Thursday, June 28, 2012

Romania court rejects electoral reform

(Reuters) - Romania's constitutional court rejected on Wednesday a law to change the electoral system, dealing a further blow to a government that has been rocked by a string of misfortunes in the last week.

The governing leftist Social Liberal Union (USL) had passed the change to first-past-the-post voting, which would have been used in a November parliamentary election, replacing the current mixed majority and proportional system.

"The Constitutional Court established, with a unanimous vote that...the law...is unconstitutional," it said in a statement.

Analysts said the USL, whose leader Prime Minister Victor Ponta is under pressure over plagiarism charges, would have benefited from the change because of its strength in individual constituencies.

It performed strongly in local elections earlier this month and may win a majority anyway, but the electoral law change could have given Ponta even stronger control over parliament.

The opposition Democrat-Liberal Party (PDL) had challenged the law, saying it went against the sovereignty of the people. The court did not give full reasons for its judgment.

Former Prime Minister Adrian Nastase, still an important figure in the USL, was taken to jail this week to start a two-year sentence on a corruption charge, which was delayed when he attempted suicide.

Ponta has also been embroiled in an unseemly argument with his political opponent, President Traian Basescu, over who will represent Romania at a Council of Europe meeting this week.

The constitutional court also ruled the president should attend as he is head of state, but Ponta said he would travel to Brussels anyway.

(Reporting by Sam Cage, editing by Diana Abdallah)

Wednesday, June 27, 2012

FT: Romania: IMF remedy starts to pay off


While eurozone policy makers thrash out the growth vs austerity debate, the evidence from Romania seems to be that the traditional medicine works.

The IMF has given Romania a qualified thumbs up on it’s economic reforms and recovery. However, the Fund may have praised Romania’s progress, but it still warned of substantial downside risks and that reform still has a long way to go.

The new government, installed after its predecessor collapsed towards the end of its term in April, needs to juggle international commitments with the political pressures of an election expected before the end of the year: a tricky balancing act.

The IMF completed the fifth review of its current stand-by arrangement for Romania on June 22, deciding that Romania had adhered closely enough to the deal’s terms to merit the release of a further €519.4m of emergency funding. Romania now has €2.67bn available for disbursement, though the government has said that it does not intend to use the cash, considering it a precautionary fund. The arrangement was approved in March last year, replacing a €12.94bn deal that had run from May 2009, when the IMF intervened to counter Romania’s fiscal crisis.

The Romanian economy hit the buffers in the wake of the global financial crisis, following several years of strong growth in the last decade. Successive governments had adopted pro-cyclical loose fiscal policy during the boom years, leading to a serious crunch once the crisis hit.

Under the aegis of the IMF, Romania has adopted austerity measures including job losses and a 25 per cent in wages in the public sector, as well as an increase in VAT. These have proved deeply unpopular, and helped fuel street protests earlier this year that eventually led to the fall of the government in April. It was replaced by a socialist-liberal coalition led by new Prime Minister Victor Ponta.

Despite the difficult political situation, the IMF noted that “Romania’s economic performance under the programme remains strong,” adding that “GDP growth is projected to pick up in the second half of the year, inflation remains in check, and the fiscal and external positions continue to improve.”

But the praise was followed by a warning that external risks are “looming large”. Romania is exposed to the crisis in the eurozone, its major trading and investment partner. While its financial system has been reinforced in recent years, it remains vulnerable to contagion, as well as to rising non-performing loans at home.

The IMF also urged “strict spending discipline” and renewed commitment to structural reform, including to the tax administration, health system and the transportation and energy sectors, as well as privatisation. Following Romania’s EU accession in 2007, reform stalled. EU fund absorption remains worryingly low – yet another sign of the populous and resource-rich country failing to capitalise on opportunity.

As this year’s protests and a number of delayed or botched privatisations indicate, austerity and economic liberalisation remain politically and economically sensitive. Having played fast and loose in the good years, Romania has faced some harsh realities.

For the time being, Ponta retains the benefit of the doubt, both from international institutions such as the IMF and voters at home, having won a resounding victory in local elections earlier this month. The temptation to dispense vote-winning baubles before the general election expected in November should be moderated by the parlous condition of the opposition, as well as Ponta’s commitment to international agreements.

After the vote, whoever is in government will face the usual Romanian situation: tremendous potential, but big challenges.

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Romania Lawmakers Ease Referendum Rules on President Impeachment


Romania’s Parliament approved a section in the law governing referendums to make it easier to impeach the president as the nation’s two top politicians bicker over policy.

Lawmakers in the Chamber of Deputies, in which Prime Minister Victor Ponta’s coalition government holds a majority, voted 187 to 56 to lower the number of referendum votes needed to validate the impeachment. More than half of voters taking part in the referendum would be needed, instead of a majority of all eligible voters in the country. President Traian Basescu needs to sign the change into law for it to become effective.

Romania, which has changed governments twice this year, is facing increased political turmoil ahead of general elections. Ponta and Basescu have argued over who should represent the country at the next meeting of European Union heads. Ponta also accused Basescu of instigating accusations the premier plagiarized his doctoral thesis.

Ponta’s political ally and head of the Liberal Party, Crin Antonescu, said his party may seek to suspend Basescu.

The Parliament also approved on June 19 another law easing the impeachment procedure by dropping the need for a notice from the Constitutional Court before the suspension procedure can go ahead and seek the citizens’ vote in a referendum.

Former Prime Minister Adrian Nastase, Ponta’s mentor, allegedly attempted to commit suicide the night before he was expected to go to prison for the country’s first conviction of a top-ranking politician.
Medical Records

General Prosecutor Laura Kovesi was quoted by Mediafax today as saying prosecutors are investigating the medical records of Nastase’s suicide attempt.

The Bucharest-based newswire also quoted anti-corruption prosecutors as saying that they are investigating a doctor and three police officers involved in Nastase’s case, on allegations that they hampered the jailing procedures of the former premier.

Ponta and other members of his Social Democratic Party have repeatedly said that Nastase’s sentence was politically motivated.

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

Romania May Refrain From Lowering Rates as Leu Hits Record Low

Romania’s central bank will probably refrain from cutting its benchmark interest rate after the sovereign-debt crisis and rising political unease helped push the leu to a record low.

The Banca Nationala a Romaniei will keep its monetary policy rate unchanged at 5.25 percent today, according to 18 out of 19 economists surveyed by Bloomberg. One forecast a cut by a quarter point. A decision will be announced after 11 a.m. in Bucharest.

“We expect the National Bank of Romania to maintain a dovish bias,” Christian Lawrence, a London-based currency strategist at Rabobank International, wrote in a note to clients before the rate announcement. “We do not think the bank will cut rates again in the near term.”

Central and eastern European central banks, including Hungarian and Romanian policy makers, are holding off from cutting rates to bolster recession-hit economies as the inflation outlook points to rising prices later in the year.

Hungary left its main rate at the highest in the European Union at 7 percent amid the fastest inflation in the 27-member bloc. Poland kept interest rates on hold on June 6. In the Czech Republic, where inflation has been above the central bank’s target for eight months, policy makers will lower borrowing costs to 0.5 percent from 0.75 percent tomorrow, according to 20 of 24 economists surveyed by Bloomberg.

Political Fight

Political bickering between Romanian Prime Minister Victor Ponta and President Traian Basescu and the European sovereign- debt crisis triggered a sell-off in the leu, which fell to an all-time low against the euro this month. It traded at 4.4563 per euro at 6:05 p.m. in Bucharest yesterday.

The turmoil may prompt policy makers to continue to shield the currency from further depreciation by keeping rates unchanged in a country which has changed governments twice this year.

The central bank left the rate alone on May 2 following a government collapse after cutting borrowing costs 1 percentage point to spur the economy in the previous meeting.

Inflation, which slowed to a two-decade low last month and helped policy makers lower the main rate, will probably quicken from May because of a statistical base effect, though the rate won’t exceed the 4 percent upper limit of a target range for this year, according to the central bank. It forecasts inflation of 3.2 percent at the end of 2012 before slowing to 3 percent next year.

Widening Deficit
Two days after Ponta’s Cabinet took office, the International Monetary Fund and the EU agreed to let the country widen its budget deficit to allow a public-sector wage increase to partly compensate for a 25 percent cut in 2010. Another wage increase is expected in January next year to fully restore wages to pre-austerity levels.

The budget-deficit target stands at 2.2 percent of economic output compared with an initial 1.9 percent goal, the IMF and the government said on May 9.

