant one.”

Raiffeisen owns lenders in 15 formerly communist countries from Slovenia to Russia, ranking only behind UniCredit and Erste by assets in the region.

Romania’s export-driven economic recovery will slow next year to a growth of between 1.8 percent to 2.3 percent, compared with a previous forecast of 3.5 percent, according to the International Monetary Fund.

--With assistance from Boris Groendahl and Zoe Schneeweiss in Vienna. Editors: Zoe Schneeweiss, James M. Gomez

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

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

Romania's Parliament Has Almost Made It Legal To Kill 50,000 Stray Dogs

BUCHAREST, Romania (AP) — Romania's parliament has voted to make it legal to euthanize the thousands of stray dogs that roam the streets of the capital and elsewhere.

Parliament voted Tuesday by 168-111 to pass the controversial law, which must still be signed by President Traian Basescu. Local authorities will be able to choose what method is used.

Animal rights groups in Romania and abroad have lobbied for months against the law.

Corruption fighters say the measure is a cynical ploy to enrich local authorities because substantial funding will be allocated for the task.

Bucharest is home to an estimated 50,000 stray dogs, according to local media.

A Romanian woman died this year after she was mauled by a pack of dogs. In 2006, a Japanese tourist was killed by a stray dog.

Tuesday, November 22, 2011

Romanian Opposition Starts President Impeachment Procedure

Nov. 21 (Bloomberg) -- Romania’s opposition parties will try again to impeach President Traian Basescu, beginning with a vote in Parliament to temporarily suspend him, on grounds that he doesn’t respect the rule of law and is in breach of the constitution.

The leaders of the Social-Democratic Party and the Liberal Party, which form an alliance and don’t have a majority in Parliament, plan to ask for support from their parties and persuade some members of the ruling coalition for help, Crin Antonescu, the Liberals’ head, told a news conference today.

“This process is not a trifle,” Antonescu said. “We’re trying to avoid another year of serious dissolution of the rule of law, because Basescu’s latest comments show he’s a person who doesn’t give any semblance of accepting the power of the judicial system.”

The opposition failed to impeach Basescu in 2007 after citizens later reinstated him through a referendum vote. The two parties now say Basescu has overstepped his constitutional authority through comments saying pensions and public wages will be frozen next year because of budgetary constraints and some increases won in court will be postponed.

Votes Needed

The Social Democrats and Liberals, who control 217 votes in a 470-seat Parliament, need 235 votes to suspend Basescu. If the parliament votes in favor of the suspension, the country by law must organize a referendum within 30 days. The president will be fired if more than half of eligible voters ratify the lawmakers’ decision.

“We will do whatever we can to get the Parliament to vote on the suspension,” Social-Democratic leader Victor Ponta said. “Once we get that out of the way, then the people’s vote will mark our victory.”

Traian Basescu, 60, won a second presidential term in 2009, supported by the current ruling coalition, formed by the Democrat-Liberal Party, the ethnic Hungarian’s Party and the Independents’ Party. The coalition has a 246-vote majority in Parliament.

--Editors: Douglas Lytle, Andrew Langley

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

Friday, November 18, 2011

France’s Filasa to Invest $1 Billion in Romanian Wind Parks

Filasa International, a French privately-held company, plans to invest 780 million euros ($1 billion) in 11 wind-parks in Romania, the company said in an e- mailed statement late yesterday.

Filasa has started work at the parks with a total capacity of 516 megawatts in the north-eastern county of Suceava and has invested 6.2 million euros so far, according to the statement. The company seeks to complete the investments in the next two years, Bernard Esquirol, Filasa’s chief executive officer said in the statement.

“We have chosen to invest in wind-parks in Romania because we are convinced of the country’s potential in renewable energy,” Esquirol said.

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

Romania Holds Off on Dollar-Bond Sale on Surging Costs

Romania will hold off on plans to sell dollar-denominated bonds until market conditions improve, after contagion concern from the euro-area debt crisis sent borrowing costs to record highs across Europe.

The eastern European country has held debt-sale meetings in Londonand across the U.S. in the past week with investors who have shown a strong interest in the planned bond sale, Bogdan Dragoi said in a phone interview today. The dollar bond sale would be the first under a three-year medium-term notes program valued at 7 billion euros ($9.5 billion).

“They were probably not happy about the yield expectations they’ve got from investors now,” said Gyula Toth, chief strategist for central and eastern Europe, Middle East and Africa at Unicredit SpA in Vienna. “They might have better chances in the near future. I think Romania’s bonds are still preferred to its regional peers.”

Borrowing costs for Spain, Italy and France surged to euro- era records, fueling concern the region’s debt crisis is deepening and prompting eastern European countries such as the Czech Republic and Romania to put their bond sale plans on hold.

Romania seeks to raise as much as $2 billion in dollar- denominated bonds in this year’s second international sale, depending on market conditions, after it stopped relying on an international bailout earlier this year. The Czech Republic said on Oct. 26 it may delay plans to sell Eurobonds this year because international markets are volatile, while budget cuts and low inflation help borrowing in the local currency.

“Our roadshow yielded good results, as investors have shown strong interest in Romania, and we’re now waiting for the best moment to issue the dollar bonds,” Dragoi said. “We’re waiting for the markets to calm down and we are ready to issue immediately once that happens.”
Regional Yields

The yield on Italy’s benchmark 10-year bond fell 19 basis points to 6.79 percent after touching a high of 7.15 percent.

In France, the extra yield, or spread, investors receive for holding 10-year French debt instead of benchmark German bunds reached 2 percentage points for the first time in the shared currency’s history as the country sold 6.98 billion euros of notes. Spain sold today 3.56 billion euros of new 10-year bonds at an average yield of 6.975 percent, higher than the 5.4 percent it paid on Oct. 20, as demand dropped.

