Wednesday, May 30, 2012

Romania to Double 2012 Wind-Power Capacity on Incentives

Romania will probably double its wind-power capacity this year, as investors tap European Union- approved incentives for investment in renewable industry, said Ion Lungu, head of CEZ AS (CEZ)’s Romanian trading unit.

Wind-power installed capacity will probably increase to 2,100 megawatts by the end of 2012 in Romania from about 1,000 megawatts at the end of last year, said Lungu, who is also president of the Association of Electricity Suppliers in Romania. The Black Sea country now has an installed capacity of 1,541 megawatts of wind power, Lungu said.

“Romania can support an installed capacity of about 3,500 megawatts of wind power, considering its current infrastructure and backup capacity,” Lungu said in an interview in Bucharest today. “That may increase if additional investments are made and new generation units become operational.”

Romania has attracted investors in its renewable energy industry, including Iberdrola SA (IBE), Portugal’s biggest utility EDP (EDP), Germany’s biggest utility EON AG and Italy’s Enel SA with an incentive plan for wind investments. It wants to attract 5 billion euros ($6.3 billion) in wind-power investments through 2020 under the incentive program.

CEZ, the Czech Republic’s largest power producer, is one of the biggest investors in wind energy in Romania. It is building a 1.1 billion-euro wind farm in the Constanta region near the Black Sea and so far has 388 megawatts operational, Lungu said. The utility plans to finish building the entire 600 megawatts by the end of this year, he said.
Green Certificates

The country is offering two so-called green certificates with a value of 28 euros to 57 euros for each megawatt-hour of energy produced from wind. State-owned power-grid operator Transelectrica SA (TEL) plans to invest 782 million lei ($219 million) this year to expand and upgrade its outdated grid to accommodate the rising wind-farm output.

Romania’s energy-market regulator is now monitoring wind- energy producers, who receive green certificates, to avoid overcompensation. This may lead to a reduction in the number of certificates granted under the program for new investors, Competition Council President Bogdan Chiritoiu said today during an energy conference in Bucharest.

“If we estimated that producers need two certificates for the wind power industry, but in reality the companies reported a higher profit than a reasonable profitability of 11 percent or 12 percent, then the support may be reduced for future investors,” Chiritoiu said.

The monitoring and potential reduction in the number of certificates before 2014 may hamper investments in the industry and jeopardize project funding, Dana Duica, head of the Romanian Wind Association, said on Nov. 14.

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

Friday, May 25, 2012

New Romania PM eyes tax cuts to boost growth

By Sam Cage
BUCHAREST | Fri May 25, 2012
Reuters

Romania's new government will stick to this year's budget plan but aim to combine growth with austerity in 2013 by cutting personal income and sales taxes should it win an election in November, the prime minister said.

Tapping into a Europe-wide debate over how to maintain fiscal discipline while kick-starting a moribund economy, Victor Ponta told Reuters he wanted to gradually ease Romanians' tax burden but also stick to commitments made to international lenders.

His left wing-dominated Social Liberal Union (USL) alliance took charge earlier this month after toppling its predecessor in a confidence vote and, with backing of about 50 percent in opinion polls, looks set to consolidate power after the parliamentary ballot.

"We are committed, after the parliamentary elections, to relax the taxation of labor and strengthen the ties with the business community," the 39-year-old former champion rally driver said in written answers to questions on Friday.

"Financial prudence and the commitment to Romania's international agreements must be complemented by measures that show more flexibility and have the capacity of promoting sustainable economic growth."

Romania's economy was booming until a property bubble burst in 2008 and, after shrinking by more than 8 percent, it is recovering painfully slowly and slipped back into recession in the first quarter.

That could raise questions over revenue generation, especially if the euro zone's troubles continue to suppress growth.

Concerns whether Romania, the European Union's second-poorest member, would stick with its 5 billion euro International Monetary Fund-led aid deal after the government switch sent the leu currency sliding to record lows.

"Important changes in taxation are not feasible without measures to offset the impact," said Ionut Dumitru, chief economist at ING in Bucharest.

While Ponta gave no details on how he aimed to square that circle, Dumitru said proposals to raise government royalties from natural resources and a tax for high wealth individuals could help.

DIVERSE ALLIANCE

The previous centre-right coalition cut public salaries by a quarter and raised value-added tax under a previous IMF deal, which left it deeply unpopular and eventually felled two prime ministers.

Ponta has since reassured markets by sealing IMF endorsement to restore public wages to pre-austerity levels while sticking to a targeted budget gap of 3 percent of gross domestic product, though the euro zone's woes are keeping pressure on the leu.

Ponta, who speaks five languages, represents a change of guard for his Social Democrat Party (PSD), the successor to Romania's communists and the dominant force in the USL.

The group also includes centrists and rightists and should it win a majority in November, one of Ponta's biggest challenges would be to keep the diverse alliance content.

It will honor this year's budget commitments and, starting in 2013, stick with 16 percent as the country's main income tax rate but introduce two bands of 12 percent and 8 percent at lower pay scales. Corporation tax will remain at 16 percent, Ponta said.

The USL is also mulling cutting value added tax from the current 24 percent over several years. The effect of raising VAT had lopped half a percentage point off potential GDP growth and hence the new administration wanted to "remedy this mistake", Ponta said.

"A careful and intelligent mix of policies promoting responsibility and growth at the same time can be the hallmarks of Romania's path towards prosperity."

(Editing by John Stonestreet/Catherine Evans)

Wednesday, May 23, 2012

Romanian Parliament Passes Law To Change Election System

Romania’s Parliament today approved a law eliminating a minimum vote threshold for lawmakers ahead of general elections expected later this year.

Proposed by the country’s newly appointed Prime Minister Victor Ponta, who also heads the Social-Democrats, and his coalition partner Crin Antonescu, the leader of the Liberals, the law changes an elections system that required every party to reach at least 5 percent of votes to enter Parliament. The law got 180 votes in favor and 30 against, Mediafax reported.

A candidate who wins the highest number of votes in a voting district in the first ballot will gain a seat in Parliament regardless of the percentage obtained by his or her party, according to the new law. Current legislation regulated that a person only can get a seat in Parliament if his or her party passed the 5 percent threshold of total valid votes cast.

Romania plans to hold local elections on June 10, with general elections probably following in November. The alliance between Social-Democrats and Liberals would win 61 percent of the votes, according to a survey conducted by pollster IRES conducted on May 2 among 1,209 people with a margin of error of 3 percentage points.

“The new law discourages the rise of extravagant parties,” Viorel Hrebenciuc, a social-democratic lawmaker, told reporters after the vote.

The opposition parties said they will challenge the law at the Constitutional Court, Roberta Anastase, the chairman of the Parliament’s lower chamber, told reporters in Bucharest.

President Traian Basescu must also sign off the law for it to become effective.

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

OMV Petrom in Romania Fined for Oil Spill in Cotmeana River

OMV Petrom SA (SNP), Romania’s biggest oil company, said a broken pipe caused an oil spill in the Cotmeana river in Arges county, 150 kilometers (93 miles) northwest of Bucharest, according to an e-mailed statement today.

The Bucharest-based company said 500 liters (132 gallons) of crude oil was accidentally spilled and it plans to clean it up today.

“The incident was immediately reported to environmental authorities and the first measures were taken to limit the pollution and to remove its effects,” the company said.

Petrom was fined 100,000 lei ($28,600) for the spill by the country’s environmental watchdog. The Environment Ministry asked for a review of the oil fields and the pipeline network to avoid such accidents in the future, the ministry said in an e-mailed statement today.

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, May 22, 2012

EurActive: Two Romanian leaders fight over single EU summit seat

Romania's recently elected prime minister, Victor Ponta, was prepared to attend the informal EU summit on Wednesday (23 May) although his country is usually represented by President Traian Băsescu. If both turn out at the summit, they there will only be one chair for them, a Council representative told EurActiv.


Ponta, who is the leader of the Social Democrat party (PSD), said he wanted the Romanian Parliament to decide who should represent Romania at the EU summit, which is expected to discuss measures to promote growth in the crisis-hit Union.

Over the past years, Romania was represented at all EU summits by Băsescu, who is affiliated with the centre-right European People's Party (EPP).

Observers see the conflict between the country’s two top politicians as politically motivated. The Romanian leftist opposition USL toppled a Băsescu-appointed government last April and Ponta acceded to the post of prime minister. His real challenge will be to retain this post following parliamentary elections to be held in November.