“The National Bank will keep the key rate unchanged because the external environment has not yet settled down and pressures on the foreign-exchange rate persist,” Banca Comerciala Romana SA analyst Florin Sinca wrote in a report to clients before the rate decision.

The new government’s looser fiscal-policy stance suggests that the Romanian central bank will remain on the “cautious side” with its monetary policy, BCR economists wrote in a separate note.

“Political tensions are now brewing between President Basescu and Prime Minister Ponta,” according to the BCR note. “For the time being, we see the central bank keeping the key rate on hold for the remainder of 2012 and even afterwards, and will continue to keep a close eye on both external and local developments.”

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

NYT: Romanian Cultural Institute’s New Mandate Draws Protests in Europe and United States


June 26, 2012
By LARRY ROHTER

Over the past five years or so, the Romanian Cultural Institute has become an important force in global cultural exchanges, promoting writers, artists and especially the critically acclaimed cinema movement known as the Romanian New Wave. But the coalition government that recently came to power in Romania has ordered an end to that international focus as it tightens its political control over the institute, actions that have set off protests among arts groups throughout Europe and the United States.

Under an “emergency decree” handed down on June 14, the institute, a non-partisan entity that formerly reported directly to the president, now responds to a Senate riven by partisanship. Its new mandate: to direct its activities at the Romanian diaspora community. As a result, collaborations with American arts institutions — including Lincoln Center, co-sponsor of an annual Romanian film festival, and publishing houses specializing in translated literature — could be in jeopardy. And in recent days, organizations including the Museum of Modern Art, Film Forum and Melville House have sent letters to the new prime minister and other government authorities, urging them rescind the measure.

“The decree itself was a complete surprise, and we were not consulted,” Horia Roman Patapievici, a physicist and writer who is the president of the institute, said in a telephone interview from Bucharest, the capital of Romania, an East European country with fewer than 20 million people. “But even more surprising was the shift in focus. Our strategy since I took over the presidency in 2005, has been that we should open to the outside world. Our aim is to relink the Romanian cultural market, cut off from the West, with the western cultural market, and in New York, you saw the result. We have been very present even though our material means are limited.”

In an e-mail, the film director Cristian Mungiu, whose “4 Months, 3 Weeks and 2 Days” won the top prize at the Cannes Film Festival in 2007, described the government action as a “brutal intrusion of politics in the cultural life” of Romania that shows a “complete lack of respect towards the artists and intellectuals that were amongst the rare providers of good news about Romania in the last years.” Mr. Mungiu, who is one of more than 3,000 intellectuals and creative artists to sign a petition protesting the new policy, added that the tendency of the new “political majority to remove all the representatives of the former regime from all public positions, irrespective of their professional capacities and results and to replace them with their own supporters, is unethical and encourages a certain kind of moral corruption that we need to fight against.”

Asked why the government had ordered the change, Mr. Patapievici suggested that electoral politics play a role. Like the United States, Romania has an election scheduled for November, and since the Romanian diaspora is allowed to cast ballots, focusing on their cultural desires at the expense of the international public and younger, globalized Romanian expatriates “is transparently an electoral measure, to cajole their votes,” he said.

But Mr. Patapievici also said that nationalist groups in the Romanian senate object to his “cosmopolitan” tastes and approach. He said that when he testified to the Senate’s cultural commission last week, he was met with hostile questions along the lines of “Why don’t you speak to national values? Why do you have anti-Romanian attitudes?”

The new situation in Romania resembles that of Hungary, where a right-wing nationalist government has also tightened controls over culture and freedom of expression. Romania differs, however, in at least one important respect: the new government there is a coalition between parties of the left and center-right, headed by Prime Minister Victor Ponta of the Social Democratic Party, which is associated with Ion Iliescu, an 82 year old former Communist apparatchik.

On Friday, the government ombudsman challenged the legality of Mr. Ponta’s decree, arguing against it before the country’s Constitutional Court. A ruling could come as early as July 5, and if it is adverse, Mr. Patapievici said he would “reject the political subordination” of the institute, which presumably means he would resign.

Mr. Ponta last week denied that he was shifting control of the cultural institute away from president Traian Basescu, his longtime political rival, so as to force Mr. Patapievici, an ally of the president, to resign. He said his actual objective was to depoliticize the institute’s top staff and operations and allow more parliamentary supervision of its expenditures at a time when Romania is undergoing fiscal austerity.

“Putting the R.C.I. under parliamentary control is the democratic choice and aims to make the institution more transparent,” the government spokesman, Andrei Zaharescu, said. “Use of public funds must be above any suspicion and only through transparent and democratic parliamentary control this can be achieved.”

With the political situation still in flux, American arts organizations that have worked closely with the institute have rallied to its side.

“The art world in New York continues to be amazed how this group representing a country whose population is a fraction of Germany, Britain and France and whose resources are circumscribed can be as effective and efficient as the cultural services of these other nations,” wrote Lawrence Kardish, a senior curator at the Museum of Modern Art. In her letter, Alissa Simon, senior programmer at the Palm Springs International Film Festival, praised the institute for providing “a precious neutral space for international cultural exchange.”

Corina Suteu, director of the New York office of the institute, which also has offices in cultural centers like Berlin and Paris, said the repercussions would be significant if the changes go through. “First of all, there will a return to archaic attitudes, with complete political control,” she said. “The Senate can say ‘I don’t like this kind of art, you should present this instead.’ But we have to present all kinds of Romanian culture. This is how we become visible abroad.”

Romanians lose faith in squabbling politicians

By Sam Cage and Andreea Birsan

BUCHAREST, June 26 (Reuters) - Romanians are losing patience with politicians who seem more interested in arguing with each other than addressing problems that beset the European Union's second poorest member.

That may push voters in a parliamentary election that is only five months away towards populist parties or fringe members of mainstream parties who pursue more extreme policies, as it has in Greece or neighbouring Hungary.

Victor Ponta, Romania's third prime minister in five months, took power in May and is already under pressure over plagiarism charges. He is keen to present himself as a champion for change.

"We are in the first line of the war with the system that governed Romania in the last years - and it governed Romania through blackmail, threat and calumny," Ponta told his cabinet after the plagiarism accusations in scientific magazine Nature.

Many people also see party leaders as still benefitting from a political system that allowed former communists to retain control while corruption and a climate of impunity flourished. Some MPs and former ministers have been convicted of corruption but many remain free on appeal or with suspended sentences.

While Romanians scrape by on an average wage of 350 euros ($440) a month and do daily battle with bureaucracy and petty officialdom, their leaders enjoy expensive cars, flamboyant villas and generous expense accounts. In country towns, the largest and most ostentatious residence is normally the mayor's.

Last week in particular was a public relations disaster for Ponta's leftist Social Liberal Union (USL). Former Prime Minister Adrian Nastase, who supervised Ponta's disputed doctorate, lost an appeal against a conviction in a separate corruption case then tried to kill himself when police took him to jail.

"When it comes to politics and politicians, my faith in the system is gone. Countless scandals and 22 years of proof that we are dealing with incompetents made me believe that democracy in Romania has failed," said 32-year-old project manager Robert Cojocaru, walking on Bucharest's main avenue Calea Victoriei.

CONFRONTATION

When he took power, Ponta quickly committed to work with the International Monetary Fund (IMF) to reassure investors then embarked on a series of confrontational policies.

The government passed a law changing the electoral system, switching to first-past-the-post ballot which analysts say will give the USL an even heftier majority in November's election.

The prime minister is also embroiled in an unseemly row with President Traian Basescu, who influenced the previous government despite his ceremonial role, over who will represent Romania at the Council of Europe. A visibly angry Basescu waved a copy of the constitution as he declaimed Ponta's tactics.

Ponta is trying to make it easier to impeach Basescu, whom he says orchestrated the plagiarism charges because of their argument, and appeared to blame the president for what he says is a politically motivated conviction of Nastase. Basescu's office has declined to comment.

There are early signs that this fighting may be changing results at the ballot box.

Independent Nicusor Dan polled close to 10 percent in Bucharest and populist Dan Diaconescu, whose new party wants steep tax cuts, was third in nationwide local votes this month. A USL mayor won 86 percent, the biggest share of the vote in the country, thanks to his Roma relocation policies.

"The game has changed," said Sergiu Miscoiu of the CESPRI centre for political studies in the city of Cluj.

"We're now in the motions of a populist discourse, fuelled mostly by poverty, disillusionment with the political class and helplessness after austerity," he said.

Ponta's biggest battle may be to hold together the USL - an eclectic political group from across the political spectrum, dominated by his Social Democrat Party (PSD) - that has already shown strains.

"It's going to be a very uncomfortable alliance," said Guy Burrow, a partner at consultancy Candole in Bucharest.