The cost of insuring against a default by Romania has increased 7 basis points to 450 basis points, 160 basis points less than credit-default swaps for Hungary, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The yield on Romania’s Eurobonds due 2018 rose to 6.271 percent today, the highest level in almost a month, from 6.24 percent yesterday, according to data compiled by Bloomberg at 5:33 p.m. in Bucharest today.

Romania stopped relying on a 20 billion-euro bailout from the International Monetary Fund and the European Union in March and cut state wages and raised taxes to narrow its budget deficit.
IMF Reviews

The country has so far completed three quarterly reviews after meeting pledges to the international lenders. Romania doesn’t plan to draw any funds from the precautionary accord, which will be held in Washington D.C. for emergency needs.

Romania sold its first bonds under the medium-term note program in June when it raised 1.5 billion euros of five-year bonds in its biggest offering of debt to international investors.

Citigroup Inc. (C), Deutsche Bank AG (DBK) and HSBC Holdings Plc (HSBA) are managers of the planned dollar-bond sale.

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

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

Thursday, November 17, 2011

Romania May Join Schengen in Two Steps Next Year, Basescu Says

Romania may join the European Union’s passport-free travel system in two steps next year pending Dutch approval, President Traian Basescu said today in an interview with public radio.

The 25-nation Schengen Area, named for the Luxembourg town in which the accord was signed, may open its marine and air borders to Romania in March and land borders in June or July, Basescu said. Before that, the Balkan nation must reach an agreement with the Netherlands, which has opposed its entry because of corruption concerns, Basescu said.

“A new delay in our entry is possible because we can’t intervene in the Netherlands’ internal affairs and we cannot vote in their parliament,” Basescu said. “We hope we’ll find a solution like we did with Finland.”

Romania and neighboring Bulgaria have been striving to enter the Schengen zone this year after the European Commission said they met all the technical criteria. Finland and the Netherlands opposed entry, saying corruption in the newest EU members, which joined in 2007, may jeopardize the security of the entire area, which stretches from the border of Russia to Portugalon the Atlantic seaboard.

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

Tuesday, November 15, 2011

Romania GDP Quickens to 4.4% on Harvest, Exceeding Estimates

Romanian economic growth accelerated in the third quarter to the fastest pace in three years as a bumper harvest compensated for weak domestic demand, raising prospects that this year’s expansion will top estimates.

Gross domestic product rose 4.4 percent from a year earlier, compared with 1.4 percent in the second quarter, the National Statistics Institute in Bucharest said today in an e- mailed flash estimate. The figure exceeded the median estimate of 2.3 percent in a Bloomberg survey of eight economists. Detailed GDP data will be published on Dec. 6. Seasonally adjusted GDP advanced a quarterly 1.9 percent.

Romania, which exited its worst recession earlier this year, will probably see economic output grow 1.5 percent in 2011, helped by demand for the products such as Dacia SA cars, according to government and IMF forecasts. Today’s data matched figures released late yesterday by President Traian Basescu.

“We have growth of 4.4 percent in the third quarter and let’s hope we’ll post 2.5 percent growth in the fourth quarter, which would allow us to have economic growth of more than 2 percent this year,” Basescu told state television TVR1 yesterday. “Growth was driven by construction, agriculture and industry, while consumption is still low.”

GDP was boosted by a 25 percent increase in output in agriculture, a 7.2 percent jump in construction and 5.5 percent increase in industry, Basescu said.
‘Real’ Growth

Agricultural output was probably the main driver as it posted “real double-digit growth,” Banca Comerciala Romana SA economist Eugen Sinca wrote in an e-mail note to clients after the estimate was released.

Growth in the export-driven economy will probably slow next year to between 1.8 percent to 2.3 percent, compared with a previous forecast of 3.5 percent, as Europe’s debt crisis slows growth in Romania’s major trading partners, Jeffrey Franks, the International Monetary Fund’s mission chief to Romania, said on Nov. 7.

“We have put under revision our 2011 economic growth forecast and the new estimate will most likely stay at above 2 percent,” BCR’s Sinca said. “We’ll revise downwards the outlook to below 1.5 percent in 2012 as lower external demand, an ambitious fiscal consolidation program followed by the government and a negative base effect in agriculture will weigh on the next year’s growth prospects.”

The leu was little changed at 4.3643 per euro in Bucharest trading as of 11:32 a.m., while the Bucharest Stock Exchange’s benchmark BET index fell 0.2 percent to 4,519.39.
Rate Cut

Policy makers unexpectedly cut the monetary policy rate by a quarter of a percentage point to a record 6 percent on Nov. 2 to spur a recovery after inflation in September was the slowest in two decades. A day later, the European Central Bank lowered its benchmark interest rate as the debt crisis drags the euro- area economy toward recession.

The GDP figure “was obviously an encouraging reading, placing Romania among the top growers in the European Union in the third quarter,” Simon Quijano-Evans, the London-based head of emerging-market research at ING Groep NV, said in an e-mail. “However, regional focus is now on 2012 being hit by spillover from the major trading partners in the Eurozone.”

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

AP: Romanian chemical plant Oltchim cuts production


November 14, 2011

BUCHAREST, Romania—The Romanian chemical plant Oltchim says it will temporarily reduce production and send 1,000 employees home for the rest of the month.

The company, which is half-owned by the state, says Monday those 1,000 employees will receive only 75 percent of their wages this month. The company, which cut production 30 percent in August, said the move is part of a cost-cutting program due to the high cost of materials and other supplies. It did not say how much more it was cutting production now.

The company, based in Ramnicu Valcea, 170 kilometers (105 miles) northwest of Bucharest, had 3,470 workers in September. It produces caustic soda, oxygenated water, polyvinyl chloride and other substances.

Friday, November 11, 2011

Romania Seeks to Raise as Much as $2 Billion in Dollar Bonds

Nov. 11 (Bloomberg) -- Romania seeks to raise as much as $2 billion in dollar-denominated bonds under a second international sale this year, depending on market conditions, the Finance Ministry said.