Ponta contends that the Romanian president has authority over foreign policy, while EU summits are increasingly focused on economic affairs.

“As EU decisions touch upon the executive, they relate to internal politics, therefore my opinion is that it’s the prime minister who should attend. The Romanian constitution does not foresee an absolute right neither for the president or the prime minister to attend" EU summits, Ponta was quoted as saying.

“On Wednesday in Brussels [leaders] will discuss economic growth and jobs creation. Băsescu has no attribution in this field, therefore he will be going just to eat and make jokes,” he said, according to reports in the Romanian press.

The EU summit, which will take place over dinner, was called by European Council President Herman Van Rompuy to discuss growth initiatives that could supplement the recently adopted fiscal discipline treaty. A major highlight will be the first appearance of newly elected French President François Hollande, who wants to renegotiate the fiscal compact so that a growth dimension can be added to it.

Without any doubt, Ponta, who acceded to the executive power two weeks before Hollande’s victory in the French elections, would like to be present on such an occasion, the Romanian press reported.

Meanwhile, Băsescu's bid received support from the president of Romania’s Constitutional Court, Augusin Zegrean, who said the Romanian president should continue to represent the country at EU summits. He said that anyone who would like to find an answer to the question should read Romania’s Constitution. However, he did not provide details and in fact, the Constitution doesn’t go into such details.

Ponta fired back, stating that Zegrean was “a friend of Băsescu”. He said he had discussed the issue with the president on 16 May, and that the two had “agreed to disagree” on the subject.

Asked what would happen if both Băsescu and Ponta attended the summit, Council spokesperson Jesús Carmona told EurActiv that both would be allowed into the building, but that there would be only one chair for the representative of Romania.

“It’s them who should decide who sits on the chair,” Carmona said, insisting that the Council would not play a role as an arbiter.

He also made it plain that the other Romanian leader would not even be allowed to sit in the same room, even in the back row, and therefore would not be able to make a statement.

Since the entry into force of the Lisbon Treaty in December 2009, EU heads of state and government attend EU summits alone, as the practice that they could be accompanied by the foreign minister was abandoned. Their ambassadors and other collaborators watch the summit discussion on screens from another room.

Monday, May 21, 2012

Romania And Moldova Seek To Fortify Relationship


By: SETimes
May 20, 2012
By Paul Ciocoiu

The newly elected Moldovan president’s visit to Bucharest this month marked a change in the countries’ diplomatic relations, which have been marred by tensions stemming from the Communist administration in Chisinau for more than a decade.

“President Nicolae Timofti came to Bucharest to tell his Romanian counterpart Traian Basescu that the diplomatic mistakes of the past will not repeated — that the previous Moldovan administration’s hostility towards Romania is history,” Vladimir Turcanu, presidency spokesman, told SETimes. “It is high time the two neighbours had a correct relationship,” he said.

Timofti was elected by the Moldovan parliament in March, ending a three-year political deadlock during which the deputies failed to choose the head of the state seven consecutive times.

During their meetings, Basescu and Timofti agreed on accelerating the common energy projects, among them the trans-border gas pipe that will link the Romanian city of Iasi and the Moldovan town of Ungheni.

Basescu said he hoped the Iasi-Ungheni pipeline, which is partially funded by the EU, will be finished in 2014. To expedite it, the two governments declared the pipeline a project of national interest.

“Through this project, Romania has given more concreteness to bilateral projects,” Turcanu said. “The Iasi-Ungheni gas pipe will help Moldova decrease its energy dependence because the energy alternative is vital to Moldova. For us, this is like a new declaration of sovereignty.”

“The Iasi-Ungheni pipeline strengthens the economic co-operation between the two countries and marks Romania’s ever clearer presence in Moldova’s economic development and defining new strategic projects,” Eugen Tomac, former secretary of state, told SETimes.

At the same time, he underlined, Moldova has in Romania the strongest supporter of its European aspirations. “Bucharest has been by far the keenest supporter of Moldova’s Western urge. There was no European Council without Romania to bring this into discussion,” Tomac noted.

Apart from the pipeline, the two countries also agreed on speeding other common projects — such as the trans-border electric lines connecting Falciu-Gotesti and Suceava-Balti, modernising the Iasi-Unghen-Kishinev railway and the bridges over Prut River which marks the border between the two states.

Despite this, analysts say Moldova should show more resolve concerning the road it plans to take.

“Timofti’s visit confirms the privileged partnership [Chisinau] … says it has with Romania. Moldova should be aware that getting closer to Romania equals getting closer to the Euro-Atlantic space,” Dan Dungaciu, director of the Romanian Academy’s International Relations Institute, told SETimes.

“As long as the Transdniestr conflict is still out there … Moldova will not be able to be 100% pro-European. Because as long as Transdniestr remains an issue, Moldova has to pay attention to Russia, too. Moldova cannot go on playing this double game,” Dungaciu said.

Romania’s Cristian Mungiu looks at love and faith in Cannes entry ‘Beyond the Hills’

By Associated Press, Published: May 19


CANNES, France — Both boos and applause greeted Cristian Mungiu’s latest film at Cannes — and that’s fine with him.


The Romanian director won the film festival’s top prize in 2007 with abortion drama “4 Months, 3 Weeks and 2 Days,” but he’s had a more mixed reception this time around.


“Beyond the Hills,” in which love and faith collide with fateful inevitability, was inspired by the true 2005 case of a young woman who died during an attempted exorcism at a remote monastery.


Some Cannes viewers failed to warm to the 2 1/2-hour film’s wintry setting and deliberate pace, or wished for more overt condemnation of religious dogma. By contrast in Romania, the director said, it was hard to make the film because of the power of the Orthodox Church.


But Mungiu says it’s “a very good thing” if the film polarizes audiences.


“Films are not meant to generate a unanimous reaction,” Mungiu told reporters ahead of the film’s red-carpet gala on Saturday. The festival runs through May 27. “I don’t want the film to be liked. I hope the film will challenge people to have an opinion.”


The film focuses on feisty but fragile Alina (Cristina Flutur), who has returned from Germany to visit childhood friend Voichita (Cosmina Stratan). The pair were once intimate, but now Voichita has joined a strict religious community with a severe view of sin.


Alina enters into a life-threatening battle of wills with a charismatic priest and a band of devout nuns, but Mungiu says he did not set out to knock religion. He is more interested in the forces that brought the characters to the crisis that unfolds on-screen.


Two decades after the fall of communism, the film shows a Romania still struggling to build up strong social institutions. Police, government officials and doctors all appear in the film — all equally ineffectual.


“All the films that I do are finally about society, or how the society behind influences the choices of the main characters,” Mungiu said.


The two central characters grew up in one of the notorious orphanages set up under dictator Nicolae Ceausescu, and Mungiu said that as well as exploring “different kinds of love and what people do in the name of love,” the film is also about abandonment.


“People who are really responsible for what happened in the lives of these girls are not present in the film,” he said. “They are the result of an education that started from the age of two or three or even younger. The kind of choices that were in front of (them) the day they left this kind of state school were very limited.


“So the film does not try to identify the guilty parties from among the characters you see on the film.”


Mungiu insists that “Beyond the Hills” is a departure from the gritty “4 Months,” but the new film retains a focus on the relationship between two women in conflict with more powerful men.


It also keeps the director’s distinctive style of long takes, painterly compositions and minimal music. Mungiu’s filmmaking is the antithesis of flashy — a deliberate choice, he says.


“Things happen in front of you and you will decide what is important,” Mungiu said. “For me it in the end is a matter of respect for the spectators.”

Romania Plans Third-Quarter Bond Abroad as Leu-Debt Sales Shrink

Romania plans to sell international bonds in the third quarter and scale back domestic debt issuance after a record first three months as speculation Greece will exit the euro roils markets, a Finance Ministry official said.

The eastern European nation, which raised a record 26 billion lei ($7.5 billion) at home in the January-March period, retains plans to sell as much as 2.5 billion euros ($3.2 billion) of bonds on global markets this year, depending on market conditions, Deputy Finance Minister Cristian Sporis said.

“We want to be a constant issuer on the international markets,” Sporis said in a May 19 interview in London. “We said we’ll issue 2.5 billion euros this year so we’ll try to issue that amount.”

First-quarter Treasury-bond and bill sales rose more than 50 percent from a year earlier as wage cuts and a tax increase aimed at trimming the budget deficit bolstered investors’ optimism toward the European Union’s second-poorest member. Romania, which exited a 20 billion-euro bailout led by the International Monetary Fund in 2011 after its deepest recession on record, has also raised $2.25 billion abroad this year.