Between these unseemly squabbles, the traditional holiday during Bucharest's scorching summer and campaigning for the November election, there is little time or desire left for important economic reforms.

These include privatisations of Romania's inefficient state industries - listing a hydro power company is already on hold after it declared insolvency - improvements to the outdated and corrupt health system and liberalising energy prices.

The leu remains near lows - painful for the two-thirds of borrowers who have foreign currency loans - and government borrowing costs are rising. With a struggling economy, Ponta also has to bring the budget gap below 3 percent of gross domestic product to avoid EU penalties.

"I think the fiscal's (economic situation) going to be worse than they think. What are they going to do about that?" said Barclays Capital analyst Daniel Hewitt. "This is (Basescu's) idea - get them in power and let some of the shine come off."

COMMUNIST INHERITANCE

Ponta's PSD is the successor to Nicolae Ceausescu's communists, having taken power after a violent 1989 revolution under Moscow-educated Ion Iliescu, still an influential figure and accused of allowing corruption and a sense of politicians' impunity to flourish.

Romania sought International Monetary Fund (IMF) help in 2009 to shore up its economy, and austerity cuts to public sector wages and raised sales tax hit poorer Romanians hard as well as sharpening the sense of alienation from politicians.

"Nothing interesting will happen in this country until the Ceausescu generation has gone," said Madalin Munteanu, a 27-year-old web designer.

Centre-right Prime Minister Emil Boc brought in the austerity measures and resigned in February after protests. His successor, Mihai Razvan Ungureanu, kept Boc's policies and coalition and left after losing a no-confidence vote last month.

That initially translated into wide support for the USL, which swept local polls in early June but whose authority is now undermined, and the questions over Ponta raise doubts over political stability and hence adherence to its IMF deal.

Ponta, 39 and a keen rally driver, was presented as a change of guard for the party but now has to defend himself against the plagiarism charges and says he will not step down.

"It's possible Ponta (will resign) - it depends on how blatant it is," said Barclay's Hewitt.

But one of his nominations for education minister stepped down due to inaccuracies on her resume, and a second followed after plagiarism charges. The political climate over plagiarism has clearly shifted elsewhere in Europe and similar charges felled Hungary's president and a German defence minister once tipped as a possible successor to Chancellor Angela Merkel.

"He is not credible, neither at home nor abroad," said European MP Monica Macovei, a former justice minister from the opposition Democrat Liberal Party (PDL). "Ponta must resign because we are all ashamed."

Tuesday, June 26, 2012

Romania leaves options open for shale gas development

Romania’s Senate has overwhelming rejected a motion to ban shale gas exploration and exploitation by hydraulic fracturing, marking an about-face for Prime Minister Victor Ponta’s Social Democrat party (PSD) that introduced the draft law in March.

The 21 June vote of 53 to 11 with nine abstentions included came seven weeks after the Ponta government took office. Ponta’s party had proposed the legislation when it was in opposition.

Nationwide protests took place in the country in April and May, including southeastern Romania, where the shale gas exploration by Chevron was due to begin. Similar protests on the other side of the border, in Bulgaria, have also upset plans by US energy company Chevron to start drilling.

The left-leaning coalition USL, which is dominated by the PSD, won the local elections held on 10 June, largely riding on the environmentalist wave. The former cabinet of Mihai Răzvan Ungureanu supported shale gas development.

In an interview with news media on 22 June, Ponta explained the position taken by the government.

"There is a moratorium [on shale gas] until December," the prime minister said, adding that his cabinet would make known its final position following the conclusion of the moratorium period, which comes after the parliamentary elections due in autumn.

The election date has not yet been set.

Ponta was quoted as saying that the final decision would seek to balance environmental protection with energy needs.

Ponta noted that the exploration operations that began last year would not be completed until 2018.

"In six years, technology will evolve over Europe and a decision will be taken according to the findings,” he told journalists.

Ponta also insisted that Romania wanted to align itself with EU legislation. "We want to be neither the only country to accept shale gas tapping nor the only one to oppose it."

The EU has so far declined to comment on individual decisions by member countries to ban or to develop shale gas. According to a recent study, published by the European Commission, there is no need for specific EU legislation on shale gas, at least for the time being.

The US ambassador to Romania, Mark Gitenstein, recently told the website Ziare.com that Romania had first to find out whether it had shale gas, and then decide if it wanted to pay, like the US customers, five times less for shale gas compared to imported natural gas.

“If you want to pay those high prices, then you shouldn’t develop shale gas,” the diplomat said.
EurActiv.com

Ford Plans to Make Second Engine at Romanian Plant From 2013

Ford Motor Co. (F) (F) plans to start production of a second engine at its Romanian plant in Craiova after announcing it has started manufacturing the B-Max car model at the factory.

The company will start commercial production of a 1.5 liter petrol engine early in 2013, it said in an e-mailed statement today.

The U.S. carmaker invested about 500 million euros ($624 million) in the plant and plans to bring its total investment in vehicle and engine production in Romania to more than 675 million euros, Ford 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

Wednesday, June 20, 2012

BBC News: Romanian PM Victor Ponta rejects plagiarism claim


Romania's Prime Minister Victor Ponta has rejected claims that he plagiarised large sections of his doctoral thesis, which was published in 2003.

A report in the science magazine Nature suggests more than half of Mr Ponta's work was made up of copied text.

Mr Ponta has strenuously denied the allegations and resisted calls for his resignation.

He says the claims are politically motivated and says President Traian Basescu is behind them.

The British-based magazine says it has been shown documents by an anonymous whistleblower that shows that "substantial" sections of text on the workings of the International Criminal Court are "identical" to material written by other law scholars.

It says the evidence shows that more than half of the 432-page thesis for Mr Ponta's doctorate at the University of Bucharest was copied.

The study was published in book form in 2004, and also formed the basis of a 2010 book on liability in international humanitarian law.

A former PhD student, Daniela Coman, is named as co-author.

The magazine quoted Marius Andruh, a chemist at the University of Bucharest and president of the Romanian council for the recognition of university diplomas, as saying: "The evidence of plagiarism is overwhelming."

'Political weapons'

Prime Minister Ponta says the bibliography lists the papers he consulted. He has pointed out the foreword has been written by Ion Diaconu, one of the writers whose work he is accused of plagiarising.

The prime minister said he was prepared to submit his work to the education ministry commission for checks.

"If the commission tells me I wasn't supposed to list the bibliography at the end but insert it as footnotes, of course I will give up my doctor's title immediately. I am not mad about titles, I don't care about this one.

"If this is a mistake, then I am willing to pay for it," he told a news conference.

There was "no way" he would resign, he added.

Victor Ponta became Romania's third prime minister in less than six months when his left-wing-dominated Social Liberal Union (USL) alliance took charge in May 2012.

The previous government had been unseated in a no-confidence vote, just two months after taking office.

Mr Ponta has vowed to fight "injustices" caused by austerity measures of the outgoing cabinet.

Parliamentary elections are due in November.

President Basescu has close links with the centre-right opposition Democrat-Liberal Party (PDL), and Mr Ponta told journalists that trust between the two leaders was "zero".

"You know very well this is a pretext of a political war between President Basescu and I, a war each of us leads with their own weapons," he said.

Officials in Mr Basescu's office have declined to comment.

Plagiarism charges have forced several European politicians to step down in recent months, including Romania's education minister.

Hungary's president and a German defence minister who was tipped as a possible successor to Chancellor Angela Merkel have also resigned over plagiarism rows.

Romania May Delay IMF-Agreed Hidroelectrica Sale for 2012

Romania may delay selling a minority stake in Hidroelectrica SA that was agreed with the International Monetary Fund and the European Union, as the power utility lacks liquidity to pay its bills and seeks to enter insolvency.

The sale was agreed on in May and its postponement will be discussed with the IMF and the EU after a court approves the legal filings, Hidroelectrica Chairman Remus Vulpescu said in Bucharest today. Vulpescu, who is also in charge of the industry state asset-selling office, said he believes the IMF will be “flexible” with the utility’s solutions.

“We didn’t eliminate or rule out the possibility of getting money for Hidroelectrica through a share sale, but it doesn’t seem possible this year,” Vulpescu told reporters. “The main purpose of the insolvency procedure is to reorganize the company and increase its efficiency through different measures. There is not enough liquidity.”

Romania, which is using a second accord with the IMF and the EU as a safeguard against the European sovereign-debt crisis, seeks to stay within the 5 billion-euro ($6.3 billion) precautionary loan and tries to meet its terms by selling state assets this year.