The ministry wants to raise at least $500 million in bonds with a maturity of at least five years, according to an official order of the finance minister published in the country’s Official Journal. The planned sale is part of the ministry’s 7 billion-euro ($9.5 billion) medium-term notes program through 2013.

The ministry “approves the second transaction on international capital markets under the medium-term notes program,” according to the document. “The final amount, maturity, interest rate and the other financial terms will be set up at the time of the sale, depending on market conditions.”

The eastern European country is meeting investors in London and across the U.S. starting today until Nov. 16 as it seeks to tap international markets for the second time this year to reduce borrowing costs and help keep its budget deficit within 4.4 percent of gross domestic product.

Romania stopped relying on a bailout from the International Monetary Fund and the European Union in March from a 20 billion- euro bailout and cut state wages and raised taxes to narrow its budget deficit.

IMF Plans

The country signed a new precautionary agreement with the IMF and the EU valued at 5 billion euros and has so far completed three quarterly reviews, after meeting pledges to the international lenders. Romania doesn’t plan to draw any funds from the precautionary accord, which will be stored in Washington for emergency needs.

Romania sold its first bonds under the medium-term notes program in June, when it raised 1.5 billion euros of five-year bonds in its biggest offering of debt to international investors.

“We think Romania is a good story for investors,” Deputy Finance Minister Bogdan Dragoi said yesterday after announcing the planned roadshow. “We’re doing this now, after the IMF and EU quarterly review showed we had a very good performance and we have the 2012 budget outline. We’re, of course, more cautious in our estimates and with our budget, considering the European debt crisis.”

Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc will be managers of the sale, the ministry said.

--Editors: Douglas Lytle, Alan Crosby

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

Nokia’s Romanian Assets Seized by Tax Agency, Realitatea Says

Romania’s tax authority seized the assets of Nokia Oyj (NOK1V)’s local unit over an unpaid debt of about $10 million, Sorin Blejnar, the head of the agency, was quoted by the local media, including Realitatea TV, as saying.

Nokia, the world’s largest maker of mobile phones by volume, said on Sept. 29 it planned to close its factory in Romania this year.

“We decided to seize the assets as a precautionary measure to prevent Nokia from selling them before they pay their debt to the state,” Blejnar said, according to Realitatea. “This won’t affect the activity of the factory.”

A spokesman for Nokia said they had no immediate comment when contacted by Bloomberg.

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

Lessons from Romania: a ticking housing timebomb

The former president of Romania shares lessons from the rebuilding of his country and argues for a 'European road map' for affordable and decent housing

Emil Constantinescu
Guardian Professional, Friday 11 November 2011


During the entire history of humankind, shelter has been a primary need for all. At its most basic, it is just a roof and four walls where we are safe and dry. But it is also one of the cornerstones upon which healthy, productive lives and societies can be built. As we rebuild democracy in south-east Europe, rebuilding our homes and communities both physically and socially must be the cornerstone of our efforts.

Despite the recent growth of GDP in Romania, an estimated 40% of the urban housing inherited from the communist times is of poor quality, prefabricated construction with ageing infrastructure and utilities. Rural housing conditions are often worse. Although many new houses were built in rural areas, 40% of our citizens still do not have their own bathroom.

We are facing serious overcrowding because of the lack of affordable housing for young people. Western Europe is also not immune from housing issues, and we see the next generation struggling in many places to access affordable accommodation. While the housing sector continues to feel the impact of the financial and economic crisis, Europeans face declining incomes, rising costs of living, energy price increases, and the loss of benefits and subsidies. In Romania, we face the additional challenges of a largely dilapidated housing stock, negative equity, frequent floods and other natural disasters, rising energy use and a lack of social change.

The process of our transition from a command to a market economy has largely shaped the housing situation in our country. Housing in the east was previously viewed as an entitlement for all, provided by the state. In a western market economy housing seems now to be largely treated as a commodity to be bought and sold. In Romania, too, houses have became goods. Mass privatisation in the early 1990s of state owned homes to the sitting tenants at extremely low prices, or for free, was a good decision. In a decade, the public sector ownership diminished to a mere 5% of the housing stock, effectively leaving no social sector in place.

New homeowners were not ready to take responsibility for their decaying apartment blocks, nor had the financial, legal or social means to achieve it. This contributed to a rapid deterioration of homes and proliferation of poor homeowners living in unacceptable conditions. Homelessness is on the rise because of evictions by private companies unwilling to tolerate utility arrears or evasion of property taxes.

Across Europe, the issue of housing has come to the political forefront. In the UK, experts are debating whether the state should promote home ownership or support social rent instead. What balance should be struck for an effective housing policy for all? What drives some cultures to aspire to homeownership while other nations, such as Austria, boast decent housing despite low rates of ownership.

I believe sustainable transformations occur only when we take collective responsibility. The values we rebuild are as important as the bricks or blocks we lay.

I believe it is high time the European decision-makers sat down together and worked out a road map for affordable and decent housing for all. Co-operation in eastern and central Europe on security and foreign policy spearheaded political changes and speeded up integration into the European Union and Nato. Why couldn't the same be true for housing?

I hope that together we can find appropriate solutions and success stories to build an inclusive and sustainable place to live. If we fail to address the issue, we will be faced with what is a ticking housing timebomb at the heart of Europe.

Emil Constantinescu is the former president of Romania and works with the charity Habitat for Humanity

FT: Tourism in Romania: investors wanted

November 10, 2011 11:13 am by Kester Eddy

Fancy an investment punt in the tourism sector? Your own B&B on the coast?

Make that the Black Sea rather than Blackpool or Palm Beach – because Romania should welcome you with open arms. It’s that short of foreign investment.

Foreign investment into the Romanian tourism sector – meaning hotels and restaurants – barely makes the radar screen on a per capita basis; in absolute terms, it totalled just €186m from 2005-2009.