After reaching a year low of 4.4625 percent on April 23, the yield on Romania’s dollar bond due 2015 has jumped to 5.119 percent as investors sell emerging-market assets amid reports Greece may return to the drachma. The cost of insuring government debt against non-payment for five years using credit- default swaps has risen to 431 basis points from a 2012 low of 295 basis points on March 14. A basis point is 0.01 percentage point.
Leu Sinks

The leu has lost 2.6 percent against the euro since January, making it the worst performer among eastern European and African currencies tracked by Bloomberg.

Romania won’t be forced to sell bonds abroad as it has a cushion of about 4 billion euros and is in line for a 1 billion- euro backstop from the World Bank, pending approval at a June meeting of the Washington-based lender, Sporis said.

“We have a buffer and we’re not caught in a corner to issue at any cost, unlike some countries,” he said. The World Bank loan “will be at our disposal any time we want to draw on it, for which we will be paying a commitment fee.”

Romania also has a two-year 5 billion-euro precautionary agreement from the IMF and the EU, which was agreed on last year after the bailout expired.

Domestically, Sporis said Romania will sell less debt after frontloading this year’s plan and will continue offering treasuries with maturities of as long as 15 years.

“We’ll reduce our debt issuance,” he said. “We’re sticking to our plan to lengthen the maturities because we want to avoid repayment peaks in the next three to four years. If we can’t find enough interest on the local market, we can tap the foreign markets if the opportunity arises.”

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

Friday, May 18, 2012

New Romania govt to stick to privatisation plans

By Kylie MacLellan

LONDON, May 17 (Reuters) - Romania's new government will stick to existing timetables for the sale of stakes in state-owned power companies and hopes to achieve dual listings for those slated to go public, its business environment minister said on Thursday.

The left-leaning government sealed parliamentary backing just over a week ago after public anger against spending cuts and tax rises helped it to power in a vote of parliamentary deputies. Romania is due to hold general elections in November.

The new administration will begin with the secondary sale of a 10 percent stake in pipeline operator Transgaz towards the end of June.

Initial public offerings (IPOs) of power producers Romgaz, Hidroelectrica and Nuclearelectrica are planned for September, October and December respectively.

"In terms of the privatisation we will stick with what we committed," Lucian Isar told Reuters during a visit to London.

"I am pushing for a dual listing because I believe it is good for the state and the result of the IPO."

Where they might be dual listed is yet to be decided, he said, but candidates include London and Vienna. Earlier this year the London Stock Exchange signed an agreement with Bucharest to help promote Romanian companies to London-based investors.

Romania, which has long shied away from privatising its inefficient state sector for fear of job losses and accusations of selling off the family silver, committed to an ambitious timetable of privatisations under a 5 billion euro IMF-led aid deal struck last year.

The timetable has slipped again and again and so far it only has a small secondary offering of shares in power grid operator Transelectrica to show.

A failure to sell a minority stake in oil and gas group Petrom - the jewel in an albeit tarnished crown - and copper mine Cupru Min had raised serious questions over commitment even before the previous government fell in April.

Former investment-banker Isar said he was also looking at which other state-owned companies could be privatised to help generate more income for the state and improve Bucharest's international standing in the IPO market.

Bucharest Stock Exchange president Lucian Anghel, also part of the delegation visiting London, said the bourse had this week agreed a tie up with the Bulgarian Stock Exchange which could see its companies list in Romania.

"Our strategy to be a regional hub for smaller countries in Southern and Eastern Europe," he told Reuters.

"After this very ambitious programme we could see even up to a 50 percent increase of daily trading volumes on the Bucharest stock exchange in 6 to 12 months."

Anghel said the exchange had learnt from the failed Petrom sale and taken steps to improve the ease of investing, such as reducing the paperwork and bureaucracy involved, to make it more attractive to international investors.

The Petrom sale is now not likely to be revived until early next year, he said.

Minister Isar said he was looking in to what happened with both Petrom and Cupru Min. The previous government backed out of a deal to sell Cupru Min, the country's biggest copper mine, to Canada's Roman Copper Corp last month after failing to agree to the terms of the deal.

"We will come up with a solution; this could be selling, joint venture, listing. We do not know exactly but in this case (Cupru Min) for sure we will do our homework better," he said. "There are several elements which we didn't agree with and we want to do it properly."

Thursday, May 17, 2012

Romanian Economy Returns to Recession in First Quarter on Crisis

Romania slipped back into a recession in the first quarter as the European sovereign-debt crisis and freezing temperatures slowed growth in exports and industrial output.

Gross domestic product shrank a seasonally adjusted 0.1 percent from the previous quarter, after contracting 0.2 percent in the fourth quarter, the National Statistics Office in Bucharest said today in an e-mailed flash estimate. GDP grew a seasonally unadjusted 0.3 percent from a year earlier, below the median estimate of 0.8 percent in a Bloomberg survey of nine economists.

Romania’s economy has fallen into a second recession in four years, after exiting its worst decline on record last year, as European austerity measures aiming to cool the sovereign-debt crisis slowed exports from the eastern European country, home to Dacia SA cars. Freezing temperatures and heavy snowfall also disrupted transportation and supply chains.

“The second-quarter data will be crucial in shedding light on whether the observed softening in economic activity is largely driven by temporary factors such as harsh winter conditions,” Citigroup Inc. economists Ilker Domac and Gultekin Isiklar wrote in a note to clients before the report.

The country will probably see growth slowing this year to 1.5 percent from 2.5 percent in 2011 as European spending cuts hinder export growth, according to International Monetary Fund forecasts. The economy will probably grow 1.4 percent this year, the European Commission said in its spring forecast published on May 11.

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, May 15, 2012

Romania Property Fund Posts First-Quarter Loss, Shares Drop


By Andra Timu - May 15, 2012

Fondul Proprietatea SA (FP), a Romanian property fund, incurred a first-quarter loss of 1.5 million lei ($434,000), compared with a 14 million-lei profit a year earlier, according to a filing with the Bucharest Stock Exchange.

Net asset value declined to 16 billion lei at the end of March, from 16.5 billion a year earlier, and to 15.5 billion at the end of April, Fondul said in a separate bourse filing.

The fund has stakes in Romanian companies such as oil company OMV Petrom SA (SNP) and utilities Transelectrica SA (TEL) and Transgaz SA. (TGN) It was set up to compensate citizens for property confiscated under communism and started trading on the bourse in January last year.

Fondul’s shares dropped 2.9 percent and traded at 0.475 lei per shares at 11:21 a.m. in Bucharest today, valuing the company at 6.5 billion lei.

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

Romanian Economy Returns to Recession in First Quarter on Crisis

Romania slipped back into a recession in the first quarter as the European sovereign-debt crisis and freezing temperatures slowed growth in exports and industrial output.

Gross domestic product shrank a seasonally adjusted 0.1 percent from the previous quarter, after contracting 0.2 percent in the fourth quarter, the National Statistics Office in Bucharest said today in an e-mailed flash estimate. GDP grew a seasonally unadjusted 0.3 percent from a year earlier, below the median estimate of 0.8 percent in a Bloomberg survey of nine economists.

Romania’s economy has fallen into a second recession in four years, after exiting its worst decline on record last year, as European austerity measures aiming to cool the sovereign-debt crisis slowed exports from the eastern European country, home to Dacia SA cars. Freezing temperatures and heavy snowfall also disrupted transportation and supply chains.

“The second-quarter data will be crucial in shedding light on whether the observed softening in economic activity is largely driven by temporary factors such as harsh winter conditions,” Citigroup Inc. economists Ilker Domac and Gultekin Isiklar wrote in a note to clients before the report.

The country will probably see growth slowing this year to 1.5 percent from 2.5 percent in 2011 as European spending cuts hinder export growth, according to International Monetary Fund forecasts. The economy will probably grow 1.4 percent this year, the European Commission said in its spring forecast published on May 11.

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 Utilities Post First-Quarter Profit Drops on Weather

Transelectrica SA (TEL) and Transgaz SA, Romania’s biggest publicly-traded utilities, said profit fell in the first quarter as a cold snap and heavy snowfall disrupted energy supplies, lowering revenue and raising maintenance costs.

Transelectrica’s net income fell 73 percent to 43.6 million lei ($12.7 million) from 160.9 million lei a year earlier, according to an earnings statement to the Bucharest Stock Exchange today. Transgaz posted an 11 percent decline in net income in the first quarter to 173.5 million lei from 194.9 million lei a year ago, it said in its bourse filing.