The country pledged to sell 10 percent stakes in Hidroelectrica and nuclear-power generator Nuclearelectrica SA this year on the Bucharest Stock Exchange and 15 percent stakes in natural-gas grid operator Transgaz SA (TGN) and gas producer Romgaz SA. It also seeks to sell a majority stake in unprofitable chemical company Oltchim SA.

No Bankruptcy

The insolvency won’t force the company to go into bankruptcy. It is meant to help its reorganization and won’t lead to cuts in power supplies to Hidroelectrica’s clients, Vulpescu said. A judicial administrator will propose a reorganization plan for Hidroelectrica which must be approved by its creditors, including Fondul Proprietatea SA (FP), he said. The restructuring won’t last more than 16 months to 18 months, he added.

The government also pledged to its international lenders to renegotiate some of Hidroelectrica’s bilateral contracts with companies such as Alro SA (ALR), which are under investigation by EU competition authorities for possible state aid in selling electricity below market prices.

The Bucharest-based court has set the first hearing on Hidroelectrica’s insolvency for tomorrow.

The government selected in April a group of banks and a brokerage led by BRD-Groupe Societe Generale SA (BRD) to sell the Hidroelectrica stake. The group also includes Citigroup Inc., (C) (C) Societe Generale SA (GLE) and local brokerage Intercapital Invest SA.

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

Tuesday, June 19, 2012

Romanian prime minister accused of plagiarism

Allegations prompt questions about government’s ability to tackle misconduct in academia.
Nature
Quirin Schiermeier

18 June 2012

Romania’s new government, still reeling from a misconduct scandal that forced its research minister to resign last month, has been hit by fresh allegations of plagiarism that strike at the very top.

Prime Minister Victor Ponta has been accused of copying large sections of his 2003 PhD thesis in law from previous publications, without proper reference. If the charges are substantiated, they could spark public pressure for Ponta to resign, say political insiders. The allegations are also raising fresh doubts about the government’s ability to tackle corruption in the higher-education system.

Nature has seen documents compiled by an anonymous whistle-blower indicating that more than half of Ponta’s 432-page, Romanian-language thesis1 on the functioning of the International Criminal Court consists of duplicated text. Moreover, the thesis was republished with very minor amendments as a Romanian-language book in 2004, and also forms the basis of a 2010 book on liability in international humanitarian law. A former PhD student of Ponta’s, Daniela Coman, is named as co-author of the books.
Substantial sections of text in all three publications seem to be identical, or almost so, to material in monographs written in Romanian by law scholars Dumitru Diaconu and Vasile Creţu. They also feature direct Romanian translations of parts of an English-language publication by law scholar Ion Diaconu.

“The evidence of plagiarism is overwhelming,” says Marius Andruh, a chemist at the University of Bucharest and president of the Romanian council for the recognition of university diplomas. If the allegations are borne out, “a serious discussion is needed in Romania and abroad to prevent this in the future,” says Andruh.

“I understand that in law studies it can be necessary to copy extensive legal articles and definitions,” says Paul Dragos Aligica, a Romanian political scientist at George Mason University in Arlington, Virginia. But Ponta’s alleged plagiarism “goes way beyond that. It’s astonishing”, he adds. Ponta did not respond to Nature’s request for comment on the allegations, and Coman could not be contacted.

“There is very clear evidence in these excerpts that the matter should be investigated further.”

Ponta, leader of the Romanian Social Democratic Party, took office as prime minister only last month, replacing Emil Boc, who stepped down in February following protests against austerity measures that he had introduced. Ponta obtained his PhD from the University of Bucharest while acting as Secretary of State in the government of an earlier prime minister, Adrian Năstase — who was also his PhD supervisor.
“There is very clear evidence in these excerpts that the matter should be investigated further,” says Vlad Perju, a Romanian political scientist and director of the Clough Center for the Study of Constitutional Democracy at Boston College in Chestnut Hill, Massachusetts.

The episode follows the resignation last month of the education and research minister, computer scientist Ioan Mang, following accusations of plagiarism in at least eight papers. An investigation of that case by the Romanian Research Ethics Council is ongoing.

The latest allegations add to complaints about declining academic standards in Romania. The previous government had introduced measures to make the country’s struggling science and education system more competitive and transparent, but the plans met ferocious opposition from large parts of the academic establishment, and have been substantially relaxed by the current government.

“It’s more than unlikely that this government is fit to create institutional structures in science that Romania urgently needs,” says Aligica. “How can it be, when some of its leaders don’t seem to even remotely understand, or care about, the standards of good science?”

Members of Romania’s post-communist elite — including many politicians — have been eager to acquire academic credentials. In the view of some critics, a number of private and public universities in the country are consequently degenerating into ‘degree mills’ that care little about the quality or novelty of the knowledge that they produce, and which are a breeding ground for academic plagiarism.

“One could almost feel pity for all these guys who have power and money, and who are now craving intellectual recognition,” says Aligica. “Unfortunately these incidents just add to the disrepute of Romanian academic standards and create extra pressure that real Romanian scholars and scientists will now have to fight against.”

Monday, June 18, 2012

TOP ROMANIAN ARTISTS FIGHT FOR CULTURAL BODY'S INDEPENDENCE

BUCHAREST (AFP) - Hundreds of Romanian artists upped pressure on the government Sunday to preserve the independence of a state-funded body that promotes the country's culture at home and abroad.

An online petition is attracting signatures after Prime Minister Victor Ponta's centre-left government issued an emergency order Wednesday to shift control of the Romanian Cultural Institute from the presidency to the Senate.

"This emergency order, adopted without any consultation or debate, is definitely a diktat," Cristi Puiu, winner of Un Certain Regard prize at the Cannes Film Festival, told AFP on Sunday.

The decree is seen as an attempt to take political control of the body, which is modelled after the British Council and Germany's Goethe Institute, with 17 offices abroad including in New York, Tel Aviv and Paris.

On Sunday, a coalition of rights groups accused Ponta's coalition, formed in May after the collapse of Mihai Razvan Ungureanu's centre-right government, of seeking "to take revenge on independent voices and apply pressure on the public TV and independent agencies like the ICR."

Filmmaker Cristian Mungiu, who won the prize for best screenplay in Cannes this year, called the decision a "purge of the worst kind" -- bold words in this former communist dictatorship.

Under the decree, the ICR management is expected to be replaced within weeks.

"It would be disastrous if the brutal practices and the arrogance of past and present politicians came to nefariously guide the destiny of culture," said prominent Jewish Romanian writer Norman Manea, a literature professor at Bard College, New York.

And eight rights groups said in a press release that the "committee of culture in the Romanian Senate, which is now to control ICR, is known as a rock bed of backward-looking nationalism".

Since 2005, the ICR has financed the translation of more than 300 works by Romanian authors. In 2011 alone, more than two million people attended ICR cultural events staged in major cities throughout the world, official figures show.


Puiu said the ICR "helped break the stereotypes on Romania. Only 10 years ago, when you said 'Romania,' people abroad thought only about dictator Nicolae Ceausescu and gymnast Nadia Comaneci. Now, our cinema is famous and this is thanks to the ICR."

Ponta, a rival of centre-right President Traian Basescu, has defended the move, saying the institute would be less politicised under Senate control.

But the ICR management denied ever coming under any kind of political pressure.

Even critics of current ICR president Horia Patapievici, who have in the past accused him of siding with Basescu, deny Ponta's allegations.

"I disagree with Patapievici from an ideological point of view but I cannot help noting that under his guidance the ICR has become an institution we can be proud of," writer Vasile Ernu said.

Filmmaker Puiu told AFP: "Unfortunately, every time there is a change of government in Romania, the newcomers bin everything that their predecessors did, even the things that worked well, dreaming they will thus leave their imprint on history."

Thursday, June 14, 2012

Romanian leaders fight over EU summit seat, Episode II

EurActiv.com

With the 28-29 June EU summit approaching, recently elected Romanian Prime Minister Victor Ponta opened a new chapter in his conflict with President Traian Băsescu over who should represent the country at the EU leaders' table. EurActiv Romania contributed to this article.

The Romanian Parliament voted on 12 June to allow Ponta, who is the leader of the Social Democrat party (PSD), to attend the June EU summit. The meeting is expected to agree on a “calendar for more EU integration” and measures on fiscal discipline and growth.

The vote of 249 to 30, with one abstention, became possible after the left-leaning coalition USL, an anti-Băsescu union of three parties dominated by the PSD, won the local elections held on Sunday (10 June). USL secured 49.31% of the vote, against 15.46% for Băsescu’s Democratic Liberal party (PDL), an affiliate of the centre-right European People's Party.