Meanwhile, just to the south, arch-rival (and much smaller) Bulgaria raked in more than €450m to spruce up its holiday infrastructure, according to a report just issued by BCR, Romania’s Austrian-owned commercial bank.

The results speak for themselves; Bulgaria made €7bn net from tourism between 2006 – 2010, including €1.8bn last year alone. Romania managed a slightly negative tourist balance – meaning Romanian tourists spent more abroad than tourists spent in Romania.

Foreign tourists stay a mere 2.2 days on average in Romania – less than half the average sojourn in Bulgaria – and spend around €360 per visit, less than anywhere in the region bar Slovakia (and, presumably, Moldova, which the report omits).

While the Black Sea may not be everyone’s choice from the sun-and-sand crowd, Romania, as anyone who has traversed the Transylvanian Alps can attest, boasts a stunning choice of natural vistas and an abundance of wildlife – including wolf and bear – that few countries in Europe can equal. Yet as the report laments in its opening lines; “with one of the highest potentials for tourism in the region, Romania is pretty slow in attracting foreign visitors.”

There are signs of an upturn; what the report deems ongoing “well-focused marketing campaigns” appear to be having an effect; in the first seven months of this year, foreign tourist arrivals were up 11 per cent, boosting revenues by 16 per cent.

Only, most never get anywhere near a Transylvanian bear; more than two-thirds of tourist nights are spent in the capital, Bucharest.

There is a good reason for that – as the report rather endearingly notes, the roads are “clapped out” and motorways are “rare” in Romania.

And even where the country scores well in terms of infrastructure – for example airport numbers – in many cases the “quality of services falls short of the mark.”

Given that tourism in Romania employs a mere 1.8 per cent of the workforce – in nearby Hungary and Slovakia the figure is above 4.0 per cent – the potential to create jobs in the sector seems clear.

The report concludes that the sector could produce “additional inflow of up to €1 – 1.5bn by 2016,” given a combination of domestic and foreign investment – except, rather strangely for a bank, it puts no figures on what that investment total should be.

Still, Lucian Anghel, chief economist at BCR, insists the bank is putting money where its mouth is.

Asked how much BCR is lending to the tourism sector, he told beyondbrics:

“It’s really quite substantial, but it’ll take a bit of time to centralise all the figures, as we’re talking about a whole range of business lines, from micro to large corporates. But the bank has donated – not loaned – €80,000 to renovate the balneotherapy centre at Baile Herculane [in the far south-east]. This used to be the pride of Romania, but had been in decay for the past 20 years.”



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Thursday, November 10, 2011

Romanian October Inflation Rate Unexpectedly Rises on Heating

Romania’s inflation rate unexpectedly rose in October for the first time in five months because of higher heating bills after the government cut subsidies to meet pledges to international lenders.

The annual rate advanced to 3.55 percent from 3.45 percent in September, the National Statistics Institute in Bucharest said today in an e-mailed statement. The median estimate of nine economists surveyed by Bloomberg was for a 3.2 percent rate. Prices grew 0.6 percent on the month.

Romania’s inflation, which has slowed more than forecasts since July, prompted the central bank to lower its main interest rate on Nov. 2 to aid an economic recovery. The rate, which will probably end 2011 at 3.3 percent, leave policy makers with more room to reduce borrowing costs, Governor Mugur Isarescu said on Nov. 7.

Non-food costs advanced to 5 percent from a year earlier in October from 4.8 percent in September, mainly driven by surging heating and fuel prices, according to the institute. Food prices grew 1.7 percent in October, matching the September growth pace, while services prices growth accelerated to 3.6 percent from 3.5 percent the previous month, the institute said.

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

Euro Crisis Increases Need for Unity, Romanian Premier Boc Says

Nov. 10 (Bloomberg) -- The euro area’s sovereign-debt crisis, which has toppled political leaders and sent markets plunging, shows that Europe needs more unity, not less, to increase stability, Romanian Prime Minister Emil Boc said.

The Balkan country is sticking to its plan to adopt the euro in 2015, before richer eastern European nations such as the Czech Republic and Hungary, as the country sees the currency as a tool for stability, Boc said an interview in Bucharest yesterday.

The crisis raised concern that the 17-nation euro region may not stay intact and prompted some eastern European countries to delay plans to adopt the currency. Romania, the second- poorest European Union nation behind Bulgaria, wants to drop the leu as soon as it meets the terms to ensure stability and complete its integration with Europe, Boc said.

“It’s very important for Romania to be part of this area and the benefits will be also for the people,” said Boc, 45. “I think the lesson of this crisis is not less integration. The lesson of this crisis is more integration.”

The leu has lost 6 percent against the euro in the past six months, the seventh-worst performance among more than 20 emerging-market currencies tracked by Bloomberg. It closed at 4.3649 per euro yesterday.

Prime Ministers Fall

Prime ministers in euro-area members Greece, Italy and Slovakia have promised to step down as European leaders struggle to regain investors confidence amid a risk of default. Irish and Portuguese voters ousted their leaders this year, with Spain and Slovenia likely to follow suit next month, according to opinion polls.

The Czech Republic won’t consider joining the euro area for several years and has refrained from naming a target date, central bank Governor Miroslav Singer said on Oct. 17. Bulgarian is putting adoption on hold until European leaders have a plan to prevent future crises, Finance Minister Simeon Djankov said on July 25. Hungarian adoption is “unimaginable before 2020,” Premier Viktor Orban said in February.

Romania would be better off in the euro area and already meets some requirements, Boc said. Public debt was at 31.7 percent of gross domestic product last year, the fourth-lowest in the 27-nation EU. The budget deficit will be less than 3 percent of gross domestic product next year, Boc said. The inflation rate was 3.45 percent in September, the lowest since the fall of communism two decades ago.

‘Populist Electoral Measures’

Countries that have joined the EU since 2004 are required to adopt the euro when they qualify. Rules include keeping public debt below 60 percent of GDP, the budget deficit at less than 3 percent of GDP and inflation within 1.5 percentage points of the average 12-month inflation rate for the three EU nations with the slowest price growth.