Romania’s utilities need to increase spending to expand and upgrade their outdated energy grids to accommodate growing output and consumption. A decline in the companies’ first- quarter profits may be compensated by higher regulated tariffs later this year, as the country’s energy regulator is expected to approve pricing plans for both utilities.

“Even though the volumes transported by the two companies declined and none of them benefited from an increase in regulated prices, the results are quite promising,” said Mihai Caruntu, an analyst at Erste Group Bank AG’s Banca Comerciala Romana SA. “We expect 2012 to be a decent year especially if we compare the current results with an exceptional first quarter last year, but for Transgaz (TGN) it will be crucial to see a tariff increase approved by the energy-market regulator in July.”

State-owned Transelectrica plans to invest 782 million lei this year in power-grid expansion, as Romania’s incentives for renewable-energy companies boost investments and wind-farm output.
No Capital Raise

Transelectrica’s majority owner, the Romanian Economy Ministry, has no plan to increase the company’s share capital through a cash contribution this year, after it sold a 15 percent stake on the stock exchange in March.

Romania raised 37.7 million euros ($49 million) from the sale of the minority stake, the country’s first in more than four years, to meet pledges to international lenders under a precautionary agreement. The ministry plans to sell a 15 percent stake in Transgaz on the stock exchange this year.

“Considering the results the Transelectrica shares may fall below 12 lei per share in the short term,” Andrei Radulescu, an analyst at the brokerage SSIF Broker SA, said in an e-mailed response to Bloomberg questions. “Trangaz’s results are decent. The company is undervalued at this point, so its shares may rise to about 235 lei.”

Transgaz fell 6.7 percent at close to 194 lei per share in Bucharest trading today, while Transelectrica’s shares declined 5.8 percent to 13 lei, valuing the company at 953 million lei.

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

Romanian Transgaz Posts First-Quarter Profit Drop on Costs

Romania’s natural-gas grid operator Transgaz SA (TGN) said its profit fell 11 percent in the first quarter from a year earlier on rising costs and lower revenue.

Net income dropped to 173.5 million lei ($50 million) from 194.9 million lei a year earlier, the Medias, Romania-based company said today in an earnings release sent to the Bucharest Stock Exchange.

The state-owned company’s revenue fell 0.5 percent to 472.2 million lei as it transported lower volumes of natural gas in the first quarter, while expenses rose 7.4 percent from January through March to 260.2 million lei, according to the statement.

“Total revenue fell short of the level reported in the first quarter of last year by 2.4 million lei, mainly because the company transported about 92 million cubic meters of natural gas less than it did in the same period of last year,” Transgaz said in the statement.

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

Friday, May 11, 2012

Romania’s Government Seeks a Progressive Tax System From 2013


By Andra Timu - May 11, 2012 

Romania’s new government plans to scrap the country’s flat tax from 2013 and introduce a progressive taxing system pending a win at this year’s elections, Prime Minister Victor Ponta said.

The newly instated cabinet seeks to design next year’s budget using a progressive taxing system with an 8 percent tax for low-income earners, a 12 percent tax for average incomes and a 16 percent tax for high incomes and cut some social contributions, Ponta said in a document published on the cabinet website today.

Romania introduced a flat tax of 16 percent in 2005 to attract foreign investors. Ponta’s government took office on May 7 after his Social-Liberal Union ousted former Prime Minister Mihai-Razvan Ungureanu in a no-confidence vote in Parliament.

The alliance, known as USL, would win 61 percent of the votes in a general election, a survey, conducted by pollster IRES on May 2 among 1,209 people, showed. Romania is scheduled to hold parliamentary elections in the second half of this year.

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, May 10, 2012

FT: Romania: 340 jobs at new Bosch plant

Bosch, the German car parts maker, has confirmed plans to go ahead with a €77m plant in northern Romania, in a move which will give the new government in Bucharest a bit of a boost.

The investment in the city of Cluj-Napoca will bring 340 jobs in the production and development of automotive electronic controls near a site where Nokia closed a showcase plant last year. Good news for a country struggling to avoid recession.

Bosch said on Tuesday that construction would start in the second quarter of 2012, with manufacturing scheduled to begin in mid-2013.

Bosch currently has three locations in Romania – a sales company in Bucharest, a communications centre in Timisoara, western Romania, and a factory in Blaj, northern Romania, which produces linear-motion technology. The group has 1,400 employees in the country.

Romania’s unemployment rate in March was 7.5 per cent, on a seasonally-adjusted basis, well below the European Union average of 10.2 per cent. But the country suffers from chronic underemployment with large pools of people in the countryside without full-time jobs. The employment rate for people of working age is around 60 per cent, compared with an EU average of nearly 70 per cent.


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Romania Agrees With Bailout Lenders on Increasing Budget Gap

The International Monetary Fund completed a review of Romania’s loan accord and agreed to let the country widen its budget deficit to accommodate a public- sector wage increase after a third government took office this year.

The IMF and Romania reached a staff-level agreement to unlock about 475 million euros ($616 million) from its 3.6 billion-euro precautionary loan, Mission Chief Jeffrey Franks said in Bucharest today. The IMF also agreed to let Romania increase its budget-gap target to 2.2 percent of economic output from 1.9 percent.

“Romania met almost all the targets under the accord except for two of them referring to some unpaid debt to private companies,” Franks said. “There are still difficulties in restoring the economic growth because of the international crisis and the risks remain high.”

The IMF and the European Union’s fiscal flexibility toward Romania comes at a time when more European leaders are pushing for pro-growth policies after France’s first power shift to a socialist president since 1981 and Greece’s electoral rebellion against austerity busted the budget-cutting consensus that has dominated the response to the sovereign-debt crisis.
Governments Fell

Romania, which secured the loan from the IMF and the EU last year as a safeguard against the European sovereign-debt crisis, changed governments twice this year amid protests against austerity measures. Former Prime Minister Emil Boc resigned on March 6 and his successor Mihai-Razvan Ungureanu lost a no-confidence vote in Parliament on April 27, three days after the IMF review began, delaying its completion by two days.

The Social-Democrat Victor Ponta was appointed as Prime Minister on May 7. His new government signed a letter of intent needed to complete the lenders’ review yesterday and agreed on an 8 percent increase of public wages on June 1, followed by another raise in December to reverse a 25 percent cut in 2010. The Cabinet is also seeking to pay back some social contributions to pensioners.

The IMF warned Ponta’s government to keep a cap on spending before elections this year after the state’s arrears started to increase “probably because of pre-electoral pressures,” Franks said.

The Romanian leu, which slid to a record intraday low of 4.4620 on May 1 after Ungureanu’s government collapsed, weakened 0.3 percent and traded at 4.4202 against the euro at 2:20 p.m. in Bucharest trading.
Easing Monetary Policy

The country’s central bank may have “small” room to further ease monetary policy this year after the government fell and the debt crisis prompted policy makers to take a pause, Franks said in an interview in Bucharest today. He also said that the inflation rate, which fell to a record low of 2.4 percent in March, will remain within the central bank’s targeted band of between 2 percent and 4 percent.

“So far we don’t see negative effects on inflationary expectations, on the exchange rate, yes, it’s weakened a bit but not significantly, so there’s no compelling reason for a tightening of the monetary stance at this point,” Franks said. “There may be a small additional space for monetary easing, but not much.”

Romania’s economy will expand 1.5 percent this year as exports to western Europe, the country’s major trading partner, are slowing amid the sovereign-debt crisis, Franks said.
Technical Recession

Romania may enter a technical recession as the economy may post a “minor” quarterly contraction in the first quarter, central bank Deputy Governor Cristian Popa said yesterday.

The Balkan country’s Finance Ministry will continue borrowing money from domestic and international markets “on an opportunistic basis” under a 7 billion-euro medium-term note program, Franks said.

Romania should wait with a plan to sell stakes in energy companies on both internal and international markets as announced by the new Economy Minister Daniel Chitoiu as it will slow the sales timetable already agreed with the lenders, Franks said.

The country pledged to sell 15 percent stakes in natural- gas company Romgaz SA and Transgaz SA (TGN) and 10 percent stakes in hydro-power operator Hidroelectrica SA and nuclear-power generator Nuclearelectrica SA this year on the Bucharest Stock Exchange.
Transgaz, Romgaz

“While in principle that might be an interesting option, at this stage it would be technically much more complicated and it might slow down the process, so I would be much more in favor of pushing ahead the plan that we already have,” Franks said. “Additional international listings can be considered afterwards.”