Ponta had already tried breaking with tradition of the president representing Romania by trying to secure a presence at the EU summit held on 23 May. Failing to do so, Ponta chose instead to pay a visit to the Romanian troops in Afghanistan.

“The Parliament’s decision is not aimed at excluding the president from European affairs, by no means,” Ponta stated after the vote. He added that it was a matter of “dividing attributions”.

According to USL, the president can represent the country when the summit agenda is dedicated to foreign policy or security affairs. But when summits are dominated by economic affairs, with a strong impact on the county’s internal policies, the meetings should be attended by the prime minister, Ponta’s party insists.

But Băsescu said the Parliament had no right to vote on the issue.

“I will read for you article 80 of Romania’s Constitution: 'The president represents the Romanian State'. You will not find anywhere the government representing the Romanian State,” Băsescu said.

Ponta replied yesterday (13 June) by saying he will visit the president to discuss the issue. “Today I will call the president and when he has time, I will go to Cotroceni [the presidential palace]. It’s not a matter of pride, I’m just younger. We will find a rational solution, we should not become a laughing stock in Brussels,” he was quoted as saying.

When asked whether he would initiate an impeachment procedure agains the president if he failed to follow the Parliament's decision, Ponta remained vague.

EU Council representatives told EurActiv that if both Băsescu and Ponta attended the summit, they would be allowed into the building but only one chair would be available for the representative of Romania.
Since 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.

Romania Gets 1 Billion-Euro World Bank Loan as Yields Rise


Romania got a 1 billion-euro ($1.3 billion) precautionary loan from the World Bank as the European sovereign-debt crisis pushes borrowing costs higher and prompts the government to sell less local debt.

The Balkan nation plans to use the new loan, approved yesterday by the Washington-based lender, to strengthen its financing buffer and cover four-month budget spending as pledged to the International Monetary Fund and the European Union, Peter Harrold, the World Bank’s country director said today. Romania will be able to draw on the money should external conditions or the debt crisis worsen, Harrold said.

Romania, which has borrowed about 35 billion lei ($9.8 billion) from the domestic market and an additional $2.25 billion from the U.S. market this year, sold only half of the planned amount of leu-denominated bills and bonds this month after yields increased by about 20 basis points.

The increase in Romania’s borrowing costs “is what you should expect as there’s a very high degree of uncertainty,” Harrold said in an interview in Bucharest. Romanian authorities “may not have had all the success they wanted but they are still well ahead with the financing program for this year. They are very close to completing the financing program for this year.”
The World Bank can extend the maturity of the Romanian loan after the initial deadline of three years expires, while the negotiated amount is fixed, according to Harrold.

The bank joined the IMF and the EU in a 5 billion-euro precautionary agreement with Romania over two years, signed in March last year. The Balkan nation hasn’t drawn any money so far from the loan.

“We judge the impact of this increase in the public debt managers’ buffer as marginally positive,” Vlad Muscalu, an economist at ING Bank Romania SA, wrote in a note to clients today. “An increased liquidity buffer can allow the public debt managers to limit issuance for a longer period but during this time frame the demand for debt does not consolidate if the buyers are in a deleveraging mode.”

Romania should not extend its “departure from usual market practices,” as the cost of returning to the markets would be steeper, Muscalu said.

The ministry sold 843 million lei in one-year bills and two-year bonds in the first two debt sales this month, less than the 1.7 billion lei planned, according to the central bank. The yields increased to 5.29 percent for the bills and to 5.73 percent for the bonds.

The country has changed two governments this year and is scheduled to hold general elections in October or November after having local elections on June 10. Prime Minister Victor Ponta’s government pledged to continue the accord with the lenders and cut the budget deficit to below the EU limit of 3 percent of the gross domestic product this year, while restoring public-sector wages after a 25 percent cut in 2010.
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

Tuesday, June 12, 2012

Romania May Inflation Stays at Post-Communist Low on Food Prices

Romania’s inflation rate remained at a two-decade low in May as food-price declines canceled out growth in services and non-food prices.

The annual rate stood at 1.8 percent for a second month, the Bucharest-based National Statistics Institute said today by e-mail. The figure matched the median estimate of 1.8 percent of nine economists surveyed by Bloomberg. Consumer prices grew 0.2 percent in the month.

As the country’s inflation, the fastest in the European Union last year, slowed to record lows over the past six months, Romanian policy makers had room to reduce the benchmark interest rate to an all-time low of 5.25 percent as the economy entered a technical recession in the first quarter.

Inflation will probably quicken from May because of a statistical base effect, through the rate won’t exceed the 4 percent upper limit of a target range for this year, according to the central bank. It forecasts inflation will end 2012 at 3.2 percent before slowing to 3 percent next year.

Food prices fell 2.1 percent in May from a year earlier, compared with a 1.9 percent drop in April, according to the institute. Price growth for non-food items accelerated to 3.3 percent from a year earlier, compared with 3.2 percent in April, the institute said.

Service-price growth accelerated to 6.2 percent in May from a year ago from 6 percent in the previous month as the leu fell to a record low against the euro and boosted telephone bills, postal service prices and other items denominated in euros, the institute said.

Industrial output rose a seasonally adjusted 2.6 percent in April from a year earlier, after it posted a 0.5 percent annual increase in March, the Statistics Institute said today in a separate release. Output grew 1.1 percent on the month.

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

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

Romania’s government does well in local elections, expected to ease pain of austerity measures

By Associated Press, Published: June 11

BUCHAREST, Romania — Bolstered by what appeared to be a strong showing in local elections, Romania’s governing coalition promised on Monday to raise the salaries of some public employees to help ease the pain of austerity measures the country imposed to win its IMF loan.

The Central Elections Bureau said that with about 40 percent of the votes counted from Sunday’s election, the left-leaning government of Prime Minister Victor Ponta won 47.2 percent of council seats and town halls. The center-right Democratic Liberal Party, which lost control of Romania’s government in a no-confidence vote in April, was a distant second with 14.5 percent.

If those percentages hold, the local elections would put Ponta’s coalition in a strong position for this fall’s parliamentary vote.

Sunday’s vote appeared to be another indication of widespread dissatisfaction with austerity measures that led to the no-confidence vote, and a perception that the country’s leaders can be corrupt and arrogant.

Ponta’s government says it respects the terms of a €20 billion ($25 billion) International Monetary Fund-led loan, but it also has promised, without providing details, to raise salaries for public employees such as police and Interior Ministry workers this year, which were slashed by 25 percent by the previous government in 2010. About 1.25 million people are state employees in the relatively poor country of Romania.

Ponta said he would address Parliament on Tuesday in a speech that is expected to begin his coalition’s platform for the parliamentary election, including issues such as European Union funding and plans for Romania to enter the EU’s visa-free Schengen travel zone.

President Traian Basescu, who supported Romania’s previous government, said it had no choice but to impose austerity measures during an economic crisis. “Nobody wanted to cut salaries ... but look at the other countries like Spain and Greece,” he said.

In Sunday’s election, the Democratic Liberal Party scored one important victory in the major city of Cluj, where former Prime Minister Emil Boc managed a narrow victory, officials said. Elsewhere, the governing coalition was taking many major cities, including the capital, Bucharest, where the former government lost all its district mayors.

The former center-right government, which had taken power in Romania in 2008, was forced to step down after it enacted measures to cut government spending in return for receiving the IMF loan in 2009. The next year, the government slashed salaries in the public sector by one-fourth and introduced a sales tax of 24 percent, one of the highest in Europe. These steps led thousands of Romanians to hold anti-government demonstrations during bitter winter weather in January and in February, leading to the collapse of Boc’s government.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Romania Seeks To Change Prime Dealers Rules

Romania seeks to boost trading of its state treasuries on a secondary market by setting new rules for primary dealers at bonds and bills auctions from next year.

The Finance Ministry and the National Bank will set new criteria for reviewing the primary dealing licenses of commercial banks depending mainly on their trading the treasuries on a secondary market, according to a draft document published on the Bucharest-based central bank’s website today and set for public debate.

The dealers can get a maximum of 50 points out of 100 for their “activity on the secondary market,” 40 points for “the activity on the primary market” and 10 points for meeting some qualitative criteria, policy makers said in the document. “The main purpose of the changes is to develop the state treasuries market, increase its efficiency, liquidity, transparency and its predictability.”