Romania won’t raise spending before next year’s election and will freeze public wages and pensions to narrow the budget gap to 1.9 percent of GDP from an estimated 4.4 percent this year by Romanian accounting standards, Boc said.

“Why should we lose these advantages which we have right now and get back to the populist electoral measures and give up this country’s opportunity to be part of the euro zone?” Boc said. “Politicians were the ones who raised the level of their countries’ debt and politicians should be the ones to have the responsibility to take the decisions” to lower it.

Taking decisions on austerity measures to voters isn’t the answer, Boc said. Greek Prime Minister George Papandreou, who is giving up the reins of government to an interim Cabinet, unilaterally called for a referendum on a bailout plan hammered together by European leaders before backing down.

‘Not a Solution’

“This isn’t a solution because politicians were the ones who put in practice policies that raised the level of public debt,” said Boc, without naming any country.

The government, which signed a 5 billion-euro ($6.8 billion) two-year precautionary loan agreement with the International Monetary Fund and the EU in March, approved the outline of the 2012 budget on Nov. 7. The country has met all the targets agreed with international lenders and doesn’t plan to draw on the precautionary funds.

“Just in case things are going to get worse and worse and worse and worse in Europe, we may apply, but that’s not the case at the moment,” Boc said. “We are able to finance our public deficit now and we’re going to be able to finance next year’s gap. We just hope that things won’t get worse in Europe or in a country around us because that will inevitably affect us.”

--Editors: James M. Gomez, Balazs Penz

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

Conference calls on Romania to acknowledge WWII war crimes

November 9, 2011

(JTA) -- A conference focusing on Romania's Holocaust-era war crimes in Ukraine and Moldova called on Romania to acknowledge and apologize for the murder of hundreds of thousands of Jews.

The conference, which ended Wednesday, on the anniversary of Kristallnacht, was convened to bring the full scope of World War II Romania’s fascist state-sponsored genocide to light. The conference examined Romania’s role in the Holocaust in Ukraine and other countries of the former Soviet Union, particularly Moldova.

Convened by Ukrainian lawmaker Oleksandr Feldman and the Ukrainian Jewish Committee, which Feldman serves as president, the conference brought together some 70 participants from Ukraine and Moldova comprising a mix of Holocaust survivors, scholars and public figures.

The Romanian ambassador to Kiev initially accepted the conference’s invitation but at the last moment declined to attend. There was, however, official representation by the embassies of Austria, Azerbaijan and Israel, as well as lawmakers from Ukraine and Moldova.

“We are not demanding financial compensation from Romania,” Feldman said. “They cannot bring their victims back to life. Even though the Romanian ambassador did not attend the conference, we are pushing forward with this process until justice is achieved.”

The conference adopted a series of three resolutions that Feldman called “a small first step of a long journey before us.”

The resolutions call on Romania to recognize publicly and officially its role in the murder of hundreds of thousands of Jews from the territories of present-day Ukraine and Moldova; to issue a formal apology to the Jewish communities of Ukraine and Moldova; and to play an active role in cooperating with Ukrainian and Moldovan governmental and nongovernmental organizations in programs designed for memorializing Holocaust victims of Romania-occupied territories.

Next to the Nazis, Romania was responsible for the deaths of more Jews during the Holocaust than any other German-allied country. During World War II, the Nazi-allied Romanian government was complicit in the murder of approximately 400,000 Jews, both on Romanian soil and in villages and forests throughout Ukraine and Moldova.

Romania to Meet Investors on Nov. 11 for Planned Dollar Bond

Nov. 9 (Bloomberg) -- Romania will meet investors starting Nov. 11 to discuss the sale of dollar-denominated bonds under a 7 billion-euro ($9.6 billion ) medium-term notes plan, Deputy Finance Minister Bogdan Dragoi said.

The government has finished upgrading its three-year program to be able to issue dollar bonds and a final decision on the sale will depend on market conditions, Dragoi told reporters in Bucharest today. The road show, which will visit London and the U.S., will last until Nov. 16, he said.

The eastern European country seeks to tap international markets for the second time this year to reduce borrowing costs and help keep its budget deficit within 4.4 percent of gross domestic product after it stopped relying on a bailout from the International Monetary Fund and the European Union.

“We think Romania is a good story for investors,” said Dragoi. “We’re doing this now, after the IMF and EU quarterly review showed we had a very good performance and we have the 2012 budget outline. We’re, of course, more cautious in our estimates and with our budget, considering the European debt crisis.

Romania sold 1.5 billion euros of five-year bonds in its biggest offering of debt to international investors in June, after it stopped drawing funds in March from a 20 billion-euro bailout led by International Monetary Fund and cut public wages and raised taxes to narrow its budget deficit.

Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc will be managers of the sale, Dragoi said.

--Editors: James M. Gomez, Alan Crosby

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

Wednesday, November 9, 2011

Romania to Meet Investors on Nov. 11 for the Planned Sale of Dollar Bonds



Romania will meet investors starting Nov. 11 to discuss the sale of dollar-denominated bonds under a 7 billion-euro ($9.6 billion ) medium-term notes plan, Deputy Finance Minister Bogdan Dragoi said.

The government has finished upgrading its three-year program to be able to issue dollar bonds and a final decision on the sale will depend on market conditions, Dragoi told reporters in Bucharest today. The road show, which will visit London and the U.S., will last until Nov. 16, he said.

The eastern European country seeks to tap international markets for the second time this year to reduce borrowing costs and help keep its budget deficit within 4.4 percent of gross domestic product after it stopped relying on a bailout from the International Monetary Fund and the European Union.

“We think Romania is a good story for investors,” said Dragoi. “We’re doing this now, after the IMF and EU quarterly review showed we had a very good performance and we have the 2012 budget outline. We’re, of course, more cautious in our estimates and with our budget, considering the European debt crisis.