The Transgaz and Romgaz stake sales will probably be the next, according to Franks.

Romania and its international lenders also agreed on a schedule to fully lift price controls of natural gas for companies starting this year and for households starting the second half of next year until the end of 2018, Franks said.

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 Petrom Q1 net profit tops forecasts

May 9 (Reuters) - Romania's top oil and gas company Petrom, majority-owned by Austria's OMV , posted on Wednesday a net profit of 1.384 billion lei ($407.73 million) for the first quarter, above market expectations.

The average forecast in a Reuters poll was for a net profit of 1.08 billion lei. Petrom recorded a profit of 840 million lei in the same quarter last year.

"The extreme weather conditions we witnessed in the first two months of 2012 caused technical disruptions which impaired our production volumes ... and dragged down our marketing sales," Petrom CEO Mariana Gheorghe said in a statement.

"However, our gas sales volumes benefited from the harsh winter and we also recorded improved margins mainly on gas extracted from storage." ($1 = 3.3944 Romanian lei) (Reporting by Ioana Patran; Editing by Jonathan Hopfner)

IMF praises Romania on aid deal, allows wage rises

BUCHAREST (Reuters) - Romania has shown strong commitment to its 5 billion euro aid deal and reached most of its targets, enabling it to start reversing some state pay cuts this year, an International Monetary Fund official said on Wednesday.

The country, which cut public salaries and raised sales tax to complete a previous 20 billion euro ($26 billion) bailout, has space to run a slightly higher deficit than initially planned and still be within its European Union commitments, said Jeffrey Franks, the IMF mission chief.

The new left-leaning government sealed parliamentary backing on Monday with a comfortable majority after public anger against spending cuts and tax rises helped it to oust the previous cabinet last month.

It needs to stay prudent due to risks from the euro zone and an election in November, Franks said.

"It is of crucial importance that Romania keeps this path. We strongly believe if Romania maintains this reform commitment this will pave the way to accelerated growth and rising living standards," Franks told a news conference.

He said the IMF had also agreed the new Romanian government could hike state wages in two steps, the first to come later this year, until wages are fully restored in 2013 to the level before the 2010 cuts.

The leftists' original plan was to restore wages to their pre-austerity levels before the parliamentary election in November, which by new Prime Minister Victor Ponta is expected to win.

Romania will now aim for a budget gap of up to 2.2 percent of gross domestic product (GDP) in cash terms this year, compared with a previous 1.9 percent, but that would still be within a broader target of 3 percent according European Union accounting standards.

Wednesday, May 9, 2012

FT: Romania: can Ponta stay the course?

May 8, 2012 12:13 pm by Stefan Wagstyl


Investors have welcomed the rapid confirmation of Romania’s new government, with the leu recovering the ground it lost after the last administration resigned less than two weeks ago.

But there’s something slightly suspicious about the ease with which prime minister Victor Ponta’s coalition has won parliamentary approval for running Romania until November’s elections. Will he really stick to the IMF-backed austerity programme, when austerity is coming under attack elsewhere in the European Union? Will his MPs stay the course as electoral reckoning approaches? Will the parliamentary turkeys really vote for Christmas?

Ponta (pictured) takes over from a government that lasted just two months. Mihai Razvan Ungureanu’s centre-right administration collapsed in the face of public protests about tax increases and spending cuts that also felled his predecessor, Emil Boc.

“Today will mark a fundamental change in Romania’s fate. I am the only prime minister that celebrated his adulthood after the 1989 revolution,” the 39-year-old Ponta said in a speech to parliament, housed in a huge marble palace built by communist dictator Nicolae Ceausescu and finished after he was toppled and executed.

The former rally champion is rightly taking heart from the scale of his majority after winning 284 votes in the 460-seat assembly in Monday’s vote. According to Bloomberg, he told reporters: “This stable majority is a good thing for us, after the very fragile majorities of the last two governments.”

But his Social Liberal Union (USL) controls just 232 seats and is itself a coalition. The remaining support comes from a fragile string of small parties of both the left and right and fickle ethnic minority representatives that tend to back whoever is in power.

Ponta’s team has vowed to stick to a €5bn pact with the International Monetary Fund and the European Union to cut Romania’s budget deficit to under 3 per cent of gross domestic product in 2012, from 5.2 per cent last year.

“We have managed from our position of an impromptu government to negotiate a letter of intent with international institutions that gives a message of stability,” Ponta said.

But Ponta also says he has IMF agreement for an 8 per cent increase in public sector wages in June – partly restoring the 25 per cent reduction imposed in 2010 – and to return to pensioners some overpayments of social security contributions.

At Tuesday’s government meeting Ponta’s administration was due to approve a letter of intent to the IMF/EU confirming its support for the loan agreement.

Investors seem ready to allow for some flexibility, as long as the overall IMF/EU deal stays in place. The leu plunged to a record low of 4.462 to the euro on May 1 after the Ungureanu government collapsed. But has since recovered and was trading at 4.40 on Tuesday.

As Capital Economics said in a note last week, Romania needs economic room for manoeuvre:


For our part, we don’t think moderate fiscal slippage is necessarily a bad thing. It looks like weak external demand may have pushed the economy into recession in Q1, while [recent] disappointing European PMI data suggest that Q2 could be even worse.

But can the government stick to even the more generous line that it is proposing in the light of the domestic pressures – and the arguments about austerity now raging elsewhere in Europe?

Romania’s recent administrations have proved short-lived. But they have been from the centre-right. Ponta comes from the left and so will want to draw a clear line between himself and his predecessors.

More importantly, perhaps, the country has stuck to its IMF-backed programmes for three years now – a good record given the deep recession it endured in 2009-10 and the weakness of the subsequent recovery.

Also, investors have a lot of faith in the central bank, which has, through intervention, kept the currency pretty stable. This year, the leu has traded within a 4 per cent range against the euro, compared with a range of around 13 per cent for the Hungarian forint.

As Société Générale said on Tuesday: “The stabilisation of the political situation (at least for the coming few months) and the central bank’s action in the FX market should help ease pressure on the RON.”

A lot may now depend on Greece, where Romania’s trade and banking ties are stronger than any other Balkan country’s. Even with the best intentions, Ponta may struggle to contain the impact if Greece implodes. It could be a long, hot, sweaty summer in Bucharest as well as Athens.




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Tuesday, May 8, 2012

Amnesty International: Romania: Housing law must protect the vulnerable

Romania’s continuing economic challenges that have seen two governments fall in fewer than three months are all the more reason for the authorities at all levels to close legal loopholes that affect the housing of some of the country’s most marginalized groups, Amnesty International said.

“These gaps in the law have allowed local authorities forcibly to evict people from their homes without any safeguards including prior notification or adequate consultation. Often, the local authorities left people homeless,” said Jezerca Tigani, Europe and Central Asia Deputy Programme Director.

“People who live in informal settlements plus social housing tenants who have not had their lease renewed have no legal protection and can be forcibly evicted from their homes at any moment. Such human rights violations are affecting the most vulnerable, very often Roma.”

A briefing by Amnesty International, Unsafe foundations: Secure the right to housing in Romania, outlines key requirements under international law that must be complied with by governments to safeguard the right to housing, including a prohibition of forced evictions.

This briefing provides the Romanian government with a “housing law checklist” based on international standards that should serve as guidance for a legal reform that is long overdue.

The current law in Romania does not prohibit forced evictions. Nor does it prohibit housing relocations to areas which are unsafe and/or polluted, and which pose a risk to people’s lives and health.

It does not oblige authorities to provide public housing in locations which allow effective access to employment, health-care services, schools, child-care facilities and other services.

Further, the current law does not expressly prohibit segregation in housing and does not provide adequate protection against this particularly pernicious form of discrimination.

Amnesty International has documented numerous cases of Romani communities being forcibly evicted and relocated to the outskirts of the cities; to overcrowded homes lacking access to essential services, and to isolated locations which present serious environmental and health risks.

“The absence of fundamental legal protections and safeguards puts Romania directly in contempt of international standards on adequacy of housing and gives the green light to local authorities to put vulnerable families in even more appalling living conditions,” said Tigani.

On the freezing morning of 17 December 2010, 356 people, mostly Roma, who lived for years in Coastei Street in the centre of the city of Cluj-Napoca, were forcibly evicted without adequate notice or consultation. They were taken by truck with their belongings to new housing units in the Pata Rât area situated on a hill close to a landfill site and a chemical waste dump on the outskirts of the city.