Romania plans to increase the competition between the 41 banks operating in its market, out of which only 12 are primary dealers for state treasuries, as it seeks to secure the funding of itsbudget deficit and maturing debt, while it starts paying- back a 20 billion-euro ($25 billion) bailout to the International Monetary Fund and the European Union from this year.
Loss of License

The banks with the two lowest rankings may lose their primary dealer license and be replaced with other lenders, while the best performers will be rewarded, following an annual review, according to the document.

Commercial banks, 90 percent of which are owned by international lenders, can use the bills and bonds as collateral for the financing operations conducted by the central bank at a time when their western parents provide less money amid the sovereign-debt crisis and new capital rules imposed by the European Banking Authority.

The Banca Nationala a Romaniei increased the weekly amount of liquidity it provides to lenders through a repurchase operation in the past month. It lent the biggest amount in almost three years on June 5 of 12 billion lei ($3.4 billion) to 13 banks, at the operation used until May 21 by only four banks, data published on Bloomberg show.

Twelve banks borrowed today 11.5 billion lei from the central bank during the weekly repurchase operation.

Central Bank Governor Mugur Isarescu said on May 8 the regulator plans to “stimulate” the secondary market for state treasuries as the IMF advised policy makers not to cut the minimumreserve requirements to provide more liquidity to the lenders and use the money as a buffer against the debt crisis.

Romania sold about 35 billion lei in leu-denominated debt so far this year and also borrowed $2.25 billion from the U.S. market in February.

Austrian lenders 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 the central bank. Erste Group Bank AG (EBS)’s Banca Comerciala Romana SA is the country’s largest lender by assets, followed by BRD-Groupe Societe Generale SA. (BRD)

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

Monday, June 11, 2012

Romania's new government wins local polls

(Reuters) - Romanians gave Prime Minister Victor Ponta's new leftist government strong backing in local elections on Sunday, sending a clear message that they had had enough of austerity.

Ponta's Social Liberal Union (USL) alliance won up to 65 percent of votes in some areas and more than 50 percent in some big cities, exit polls showed, in the first electoral test since it came to power last month on a wave of discontent over austerity measures in the EU's second-poorest economy.

The results put the USL on course to win a majority in a parliamentary election later this year.

Police said they were investigating a number of fraud allegations, including accusations of bribery and attempts at multiple voting.

The USL toppled the centre-right Democrat-Liberal Party (PDL) after a no-confidence vote in parliament last month. He promised to restore wages and cut some taxes, while sticking to an International Monetary Fund-led aid deal.

The PDL cut public salaries and raised sales tax in 2010 as part of an austerity program. The party was so badly damaged it has struggled to hold on to second place ahead of the populist Dan Diaconescu, whose new party wants major tax cuts.

In most areas, the PDL trailed far behind the USL - with only 13-30 percent in Bucharest - but was still ahead of Diaconescu's party.

Ponta's USL alliance was set to win powerful mayoral positions in a string of big cities, including Bucharest, which would help to build up his support before the parliamentary vote, expected in November.
"I voted for what I think could be honest and diligent politicians," said 58-year-old teacher Mariana Stoiculescu at a polling station in the capital Bucharest. "We want better wages, better services and a better life for our children."

BUCHAREST WIN

Elena Constantinescu, 40, who works in the southwestern city of Pitesti, said: "What matters to us is to get better wages, more jobs, and ... to see the government cares more about us."

The USL is dominated by the PSD party, the reformed heir of Romania's pre-1989 communists, and also includes centrists and rightists in a broad coalition that many analysts say could suffer serious tensions now it is in power.
Eighteen candidates entered the race for Bucharest mayor and USL-backed Sorin Oprescu was set for re-election ahead of the PDL's Silviu Prigoana.

Most candidates promised to tackle the city's chronic stray dogs problem. There are up to 40,000 strays on the streets of Bucharest, a problem exacerbated by late communist dictator Nicolae Ceausescu who forced thousands of people to move into apartments where they could not look after the animals.

Former Prime Minister Emil Boc, who rolled out the 2010 austerity cuts and tax hikes, is running to become mayor of the city of Cluj in Transylvania - his stronghold - and exit polls showed him neck-and-neck with the USL candidate in what was by far the PDL's strongest showing.

The Central Electoral Bureau may release final results as early as Monday.

(Additional reporting by Sam Cage; Editing by Ralph Gowling)

Friday, June 8, 2012

Romanian voters ready to snub austerity


By Sam Cage

LEORDENI, Romania | Thu Jun 7, 2012 5:20am EDT

(Reuters) - Voters who have had enough of poverty and austerity will almost certainly give Romania's new leftist government a ringing endorsement in local elections this weekend and set it up for a comfortable parliamentary majority.

The Social Liberal Union (USL) alliance took power last month, toppling the centre-right Democrat-Liberal Party (PDL), which suffered the same fate as other European governments that pushed through painful cuts to maintain investor confidence.

USL Prime Minister Victor Ponta has been a vocal opponent of austerity measures and pledged to restore wages and cut some taxes, while sticking to an International Monetary Fund-led aid deal. He also plans an electoral reform that should further entrench his position.

But more than 20 years after the violent overthrow of communist dictator Nicolae Ceausescu, Romania is still the second-poorest European Union member and struggles to provide running water to many of its 19 million people.

"How is the situation in our country now? It's very bad. We don't believe in any politician anymore," said pensioner Radu Dumitru, chatting with friends outside his house in the village of Leordeni, about an hour northwest of the capital Bucharest.
"It was better with Ceausescu than with these guys."

With opinion poll ratings above 50 percent, Ponta's main challenge may prove to be keeping together his alliance of leftists, centrists and rightists - whose main rallying point was opposition to the previous government - now it is in power.

The PDL cut public salaries and raised sales tax in 2010 and has been so badly damaged that it is struggling to hold on to second place ahead of the populist Dan Diaconescu, whose new party wants steep tax cuts and higher wages and pensions.

FRUSTRATION

Sunday's votes for councils and mayors have no direct impact on the approaching national election but will give a clear sign of parties' support for the first time since the new government took over in May.

The winners of local votes also can have more influence over future ballots, for example by launching high-profile projects or backing a specific candidate. The parliamentary election is due late this year.

"The current climate of insecurity, poverty and frustration will dominate both the local and parliamentary elections this year," said independent political analyst Cristian Patrasconiu.

Though the USL dominates opinion polls, many voters have had enough of Romania's whole political class, saying they are only interested in lining their own pockets and have failed to deliver on promises to catch up with richer European countries.

Across the country in villages such as Leordeni, where chickens wander on the grassy verge of a main road, many people supplement meager wages and pensions by farming their own land and still use a horse-drawn cart.

The average wage is 350 euros ($440), less than a quarter of France's minimum, and pensions can be just 78 euros per month.

Ponta - who is 39 and represents a change of guard for his party, the successor to Romania's communists - has acknowledged this dissatisfaction but the USL's opposition to austerity has put it in pole position, regardless.

Leordeni's 6,000 inhabitants have voted for Ponta's Social Democrat Party (PSD), the main grouping in the USL, for the past 12 years and will probably do so again. Residents may be unhappy with the political class but prefer to stick with what they know - and promises to finally install a sewerage system.

"They are riding the back of the people and we don't have anything at home. We don't have money, so we have to leave," said veterinary technician Adriana Niculescu, who left Romania three times in search of a better life but kept returning to her family. ($1 = 0.8023 euros)



(Additional reporting by Radu Marinas in Bucharest; Editing by Alison Williams)

FT: Fracking: easier said than done in Romania

There is always a danger in using the word “inevitable”. Take the development of shale gas in central and eastern Europe.

It’s all very well KPMG describing it in such terms. Of course almost all of the countries in the region want affordable energy, but that’s not how some of the locals see it. The ‘Nimby’* contingent, aided by modern technology, are very active in the region. And politicians are taking note.

That’s part of the reason why the new government in Romania, under the new government led by Victor Ponta, the centre-left prime minister, imposed a moratorium on shale gas exploration and extraction towards the end of last month.

There was a series of vociferous protests, including in the job-starved east of Romania, where a campaign was waged against the former government’s decision to grant Chevron, the US oil company, licence to explore potential shale gas deposits in the Barlad Block, near the border with Moldova.

Chevron on its website says it has won several exploration licences over a total of just over 9,000 sq km, in the north-east and south-east Dobrogea region, near the border with Bulgaria.

Asked to explain it’s current position in Romania, the company replied with a statement:

Chevron is committed to working with the government to address any concerns in the development of natural gas in Romania. The development and production of natural gas from shale formations has a proven record of being done in a safe and environmentally responsible manner.

Unsurprisingly, confusion levels are high. It is unclear as to whether the moratorium on exploration (and extraction/production) is now in force, and what exactly that covers if it is.