Romania sold 1.5 billion euros of five-year bonds in its biggest offering of debt to international investors in June, after it stopped drawing funds in March from a 20 billion-euro bailout led by International Monetary Fund and cut public wages and raised taxes to narrow its budget deficit.

Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc will be managers of the sale, Dragoi 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

Ex-Romanian TV boss, union leader, others arrested



BUCHAREST, Romania (AP)

A court on Tuesday ordered the arrest of a former TV boss and a union leader on charges they bankrupted a company and laundered tens of thousands of euros.

The Bucharest court ordered the arrest of Sorin Ovidiu Vantu, until recently the owner of influential Realitatea TV, and union leader Liviu Luca, and eight others for 29 days pending trial.

Prosecutors said the ten — businessmen and company employees — laundered more than euro83,000 ($114,000) from Petrom Service SA, a company that maintained and repaired gasoline pipes, in which Vantu had shares.

Prosecutors said they siphoned money into other ventures — transferring funds to other companies including Realitatea Media SA — before deliberately bankrupting Petrom in 2009.

Realitatea TV is critical of the government and Vantu is bitterly disliked by President Traian Basescu. Vantu says charges against him are politically motivated.

Tuesday, November 8, 2011

IMF, Romania Agree on Next Loan Tranche, 2012 Budget Limits

Romania and the International Monetary Fund completed talks after a two-week review to unlock about 475 million euros ($652 million) in funds and reached agreement on a target for next year’s budget.

A joint IMF-European Union mission finished reviewing Romania’s progress under a 5 billion-euro precautionary accord today and will recommend that the Washington-based board unlock a fourth installment. The Balkan nation met all its targets at the end of September and plans to push ahead with a state-asset sale program that so far has produced “unsatisfactory results,” IMF mission chief Jeffrey Franks said at a news conference in Bucharest today.

“We are not talking about radical cuts” to meet the 2012 budget deficit target of 2.1 percent of gross domestic product under Romanian accounting standards, Franks said. “We are talking about holding wages at the current level and continuing the natural process of attrition to continue to bring down the size of the public sector.”

Romania plans to reduce its budget deficit to between 1.9 percent and 2.1 percent of GDP, under Romanian Accounting Standards, from an anticipated 4.4 percent this year as it seeks to limit its financing burden amid Europe’s sovereign-debt crisis and a slowdown in global economic growth. It doesn’t plan to draw on the precautionary funds, which will be stored by the IMF in Washington for emergency needs.
Slowing Recovery

The country’s export-driven economic recovery will slow next year to growth of between 1.8 percent to 2.3 percent, compared with a previous forecast of 3.5 percent as it counts on western Europeans to buy its manufactured goods such as Dacia cars, Franks said.

Prime Minister Emil Boc’s government will try to push ahead with a plan to sell minority stakes in state-owned companies, such as Transgaz SA, Transelectrica SA (TEL) and Romgaz SA, and majority stakes in Oltchim SA and newly-formed power companies Oltenia SA and Hunedoara SA, even during a time of market turmoil that led to the failed sale of a 9.8 percent stake in OMV Petrom SA (SNP) in July.

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 Has Room for Rate Cuts as Inflation Slows, Isarescu Says



Romania’s slowing consumer-price growth creates room to reduce borrowing costs and monetary policy makers will have to adjust interest rates without disrupting the leu, central bank Governor Mugur Isarescu said.

Inflation will probably ease to 3.3 percent next month and 3 percent by the end of 2012 from 3.45 percent in September, Isarescu said at a press conference in Bucharest today. The Banca Nationala a Romaniei earlier forecast a 4.6 percent rate for end-2011 and 3.5 percent a year later.

Romania unexpectedly cut the monetary policy rate by 25 basis points to a record-low 6 percent on Nov. 2 to spur an economic recovery as inflation slowed more than expected, reaching the lowest level in two decades. A day later, the European Central Bank lowered its benchmarkinterest rate as the debt crisis drags the euro-area economy toward recession.

“There is pretty significant room for an easing cycle, but we don’t want to disrupt the current balances,” Isarescu said. “This isn’t about fear, one doesn’t have to prove courage by hitting one’s head against a steel wall. We are prudent because we know how quickly things could deteriorate.”

The leu strengthened 0.2 percent against the euro to trade at 4.3541 at 2:23 p.m. in Bucharest. The Romanian currency has lost 1.7 percent this year, the sixth-best performance among more than 20 emerging-market currencies tracked by Bloomberg.
‘Mind These Risks’

Regulated prices, risk aversion and volatile capital flows may boost inflation in the medium term, Isarescu said. Policy makers will also monitor the developments of the European debt crisis, he said. The central bank will next meet to set interest rates on Jan. 5.

“Our next rate-setting decision scheduled for January will have to take into account what happens in Greece,” Isarescu said. “We have to mind these risks because they influence our capital flows.”

Cutting interest rates more than 0.25 percentage points would diverge from the central bank’s “normal behavior” and raise questions about its motivation without giving commercial lenders enough time to adapt their products, Isarescu said.

The inflation rate may fall to less than 2 percent by March, Isarescu said. Economic growth may be between 2 percent and 3 percent in 2012, he added.

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

Friday, November 4, 2011

Romania May Cut Rates Again, Allow Weaker Leu, BNP Paribas Says

Romania, which unexpectedly cut funding costs yesterday, may ease monetary conditions further and allow the leu to weaken to an all-time low to boost exports and economic growth, according to BNP Paribas SA.

The National Bank of Romania may reduce its main interest rate to 5.75 percent from 6 percent at its next policy meeting in January and let the currency retreat to 4.50 per euro in the next half-year, emerging-market strategists at BNP Paribas led by London-based Bartosz Pawlowski wrote in a report today.