On warm days, the smell of chemicals fills the air. Families – sizes of which vary between four and 11 people – were provided with one room of up to 18 m². Four rooms share a communal bathroom with only cold water.

About 30 of the evicted families were not offered any alternative accommodation. Some of them constructed improvised houses next to the existing units without access to electricity, water, or sanitation and at risk of new eviction.

Pata Rât is 9km away from the city centre, it is not a residential area and transport is infrequent and expensive. The closest bus stop is 2.5km away, the closest school 9km, and shopping centre 10km.

Coastei Street is not an isolated case of forced eviction where the authorities have violated their obligations under international law as a result of deficiencies in the Romanian law.

“No matter whether people rent, own or occupy their home or land without proper documentation, everybody is entitled to the same level of protection against forced evictions, harassment or other threats,” said Tigani.

“The new Romanian government should model its housing law on the international standards that it has voluntarily accepted and ensure that the law guarantees adequate housing and related rights for everybody in the country.”

Romania's Grain Harvest to Fall 8.3% on Adverse Weather

Romania’s grain harvest will decline this year by 8.3 percent to 18.8 million metric tons from 20.5 million tons last year after an autumn drought and winter frosts, Ukrainian agriculture researcher UkrAgroConsult said.

Still, it will be the third-biggest harvest in Romania after those of 2002 and 2011, the Kiev, Ukraine-based researcher said today in e-mailed statement.

To contact the reporter on this story: Kateryna Choursina in Moscow atkchoursina@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net

AP: Romania's new left-leaning government is approved

BUCHAREST, Romania—Romanian lawmakers on Monday approved a new left-leaning Cabinet that is expected to continue a slate of economic reforms, but partially restore public sector wages and pensions slashed as part of austerity measures.

Parliament approved the government of Victor Ponta by 284-92 votes, making him Romania's third prime minister this year after previous two centrist governments collapsed over unpopular cuts.

Ponta had told lawmakers that if his coalition government of Social Democrats and Liberals is approved it would only remain in office until November parliamentary elections.

"I am convinced that today we begin to fundamentally change the fate of Romania," said Ponta, who has vowed to reduce the number of political appointments in state institutions and end endemic cronyism.

Pledging "stability and seriousness," he said the government would start working on Tuesday.

His government has said there will also be a moratorium on shale gas exploitation and a review of a controversial Canadian gold mine.

Romania took a (EURO)20-billion ($26-billion) bailout loan from the International Monetary Fund, the European Union and the World Bank in 2009, when its economy shrank 7 percent.

To keep to the bailout agreement, the government cut public wages by 25 percent, cut pensions and raised sales tax to 24 percent. Thousands of Romanians protested in cities around the country in bitter January weather which led to the collapse of the government of Emil Boc, who was prime minister since 2008.

Less, than three months later, another government fell in a no-confidence vote on April 27.

President Traian Basescu is expected to lead a ceremony to swear in the Cabinet.

Monday, May 7, 2012

Romania president cautious on pay rise deal with IMF

(AFP)

BUCHAREST — Romania's President Traian Basescu said Sunday he would oppose a deal with the IMF and the EU to raise public wages if it meant exceeding the public deficit target set for 2012.

Florin Georgescu, finance minister in the left-leaning government expected to win parliament's approval Monday, said an agreement had been reached with the International Monetary Fund on increasing the budget deficit in order to hike public wages.

Crisis-hit Romania had slashed wages in the public sector by 25 percent in 2010 and all political parties have pledged to restore them this spring.

But Basescu insisted the move should not jeopardise this year's public deficit target, set at 1.9 percent of gross domestic product.

"This is a key issue. If this principle is not observed I will not send the letter (of intent signed with the IMF) to parliament," Basescu said during a meeting with a delegation of the IMF and the EU.

Basescu, who advocated austerity measures, has repeatedly stressed Romania should continue to keep a tight lid on public spending.

The IMF had said during its previous mission in Bucharest that it would only agree to a modest pay rise, in the range of three to five percent.

Clouds hang over gold mine plans in Romania

By Mihaela Rodina (AFP)

BUCHAREST — Plans by the Canadian company Gabriel Resources to open a gold mine at Rosia Montana in Romania might be hampered by a centre-left cabinet which is to take office on Monday, analysts say.

"The Rosia Montana project will be reassessed in a transparent way so that decisions are in line with the national interest, environment protection regulations and European legislation," the new government's economic programme says.

Prime minister-designate Victor Ponta has already threatened to block the project once he comes to power.

The Canadian firm which owns 80 percent of the Rosia Montana Gold Corporation -- the Romanian state holds the balance -- plans to extract 300 tonnes of gold and 1,600 tonnes of silver over 16 years in Rosia Montana, a village thought to lie on Europe's largest gold deposits.

"I expect Ponta will change his stand on this major investment once he takes office," financial analyst Ionel Blanculescu told AFP.

"But there will be no decision on Rosia Montana until the general elections due in November," he added, explaining that the topic was too sensitive.

Gabriel Resources chief executive Jonathan Henry said Romania had a lot to gain from the mine.

"We have over $30 billion of economic benefits that come out of this project and remain in Romania," Henry told AFP in an interview.

"This equates to somewhere between 70 and 90 percent of the total benefits."

The figure is seven times higher than the amount initially promised by Gabriel Resources, but Henry stressed that this was the result of the investment's multiplying effect and contingent on gold prices going up.

"This is an exaggeration," said Afrodita Iorgulescu, a professor at the Academy of Economic Studies and head of an opposition group.

"The multiplying effect in mining is not the same as in other industries, such as machine building."

Nearly 15 years after it first embarked on a project that is estimated to cost $1.7 billion, Gabriel Resources is still waiting for a key environmental permit.

And a recent court ruling invalidated a zoning plan, placing another obstacle in the way of the permit process.

Outgoing environment minister Attila Korodi said the review by a technical commission should be suspended until a new certificate was obtained.

But Henry did not share his view: "The advice I received is that we have all of the requisite licences and permits in place to continue with the commission review."

He admitted however that the fall of the centre-right government, considered more favourable to the mine, had complicated things.

"Our shareholders see far more risks in investment in Romania now than they did previously and that reflects in the share price," which has plummeted over the last few days, Henry said.

"We need to make sure the new government understands fully what this project means to Romania," he added.

Opponents including environmentalists, archaeologists, historians and international organisations say that the open-cast mine, which would use 12,000 tonnes of cyanide a year in a leaching process, threatens the environment and Roman-era mining galleries.

They also argue that the project would lead to the partial destruction of four mountains surrounding the village and damage part of the galleries, unique in Europe.

But Henry insisted that the plan would meet the highest Romanian and European standards.

The Gabriel Resources CEO stressed that his company would also respect a Romanian demand to lower cyanide levels in the tailings pond to below three milligrams per litre (mg/litre), compared with a 10 mg/litre EU limit or up to five mg/litre in a cup of coffee.

He said the firm had already spent more than $450 milllion in exploration, engineering, feasibility, environmental study and employment.

Some $25 million alone has gone since 2009 to the company's communication strategy.

"This was not cheap," he said. But apparently it paid off, as the project's approval rating surged from 15 to over 50 percent, he said.

Rights groups however say the campaign has blocked all debate on the topic in the media, with journalists under pressure from the investor.

Responding to calls for a renegotiation of the deal so that Romania gets a bigger share of the profits, Henry said the firm was open to dialogue on equity participation and royalty rates.

But he stressed: "The current 4.0-percent royalty rate is extremely competitive. Pushing it to 8.0 percent, as the outgoing cabinet had planned to do in December, would make the country uncompetitive."

Although the permit process is dragging on, Gabriel Resources does not intend to throw in the towel.

"Our licence expires in June 2019. Our shareholders would be disappointed if nothing happened until 2019 but we can renew the licence for five years," he said.

"All we ask is a fair hearing so the true facts are understood."

Friday, May 4, 2012

Romania gov't: moratorium on shale gas exploration

BUCHAREST, Romania (AP) — Romania's new left-leaning government has pledged a moratorium on shale gas exploration and will review a controversial Canadian plan to build Europe's largest open-cast gold mine.

Prime Minister-designate Victor Ponta also said he will respect commitments to the International Monetary Fund, and increase public sector wages that were slashed by 25 percent in 2010 to meet the terms of a €20 billion($26 billion) IMF-led loan.