The idea of a moratorium on environmental grounds is not big surprise – Ponta has a green-friendly track record – though some close observers wonder if it is not more down to simple political realignments by the new leadership.

One Romanian analyst told beyondbrics: “The new government put all contracts on hold, probably because they were the pet projects of president Basescu. Closer ties to Russia and local oil-producing companies mean long delays to fracking projects. A lot will depend on the approach used by Chevron and other interested parties. All potential [shale gas] fields are located in regions dominated by the current coalition, so public reception will also be important”.

Ponta’s government has certainly not ruled out developments, saying it will lift the moratorium if investigations into fracking prove it to be environmentally safe.

The latest Romanian moves came too late for inclusion in the KPMG regional study; the country currently imports less than 20 per cent of gas consumed, although demand is rising.

However, Seve Butler, director at KPMG in Hungary’s energy & utilities advisory practice, and co-author of the report, says such developments are just par for the course of any modern energy-harnessing process. “One of our key findings is that the regulatory environment with regard to shale gas is very much an unfolding story in the region, as several countries (including Romania) have yet to define how they will regulate (and tax) shale gas extraction,” he said.

In addition, the fact that there have been several changes to governments in the region this spring, with new political parties taking power, inevitably means a country’s position on shale gas may change. That may have an impact upon an individual investor’s approach – and level of investment in – any given country.

“Clearly, the recent change of government in Romania has led to this shift in policy. It remains to be seen for how long this moratorium will last, and whether it might be changed again as a result of further study, or via another possible change in government,” Butler argued.

We’ll wait and see.




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Wednesday, June 6, 2012

The Economist: EU funds absorption in Romania

EU funds absorption in Romania
A funding obsession
Jun 5th 2012, 19:01 by L.C.| BUCHAREST

"God gives you but he is never stuffing it into your bag," is an old Romanian saying suggesting that everything one achieves in life should come with an effort. Most Romanians seem to have forgotten the proverb under the Communist regime which gave citizens a house and a job regardless of their efforts. They are now finding it difficult to get their funds from the European Union (EU), which involves making an effort.

The second poorest country in the EU, Romania continues to fail with the absorption of EU funds. At around 7.4% it is the state with the lowest absorption rate in the European Union. Absorption capacity is the extent to which a state is able to spend financial help from the EU in an effective and efficient way.

After joining the EU in 2007, Romania was told it could access up to €20 billion in aid until 2013 in order to catch up with more advanced EU members. It did not make good use of EU largesse. Victor Ponta, the prime minister, recently said the country is in danger of losing €100m from the European Commission by the end of the year. Next year Romania stands to lose more than €1 billion in the human-resources sector amid concerns over corruption and other irregularities.
That’s not all. In April, Leonard Orban, boss of the newly created ministry of European Affairs, said the EU might freeze five development programmes if the country fails to respect European recommendations by the end of June. It wouldn’t be the first time the European Commission decides to block payments to Romania. In February, Brussels withheld funding for Romania after it revealed a series of irregularities estimated at around €3.5 billion in the management of the human-resources development sector.

Romania’s very low degree of EU funds absorption has become an obsessive problem for the government in Bucharest. The government has repeatedly said the European funds represent the main priority for the country this year.

What are the main reasons for the failure to absorb the EU’s so-called structural funds? Analysts point to corruption, a lack of motivation and information, inadequate administrative capacity and major gaps in understanding how EU institutions work.

To tackle the problem the government set up the ministry run by Mr Orban in September. Romanians are in urgent need of the structural funds that are being withheld. Five years after Romania joined the EU, there are still villages around the country where people live without electricity or running water. Romania’s infrastructure is far from European standards, with just 300 kilometers of highway and dozens of damaged roads built during Ceausescu’s regime.

The European Commission is expected to publish a new report on Romania in the following weeks. The political turmoil Romania has experienced recently and the fact that the country has re-entered recession last month is adding pressure on the government.

The clock is ticking as the country is heading for the 2013 deadline for absorbing the European money. The Management Authority, the institution in charge of funds absorption for the human-resources programme, must make a radical change by the end of this year, said Mr Ponta. Otherwise he will restructure the authority completely next year. He is even prepared to risk the loss of the entire EU budget for 2013. This could be an opportunity for Romania to start all over again; this time maybe in the right direction.

Romanian Economy Shrinks 0.1% In First Quarter, Enters Recession

Romania’s economy posted its second quarterly contraction in the first three months of the year, re- entering a recession as the European sovereign-debt crisis and a cold snap slowed growth in exports and industrial output.

Gross domestic product contracted a seasonally adjusted 0.1 percent from the previous quarter, after shrinking 0.2 percent in the fourth quarter, matching a preliminary report on May 15, the National Statistics Office in Bucharest said today in an e- mail. GDP grew a seasonally unadjusted 0.3 percent from a year earlier.

The eastern European country’s economy has slipped into its second recession in four years after exiting its worst decline on record last year, as European spending cuts slowed exports including Dacia SA cars. Freezing temperatures and heavy snowfall in the first quarter also disrupted transportation and supply chains.

Romania’s output growth will probably slow this year to 1.5 percent from 2.5 percent in 2011 as European austerity measures hamper export growth, according to International Monetary Fund forecasts.

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

Monday, June 4, 2012

Romanian lawmaker: 5 years prison for bribes

Posted on June 1, 2012

BUCHAREST, Romania (AP) — A court has sentenced a Romanian lawmaker to five years in prison for receiving hundreds of thousands of euros from businessmen to pay off judges for favorable outcomes in court cases.

The court convicted Catalin Voicu, a Senator for the Social Democratic Party on Friday of receiving about €260,000 ($322,000 ) from July to September 2009 from businessmen Costel Capsunaru and Marius Locic.

Capsunaru and Locic were each handed four-year sentences for paying bribes, and former judge Florin Costiniu was given a three year suspended sentence. All four can appeal Friday's ruling.

Voicu claims he is not guilty. In 2010, lawmakers stripped his immunity, and he was then arrested, making him first lawmaker to be arrested since the 1989 anti-communist revolt.

The European Union, which Romania joined in 2007, has repeatedly called on Romania to crack down on high-level corruption.

Romania’s Chitoiu Sees Gold Mine Start in 2012, Mediafax Reports


Romania’s Economy Minister Daniel Chitoiu said he is convinced that Gabriel Resources Ltd. (GBU)’s stalled Rosia Montana gold-mine project will start this year, Mediafax reported today.

Chitoiu told reporters during a visit to the Romanian town of Alba Iulia that a political decision on the project might be taken by the end of this year, according to the Bucharest-based news service. Mining will continue throughout Romania in an efficient manner, without causing losses to the state, Mediafax cited Chitoiu as saying.

Chitoiu added that he will take a decision on the mine together with Environment Minister Rovana Plumb, whose ministry decides whether Canada’s Gabriel Resources gets an environmental permit to start work at the mine, the news service said.
The Economy Ministry’s press office couldn’t immediately confirm Chitoiu’s statement when contacted by Bloomberg News by phone and e-mail.

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, June 1, 2012

Romanian mining town suffers from its gold riches

(Reuters) - Nature has carved a humbling landscape of deep river valleys and reddish peaks in a corner of the Carpathian mountains in western Romania.

Rosia Montana town, made up of 16 villages that dot the slopes along the river Rosia, has hundred-year-old churches and houses, cemeteries and ancient Roman mine galleries.

It also has gold. But for those who live here, that is more of a bane than anything else.

Canada's Gabriel Resources wants to build Europe's largest open cast gold mine in Rosia Montana, a 15-year quest that has put the area at the centre of a national debate between heritage and development.

The mine could bring billions of euros in taxes and potentially thousands of jobs to an economically depressed region. But it will also require blasting four mountain tops, relocating the community and flooding one village to create a 300-hectare pond for chemical waste held back by a 180-metre-high dam.

The mine has the support of most of the 2,800 locals, the mayor and county administration and President Traian Basescu, eyeing the bounty the investment will bring.

Those who oppose the project - a handful of residents, several church, environmental and human rights groups, the Soros Foundation and neighbor Hungary, which fears the consequences of any environmental damage - want to turn the area into a UNESCO heritage site focused on tourism and farming.

Critics are concerned that concession rights were awarded without transparency and without exploring other options.

Romania's new leftist Prime Minister Victor Ponta, a political opponent of Basescu, has openly criticized both the plan and the president's support, and the topic will be a focus of debate in the run-up to a November parliamentary election.

The issue also cuts to the heart of Romania's economic problems, as the European Union's second-poorest nation struggles to take advantage of its resources and strategic location between western Europe and the Middle East.