Policy makers yesterday lowered the monetary-policy rate to a record-low from 6.25 percent as the slowest inflation in two decades gave them room to spark an economic recovery. Consumer- price growth will probably remain inside the target band between 2 percent and 4 percent in 2011 and 2012, the central bank said.

“The NBR is showing growing tolerance towards a weaker leu, despite intermittent currency interventions to smooth the decline,” Pawlowski said. “Tight fiscal conditions as well as slowing exports and growth could see officials in Romania allowing euro-leu to approach 4.50 over the next six months.”

The Romanian currency has lost 5.8 percent against the euro in the past six months. It weakened 0.4 percent today to 4.3620 per euro by 1 p.m. in Bucharest, trading near this year’s intraday low of 4.3766, reached a month ago.

To contact the reporter on this story: Krystof Chamonikolas in Prague atkchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

Thursday, November 3, 2011

FT: Romania: a risky rate cut


November 2, 2011 
by Stefan Wagstyl




Romania on Wednesday became the first European Union country to cut interest rates in response to the Greek crisis and the consequent deterioration in the economic outlook.

Faced with the risk of renewed recession, the central bank surprised the markets by reducing its benchmark rate by 25 basis points to 6 per cent – despite clear risks of a run on the currency. Investors have so far taken the news in their stride, with the leu holding steady against the euro. But Romania’s close ties to Greece leave it vulnerable.

Neil Shearing of Capital Economics, told beyondbrics: “This is a surprise move. I don’t expect it to be the start of a cycle of aggressive rate-cutting. And there is a risk of an about-turn if the crisis in the eurozone gets worse.”

After the announcement, the leu erased earlier gains to trade flat against the euro around mid-day. Other currencies in the region were generally up against the euro, with the Polish zloty, for example, rising 0.6 per cent.

The pressure for a cut in Romania was particularly strong with the country facing one of the worst declines in economic prospects in the region. In its latest economic forecast, published last month, the European Bank for Reconstruction and Development cut its GDP growth prediction for Romania for 2012 by 2.7 percentage points to 1.1 per cent, the biggest cut for any country in the region bar Slovakia (-3.0 percentage points).

With only 1.5 per cent growth now forecast for 2011, Romania could be set for a prolonged slowdown if not outright recession.

Meanwhile, links with Greece are close, with Greek banks particularly prominent in Romania. Capital Economics calculates that Greek parents have extended credits of around $5bn to Romanian subsidiaires – credits which would, in extremis, be called in.

Fortunately for the central bank, Romania also has some advantages. First, it has in place a €5bn ($6.8bn) precautionary facility from the International Monetary Fund – useful ammunition should it come under attack in currency markets. An IMF mission is currently in Romania conducting a review.

Next, unlike other free-floating east European currencies, the leu has held its own against the euro this year, falling only by about 1.5 per cent. The zloty, by contrast, is down nearly 10 per cent.

Also, inflation – a longstanding challenge for Bucharest – slowed to 3.5 per cent in September and came inside the central bank’s target range.

That doesn’t mean Romania is safe. With nearly two thirds of credit denominated in foreign currencies, the country could face the same foreign exchange loans problems that have hit Hungary and Poland.

Capital Economics said in a note:


Admittedly, the leu has held up fairly well during the recent market turmoil… But even so, Romania’s fragile banks and close financial ties to the euro-zone’s southern periphery (especially Greece) mean that the leu is likely to come under further pressure as the euro-crisis intensifies.

As elsewhere in the region – and around the globe – all eyes are on Athens.

Wednesday, November 2, 2011

Romania Unexpectedly Lowers Benchmark Rate to Record-Low 6%

Nov. 2 (Bloomberg) -- Romania’s central bank unexpectedly cut its main interest rate for the first time in 19 months as slowing inflation gave policy makers room to spark economic growth during the euro-area’s sovereign-debt crisis.

The Banca Nationala a Romaniei lowered the monetary-policy rate to a record-low 6 percent from 6.25 percent, the Bucharest- based bank said in an e-mailed statement today. The decision matched the forecast of one of 15 economists in a Bloomberg survey. The other 14 expected no change.

The rate cut “is a very important signal considering the central bank has remained on hold for such a long time,” Raiffeisen Bank Romania’s Chief Economist Ionut Dumitru, who forecast the rate cut, said in a phone interview today. “It shows the bank’s strong belief that the inflation rate will remain low this year and next. The good track record of fiscal policy is giving the central bank room for further easing through other rate cuts in the future.”

Romanian policy makers resumed cutting rates to spur a faltering economic recovery and as inflation slowed faster-than- expected to the lowest level in two decades in September. Inflation may enter the central bank’s target band in 2011 for the first time in five years.

Central bankers left rates on hold after a July 2010 increase in the value-added tax rate to meet international bailout pledges boosted inflation to the fastest in two years. Before that, the bank lowered borrowing costs four times to combat the worst recession in two decades.

Leu Eases

The leu erased gains against the euro after the rate announcement, and rose 0.1 percent per euro to 4.3453 per euro as of 12:28 a.m. in Bucharest. The leu gained as much as 0.4 percent before the rate decision.

The Balkan nation is struggling to boost growth after exiting a two-year recession in 2011, helped by surging exports, as the debt crisis cools the economies of Romania’s main trading partners.

The economy, which is poised to grow 1.5 percent this year, will probably expand about 2 percent in 2012, compared with a previous estimate of 3.5 percent, according to the International Monetary Fund.

“Considering the external environment, the relatively high exposure from the banking sector to the eurozone periphery and a large share of foreign-exchange loans, we think that the decision today is somewhat premature and could put further pressure on the leu,” Nordea Bank AB’s Elisabeth Andreew wrote in a note to clients. “The bank must be confident about the inflation path and probably doesn’t see significant risks of capital outflows from the foreign banks.”

Inflation Target

Romania may meet the central bank’s inflation target in 2011 as a good harvest boosted supply and lowered food prices and the effects of the government tax increase fade, Deputy Governor Cristian Popa said on Sept. 29. Inflation will probably slow to about 3 percent next year, within the bank’s 2 percent to 4 percent target band, Popa said.