He also promised to reduce sales tax on bread from 24 to 9 percent, to better absorb European Union funds, and to reduce the level of political appointments in public institutions.

The measures are part of Ponta's governing program, which was published Friday. Parliament is expected to approve Ponta's Cabinet in a Monday vote.

The previous government which fell in a confidence vote last week, awarded U.S. petroleum company Chevron Corp. exploration rights of shale gas for large areas near the Black Sea in March, which drew criticism from environmentalists.

Canada's Rosia Montana Gold Corp. which has been waiting for permits to go ahead for 14 years for the gold mine in Transylvania, says it is believed to contain 300 tons of gold and 1,600 tons of silver.

President Traian Basescu, a strong supporter of the mine, urged the previous government to speed up the process to grant permits, saying the mine would provide vital foreign investment and jobs in an impoverished region.

The project, has been strongly criticized by environmentalists and historians because it uses cyanide in the extraction process and the mine is located in an area where there are Roman remains.

The Economist: Romania’s government falls

Next!
A country where governments have the longevity of mayflies

May 5th 2012 | BUCHAREST | from the print edition

AUSTERITY bites, citizens protest, politicians squabble and a government collapses. The latest country performing this drama is Romania, where Mihai Razvan Ungureanu’s government, 78 days old, fell on April 27th after losing a vote of confidence.

Another example of the backlash against austerity? The fiscal tightening by Mr Ungureanu’s centre-right Democratic Liberal Party (PDL) in the past three years has few fans among Romanians, the second-poorest people in the European Union. Wages have been slashed and recovery from recession in 2008-10 has been sluggish. A slowdown in the EU has hurt exporters. Thousands of Romanians protested, sometimes violently, earlier this year, toppling the government of Emil Boc, Mr Ungureanu’s predecessor.

But there are parochial as well as continental reasons for Romania’s second new government this year. Mr Ungureanu was brought down after defections from his unpopular coalition to the opposition Social Liberal Union (USL) group, which is riding high in the polls. Romania’s fair-weather politicians have done little to dispel a reputation for opportunism. An election in November (if the new government holds on until then) will bring more changes. President Traian Basescu, who once led the PDL, is not due to leave office until 2014, although voters are growing tired of him, too.

The new prime minister is Victor Ponta, head of the Social Democratic Party, which dominates the USL. Mr Ponta is a critic of austerity. On taking office he vowed to reverse “social injustices”. He plans to raise public-sector wages by 15%, after a 25% cut in 2010. The leu fell to a record low against the euro three days after Mr Ponta’s appointment. Fitch, a credit-rating agency, said it might downgrade Romania if the new government fell prey to populism.

On balance, that seems unlikely. Mr Ponta said he would respect pledges made to the IMF and EU last year in exchange for a credit line worth €5.3 billion ($7 billion), which remains untapped. That means more of a fiscal squeeze. Romania aims to cut its budget deficit to 1.9% of GDP this year, from 4.4% in 2011. The surprise choice of Florin Georgescu, number two at the central bank, as finance minister seems designed to reassure Romania’s creditors.

The USL, an awkward alliance of social democrats and liberals, has lately enjoyed poll ratings of around 50%, although in a country where politicians are widely seen as corrupt placemen this probably represents no more than an excess of distaste for the PDL. Still, if Mr Ponta is more resilient than his predecessor he may lead his group to a clear win in November’s vote. And that might mean a chance of serving a full term.

Romania’s Ponta Pledges to Undo Wage Cuts, Keep Prudent Policy

Romania’s designated prime minister, Victor Ponta, said he plans to reverse public-sector wage cuts while pursuing a prudent fiscal policy and continuing an accord with the International Monetary Fund and the European Union.

Ponta’s cabinet plans to restore public-employee wages this year after a 25 percent cut in 2010 and go ahead with share sales in state-owned assets after auditing the previous government’s asset-sale plan, according to a governing program filed to Parliament yesterday. The new government plans to seek a confidence vote in Parliament on May 7.

President Traian Basescu asked Ponta to form a new government after the three-month-old cabinet of Mihai-Razvan Ungureanu was ousted on April 27 in a no-confidence motion. Ponta will be backed by his Social Democrats and the Liberals, the parties that initiated the vote against the previous administration. Ungureanu’s ouster took place as the IMF and the EU were reviewing the country’s progress under a 5 billion-euro ($6.6 billion) precautionary-loan accord.

“The governing program aims to boost economic growth in the country and repair the social inequities done by the previous governments,” Mircea Dusa, a Social Democratic lawmaker, told reporters in Bucharest yesterday.

The designated premier, a 39-year-old former prosecutor, also plans to “rethink the tax system on exploring the country’s resources,” and put the energy regulator, known as ANRE, under the control of Parliament, according to his governing program.

The cabinet also plans an immediate moratorium on the exploration of shale gas until European studies show the impact of hydraulic fracturing on the environment.

It will also seek a “transparent’ review of a gold-mine project at Rosia Montana, majority-owned by Canada’s Gabriel Resources Ltd. (GBU), so that the permitting decisions take into account the national interest, environmental protection and European legislation.

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

BBC: Howls of derision in Bucharest as Romania statue unveiled


The curator of the museum says the statue will have to go, sooner or later


A statue representing the birth of the Romanian nation has been greeted with derision by the public and critics.

The sculpture, unveiled outside Bucharest's National History Museum, portrays a naked Roman emperor Trajan carrying a wolf.

It is supposed to represent the fusion of the Roman empire with the ancient tribes of Dacia.

But the work by Vasile Gorduz has been described as a "monument to Romania's stray dogs".

Gorduz, who died in 2008, was a central figure in Romania's art establishment for decades, and in the 1990s was the professor of sculpture at the National University of Arts in Bucharest.'Doubtful artistic quality'

The nudity and apparent awkwardness of the Trajan figure, the impracticality of the pose (neither arm supports the wolf's weight), and the appearance of the wolf, have all attracted negative comments.

"I have never seen anything so grotesque, a wolf with a pitbull's head, a lizard's tail and a tumour on its neck, carried by a guy who is visibly embarrassed by his nudity," said one woman passer-by.

Even the curator of the museum has joined in the criticism of the work.

Ernest Oberlander Tarnoveanu told AFP news agency that, sooner or later, it would have to go.

"I am not a prude or a conservative, but the statue should never have been erected here because of its doubtful artistic quality," he said.

Satirical website Times New Roman (in Romanian) commented that "Bucharest's mayor has just inaugurated the first monument dedicated to Romania's stray dogs".

Other commentators have wondered why "the dog is levitating", and why the animal wears a scarf "while the emperor isn't even wearing any underwear".

Thursday, May 3, 2012

Romania Keeps Rate Unchanged at 5.25% on Political Turmoil

Romania’s central bank kept its main interest rate unchanged for the first time in eight months, halting a series of cuts after the currency plunged because of increased political risks.

The Banca Nationala a Romaniei left its monetary-policy rate at 5.25 percent, the Bucharest-based bank said today in an e-mailed statement. Six economists surveyed by Bloomberg after the government fell on April 27 forecast no change in rates. The median estimate of a survey of 17 economists prior to the turmoil expected a quarter-point cut.

The political turmoil in the Balkan country triggered a sell-off in the country’s currency, which fell to an all-time low against the euro on May 1 and prompted policy makers to shield the leu after lowering borrowing costs by one percentage point over four meetings to boost faltering economic growth, helped by a record-low inflation rate.

“Judging by the inflation rate, there’s probably more room for rate cuts, but the domestic and international situations are more complicated,” Governor Mugur Isarescu told reporters after the decision. “Both the restructuring of the European banking system and domestic political developments have put us in the position to interrupt the rate-cutting cycle.”
Leu Rebounds

The leu rebounded from its weakest on record against the euro today, gaining as much as 0.5 percent to 4.4138 per euro and was trading at 4.4165 by 5:30 p.m. in Bucharest. The leu reached an all-time intraday low of 4.4620 yesterday after the government collapse, mainly driven by London- and New York-based investors as the Romanian market was closed for a public holiday, Isarescu said.

“We are carefully watching the leu moves and we can hardly say the current level is high, it’s only a bit higher as we are talking about a depreciation of only 2 percent since December,” Isarescu said. “The leu has stabilized on its own today even though it breached a psychological ceiling of 4.4 per euro.”

Governments are crumbling across the European Union as German Chancellor Angela Merkelpushes for austerity to prevent the euro area from breaking up and a debt crisis from spreading. The ouster of Prime Minister Mihai-Razvan Ungureanu took place as the International Monetary Fund and the EU were reviewing the country’s progress under a precautionary-loan accord.
Ending Cycle

The central bank is considering a scenario to end its easing cycle, “even though it’s not a desirable outcome,” depending on domestic and international factors, Isarescu said.

Today’s decision signals that “policy makers care more about the markets than about the economy, they don’t want financial havoc,” said Aurelija Augulyte, an emerging-market economist at Nordea Bank AB in Copenhagen.

The bank also left its minimum reserve requirements on foreign-exchange deposits at 20 percent and the ratio for leu deposits at 15 percent, according to the statement. The bank also approved its quarterly inflation report, which will be made public during a press conference on May 8.

The leu decline will have a limited impact of 0.1 percentage points to 0.2 percentage points on the country’s inflation rate, which will probably drop to around 2 percent by May from 2.4 percent in March, Isarescu said.

President Traian Basescu moved to limit the turmoil after the no-confidence vote designating Victor Ponta, the head of the opposition Social Democrats, as Prime Minister, giving him 10 days to draw up his governing plan. He will seek a vote of confidence in Parliament on May 7.

Romania, which secured a 5 billion-euro ($6.6 billion) precautionary loan from the IMF and the EU in 2011 to protect it from the debt crisis, is trying to reassure investors it will keep fiscal discipline and cut the budget deficit to 1.9 percent of gross domestic product this year after 4.4 percent in 2011. It hasn’t drawn any funds so far.

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

Romanian official says public wages will increase

BUCHAREST, Romania—An official says public wages in Romania, which were slashed by one-quarter in 2010, will be increased.

Mariana Campeanu, who has been named labor minister by Prime Minister-designate Victor Ponta, said Wednesday the salaries will increase 15 percent.

Romania took a euro20 billion ($26 billion) bailout loan from the International Monetary Fund, the European Union and the World Bank in 2009, when its economy shrank 7 percent.

To keep to the bailout agreement, the government cut public wages by 25 percent.

Last week, Mihai Razvan Ungureanu's government lost a no-confidence vote that reflected the unpopularity of austerity measures, and Parliament will vote on the new Cabinet on Monday

Wednesday, May 2, 2012

Romania Keeps Key Rate Unchanged at 5.25% on Political Turmoil

Romania’s central bank kept its benchmark interest rate unchanged for the first time in eight months, halting a series of cuts to protect the leu after it plunged to a record low because of the government’s collapse.

The Banca Nationala a Romaniei left its monetary-policy rate at 5.25 percent, the bank said today in an e-mailed statement. Six economists surveyed by Bloomberg after the government fell on April 27 forecast no change in rates. The median estimate of a survey of 17 economists prior to the turmoil expected a quarter-point cut. Governor Mugur Isarescu will hold a news conference at 3:30 p.m. in Bucharest.

The political turmoil in the Balkan country triggered a sell-off in the country’s currency, which fell to an all-time low against the euro on May 1 and prompted policy makers to shield the leu after lowering borrowing costs by one percentage point over four meetings to boost faltering economic growth.

“Looking ahead, we believe that the National Bank of Romania faces a tough balancing act between fending off depreciation pressures and avoiding an excessive rise in the Treasury’s cost of borrowing,” Citigroup Inc. economists Ilker Domac and Gultekin Isiklar said in a note to clients before the decision. “Against this backdrop, we argue that a quarter-point rate cut at the May Board meeting -- as we were predicting before -- is now unlikely on the back of higher political uncertainty and the leu weakening.”
Reserves Unchanged

The bank also left its minimum reserve requirements on foreign-exchange deposits at 20 percent and the ratio for leu deposits at 15 percent, according to the statement.

Governments are crumbling across the European Union as German Chancellor Angela Merkel pushes for austerity to prevent the euro area from breaking up and a debt crisis from spreading. The ouster of Prime Minister Mihai-RazvanUngureanu took place as the International Monetary Fund and the EU were reviewing the country’s progress under a precautionary-loan accord.

President Traian Basescu moved to limit the turmoil after the no-confidence vote designating Victor Ponta, the head of the opposition Social Democrats, as Prime Minister, giving him 10 days to draw up his governing plan. He will seek a vote of confidence in Parliament on May 7.

The Social Democrats and Liberals toppled Unugureanu’s government with 235 votes in favor of toppling the administration, four more than the 231 needed to oust the Cabinet in the 460-member legislature.

Ungureanu was unable to fend off defections in the former ruling coalition in his first no-confidence motion. His predecessor, Emil Boc, survived 10 such votes before he stepped down Feb. 6 to ease political and social pressure stemming from anti-austerity nationwide protests.

Romania, which secured a 5 billion-euro ($6.61 billion) precautionary loan from the IMF and the EU in 2011 to protect it from the debt crisis, is trying to reassure investors it will keep fiscal discipline and cut the budget deficit to 1.9 percent of gross domestic product this year after 4.4 percent in 2011. It hasn’t drawn any funds so far.

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

Romanian Premier Sets Cabinet, Georgescu Named as Finance Chief

Romanian Prime Minister-designate Victor Ponta announced his Cabinet yesterday, choosing central banker Florin Georgescu to be finance minister as the Balkan nation continues international bailout talks.

Lawmakers in Bucharest will probably hold a confidence vote in the government on May 7, Ponta said in a televised speech late yesterday. The three-month-old Cabinet of Mihai-Razvan Ungureanu was ousted on April 27 in a no-confidence motion. Ponta will be backed by his Social Democrats and the Liberals, the opposition parties that initiated the vote against the previous administration.

The ouster of Ungureanu took place as the International Monetary Fund and the European Union were reviewing the country’s progress under a precautionary-loan accord. The lenders suspended formal discussions and said they will continue technical work until a new government is installed.

“It’s a special government, created in special circumstances with a limited mandate until the general election,” Ponta said. “It is essential for the new government to respect Romania’s pledges to its international lenders, but it is also essential to respect our pledges to our citizens.”

The Romanian leu fell to a record low of 4.4620 per euro today in Bucharest, marking the third day of losses following the government’s fall.
Bailout Talks

Romania, which secured a 5 billion-euro ($6.6 billion) credit from the IMF and the EU in 2011 to shield it from Europe’s debt crisis, is trying to assure investors it will maintain fiscal discipline and cut the budget deficit to 1.9 percent of gross domestic product this year after a gap of 4.4 percent in 2011. It hasn’t drawn any funds so far.

Georgescu, 58, is the central bank’s first deputy governor. He will return to the bank after elections later this year. Daniel Chitoiu, 44, was named as economy minister, while Rovana Plumb will become environment minister. Leonard Orban, a former European Union commissioner, stays on as the minister in charge of absorbing EU funds, Ponta said.

If Ponta, a former prosecutor, fails to get the backing of lawmakers, the president will nominate another candidate. A second failure may trigger early elections, according to the constitution. Romania is scheduled to hold local balloting on June 10 and a general election later this year.
Rating Pressure

“The fall of the second government in Romania in less than three months has increased political uncertainty,” Fitch Ratings said in a statement on April 30. “A material increase in populist policies resulting in a significant divergence from the current fiscal consolidation program, either before or after the general elections, could put downward pressure on the rating.”

Fitch raised Romania’s credit rating to an investment grade BBB- in July last year after the government embarked on a program to cut the budget deficit and the economy exited a two- year recession.

Ponta said on April 30 that he expects a letter of intent with the IMF to be approved by the new government on May 8 following the review mission.

“It’s obvious that few of the pledges Romania has undertaken so far can be changed, but the new government has its own vision,” Ponta said.
Opinion Polls

The Social Democrats and the Liberals, who formed an alliance ahead of elections this year, lead in opinion polls and would garner more than 48 percent of the votes in a general election, according a survey published by pollster IMAS on Adevarul newspaper on April 2.

Previous governments had pledged to sell minority stakes in state-owned companies such as utility Transgaz SA (TGN) and hydro- power operator Hidroelectrica SA on the stock exchange and majority stakes in unprofitable Oltchim SA (OLT) this year.

The country’s economic growth will probably slow to as low as 1.5 percent this year, after output grew 2.5 percent last year, on declining exports to western Europe and weak domestic demand, according to IMF forecasts.

The economy probably posted an annual growth of about 1.5 percent in the first quarter, outgoing Finance Minister Bogdan Dragoi said, adding that the ministry has 5 billion euros and 7 billion lei ($1.5 billion) in reserves and that the macroeconomic conditions allow the new Cabinet to restore public sector wages.

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