The inflation rate fell more than expected in September to the lowest level since the fall of communism, giving policy makers scope to cut the main rate. Annual consumer-price growth slowed to 3.45 percent from 4.25 percent in August.

Dumitru said the inflation rate may fall below 3 percent in October and rise to about 3.5 percent at the end of the year after a possible increase in administered prices. He estimates the rate to remain below 4 percent next year.

The Romanian central bank also left its minimum reserve requirements on foreign-exchange deposits at 20 percent and the ratio for leu deposits at 15 percent. It will release a detailed statement on the decision in about three hours.

--With assistance from Andra Timu in Bucharest. Editors: Douglas Lytle, James M. Gomez

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 to Keep Main Rate Unchanged on Leu Concern, Survey Shows

By Irina Savu

Nov. 2 (Bloomberg) -- Romania’s central bank will probably keep its main interest rate unchanged at its last meeting this year to prevent capital outflows and a depreciation of the currency during Europe’s debt crisis.

Banca Nationala a Romaniei will keep its benchmark interest rate at a record-low 6.25 percent, according to 14 out of 15 economists surveyed by Bloomberg. One forecast a cut of a quarter of a percentage point. A decision is likely to be announced after 11 a.m. in Bucharest.

“While inflation is obviously falling sharply as a result of tax changes” fading out, “the currency position is precarious, especially with Romania likely to be a target” for capital outflows from euro-area banks, said Peter Attard- Montalto, a London-based economist at Nomura International Plc. “Balancing macro and financial stability through unchanged rates makes the most sense.”

Eastern European policy makers have kept rates on hold, even as an economic recovery falters, to protect their currencies as investors exit emerging-market assets amid Europe’s sovereign-debt crisis.

Regional Outlook

The Romanian central bank kept the European Union’s highest benchmark rate at 6.25 percent for an 11th meeting on Sept. 29. Hungary left borrowing costs unchanged on Oct. 25 for a ninth month, while Poland stood pat for a second meeting on Oct. 6. The Czech central bank is forecast to leave its rate at a record low when it meets on Nov. 3.

The leu, the ninth-best performer this year among 25 emerging-market currencies tracked by Bloomberg, weakened 0.2 percent to 4.3489 against the euro as of 5:05 p.m. in Bucharest yesterday. Montalto estimates the leu will depreciate further to 4.4 percent by the end of the year and said he sees “upside risk into next year.”

The inflation rate fell more than expected in September to the lowest level in two decades, giving policy makers scope to cut the main rate. Annual consumer-price growth slowed to 3.45 percent from 4.25 percent in August.

Romania may meet the central bank’s inflation target in 2011 for the first time in five years as a good harvest boosted supply and lowered food prices and the effects of the government tax increase fade, Deputy Governor Cristian Popa said on Sept. 29. Inflation will probably slow to about 3 percent next year, within the bank’s 2 percent to 4 percent target band, Popa said.

Central bankers left rates on hold after a July 2010 increase in the value-added tax rate to meet international bailout pledges boosted the inflation rate to the highest in two years. Before that, the bank lowered borrowing costs four times to combat the worst recession in two decades.

--With assistance from Zoya Shilova in Moscow. Editors: Douglas Lytle, Alan Crosby

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

Tuesday, November 1, 2011

Romania Central Bank Tightens Foreign Exchange Lending Rules

The Romanian central bank tightened its rules on lending in foreign currencies as it seeks to boost leu-denominated credits and stem growth in bad loans.

The new rules, which took effect Oct. 31, limit the maximum maturity of consumer credits taken in foreign currencies to five years, down from 20 years and increase the down payment for mortgages to 15 percent for leu-denominated credits, 25 percent for euro-denominated credits and 40 percent for loans taken in other currencies, the bank said in a document on its website.

“The rules aim to set a balance between leu-denominated credits and those in other currencies and will help consolidate financial stability in the country,” the central bank said in an e-mailed statement. “They also aim to assure proactively a client’s ability to repay their loans.”

Eastern European countries, including Hungary and Romania, witnessed a boom in foreign-currency denominated loans over the last decade as clients tried to escape high interest rates in their local currencies. They are now experiencing repayment problems after their currencies depreciated.

The Romanian leu fell 18 percent against the euro since the collapse of Lehman Brothers Holdings Inc. three years ago, while the Hungarian forint declined 18 percent against the euro and plummeted 63 percent against the Swiss franc in the period.
All Banks

All the banks in Romania, including branches of foreign banks, will be obliged to abide by the lending rules. State- backed mortgages denominated in foreign currencies won’t be affected, the central bank said.

Lenders must determine the degree of a client’s indebtedness based on a worst-case scenario where the leu would weaken 35.5 percent against the euro, 52.6 percent against the Swiss franc and 40.9 against the dollar, interest rates would rise 0.6 percentage points and the client’s net income would fall 6 percent.

“The new rules should have a limited impact on banks’ profits in the short- and medium-term because there is practically no demand for new credits,” Andrei Radulescu an analyst at Avangarde Finance said by phone today. “I don’t think we will see a rebound in loan demand anytime soon because economic growth is slowing and we could even fall into a recession in the first quarter of next year.”

Romania’s banking industry is dominated by Austrian lenders, which control about 39 percent of the market, followed by Greek banks with 15.5 percent and French lenders with more than 10 percent, according to central bank data. Erste Group Bank AG (EBS)’s Banca Comerciala Romana SA is the country’s largest lender by assets, followed by BRD-Groupe Societe Generale (BRD) SA.

The industry posted a combined loss of 516 million lei last year, with 22 of the 42 banks operating in the country failing to post a profit, central bank data show. Bad loans accounted for 13.6 percent of total lending at the end of August, central bank Deputy Governor Cristian Popa said on Oct. 5.

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

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