"Basically it's a choice between two world views set around the question of how we see Rosia Montana and Romania's future in five, 50 or 500 years," said Magor Csibi, country manager at the Romanian arm of environmental group WWF.

"It's a war of nerves," said Csibi. "Whoever lasts longest wins."

TWO SIDES TO THE STORY

When hundreds rally against the mine in the capital Bucharest, hundreds rally in Rosia Montana in support. When Greenpeace activists stormed the ministry chaining themselves to radiators in January, mine supporters gathered outside demanding jobs days later. Countless court cases challenging the permits are pending, as are many appeals by the company.

Stuck in the middle, with no other source of employment, the community is slowly dying out. The villages lack central heating or running water and infrastructure is decaying, while previous mines have polluted the water.

Most locals hope Gabriel Resources' Romanian unit, Rosia Montana Gold Corporation (RMGC), will restore jobs and the economy.

In fact, mining is the reason there is a community here at all.

The town is in the Golden Quadrilateral, an area of about 900 sq km (350 sq miles) which holds one of Europe's largest gold reserves and is also rich in copper and silver.

The town was founded on mining before Roman times and enriched waves of foreigners who moved to the area under Austro-Hungarian rule.

Nelu Oprisa grew up here and spent 17 years at the state gold mine, working his way up to chief engineer by the time it closed and he retired. He sold his property to RMGC in 2003 and moved to a nearby town, although he still comes back often to look after to a private tourist organization.

"There used to be a time when Rosia was not necessarily thriving, but people had a routine, they worked hard at the mine ... drank a little brandy and went home," said the 52-year-old, smoking and sipping coffee on the main square.

"People had jobs. And we were a lot closer to each other."

But after the 1989 collapse of communism, Romania was left with an inefficient, heavily subsidized mining sector that employed hundreds of thousands and scarred the environment. It closed hundreds of mines and sacked workers. The government estimates it still needs 1 billion euros ($1.2 billion) for ecological repairs.

Many people left Rosia Montana. Others, like Oprisa, sold their properties to RMGC and moved to modern houses the firm built in the town of Alba Iulia, 80 km (50 miles) away.

"The Romanian state cannot sit on the largest gold reserve in Europe without investing," Oprisa said.

Eugen David, a former copper miner who moved to Rosia Montana roughly 17 years ago when he met his wife, feels differently. He owns land on top of one of RMGC's planned quarries and where it aims to build a processing plant and says he will give it up only by force.

As the head of anti-mine organization Alburnus Maior, David no longer greets the mayor or Oprisa. His alternative to the mine is farming and using Rosia Montana's notoriety to attract tourists.

"I have a fundamental right to live here," the charismatic 47-year-old said in his backyard, where he and his family run a cattle farm. "I never understood why mining is hailed as the sole development solution for this place. I mean, we haven't developed much in 2,000 years of mining."

Several thousand people visit Rosia Montana each year, most just passing through. Even with massive investment, there is little guarantee the locals will be able to earn enough from tourism.

At the moment, it is difficult to get to and has little tourism infrastructure in spite of its natural beauty and mining heritage.

"If it goes forward it will destroy this community. There will be no more mountains. The company will relocate 1,000 families. How is that good for the community?" David said.

"Not everybody will earn a living from the mine, just as not everybody will earn a living from tourism and farming. But these would be cleaner, more sustainable jobs."

EUROPE'S BIGGEST GOLD MINE

RMGC, in which the Romanian state holds a 19-percent stake, started exploration work in Rosia Montana in 1997 and secured concession rights two years later. Opponents are angry that parts of the agreement are confidential under the country's natural resources legislation, while the project has discouraged any other potential investment.

RMGC estimated the mine is worth $7.5 billion overall and that the state would get more than half of that in royalties, taxes, dividends and indirect services, based on a 2007 study that used an average price of $900 per gold ounce. The economy ministry approved the study without conducting an independent survey.

Gabriel's CEO says the mine could be worth roughly $30 billion at current prices of roughly $1,600 per ounce, and the mine would make Romania the EU's largest gold producer, overtaking Finland, Sweden and Spain.

RMGC plans to dig four quarries on mountain tops, where open pits are necessary to extract the gold and silver particles embedded in the rock, and four of the 16 villages will be largely destroyed.

Cyanide will be used to separate the metals, and the waste treated, then stored in a mud pond where the concentration will be reduced to 5-7 milligrams, below the EU's legal limit.

The pond, one of the most contested issues in the project, would wipe out Corna village. This patch of chemical waste will be contained by a dam the company says can withstand massive earthquakes and rainfall.

Memories of the potential for broken dam disasters are fresh after Hungary's 2010 red sludge spill. Romania has a poor track record of its own after a dam broke in 2000 at a gold processing plant and cyanide poured into the river Tisza, affecting much of eastern Europe, including Hungary.

RMGC says it will use the safest, most up-to-date technology and plans to fix environmental damage, plant trees, completely restore the old centre and create a vast gold mining museum.

"We have addressed all the concerns related to the project and we would like the approval process to go on," said RMGC director Dragos Tanase. "Miners are not looking for favors, but it is also not fair to block important investment for years."

POLITICAL GAME

The project has become a political hot potato after 15 years mired in Romania's bureaucratic process. An environmental permit has still not been issued and a final decision looks distant.

It has a powerful backer in Basescu, who for more than a year has used almost every public appearance to urge politicians to support mining to create jobs and boost the economy.

His comments have often sparked small protests across the country and have drawn criticism from the new prime minister, Ponta, who before he came to power pledged to block the plan.

"Projects of this magnitude cannot be made simply because a politician really wants it, regardless of his name. I obviously mean President Basescu," Ponta said.

He and Environment Minister Rovana Plumb, who has said Romania should reject cyanide mining on principle, have softened their rhetoric since coming to power in early May.

But the November election could cause more delays. Even if RMGC gets the environment permit, the opposition will challenge the decision in courts.

Meanwhile, Rosia Montana remains in limbo. According to Mayor Eugen Furdui, RMGC already employs some 500 people and has helped halve the unemployment rate - but it is still at 40 percent.

"Politicians seem forever shy about making a decision either way, and that is perhaps what hurts Rosia Montana the most," said Oprisa.

(Editing by Sonya Hepinstall)

Romania Central Bank Eases Regulations for Liquidity Operations

Romania’s central bank eased regulations for the way it provides liquidity to commercial banks, giving lenders a chance to tap more money in exchange for state treasuries.

Policy makers raised the number of different state debt issues a bank can use as collateral to get liquidity from the central bank to five from three, including for weekly repurchase operations, according to a document published on the regulator’s website. The new rules came into force yesterday.

Some of the 41 banks operating on the Romanian market, mostly owned by western European lenders, started relying more on the funding provided by the central bank as a worsening of the European sovereign-debt crisis trims funding from parents.

Banca Nationala a Romaniei lent the biggest amount of short-term liquidity in more than two years on May 28. Eight banks borrowed about 8 billion lei ($2.2 billion) at the weekly repurchase operation, regularly used until May 21 by only four banks, data published on Bloomberg show.

Austrian lenders 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 the central bank. Erste Group Bank AG (EBS)’s Banca Comerciala Romana SA is the country’s largest lender by assets, followed by BRD-Groupe Societe Generale SA. (BRD)

-- With assistance from Irina Savu in Bucharest. Editor: James M. Gomez

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

Erste’s BCR Closed 25 Retail Units In Romania In May, ZF Reports

Banca Comerciala Romana SA, Romania’s largest bank by assets, closed 25 retail units in May in the eastern European country and downsized its network to 643 units, Ziarul Financiarreported today, citing bank data.

The lenders are considering several options to restructure and adapt their networks to lower business volumes, the Bucharest-based newspaper said today, citing unidentified people in the banking industry. The bank known as BCR, majority-owned by Austria’s Erste Bank Group AG and BRD-Groupe Societe Generale (BRD) SA, is Romania’s second-biggest bank.

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

Bloomberg: Romanian energy chief fired for 'arrogance'

BUCHAREST, ROMANIA

The prime minister has fired the head of the national energy regulator for `'arrogant" comments, saying they showed he was out of touch with ordinary people.

Victor Ponta said Thursday he fired Petre Lificiu after the official dismissed a five percent increase in electricity prices as insignificant.

Lificiu, the deputy president of the ANRE energy regulatory body, had said earlier this week: "Five percent means nothing. It means we don't leave the bathroom light on when we go to work."

Ponta says the remarks would incur public anger against the government. He says `'It's a hard time and the way (we) relate to people is important."

Romania is in a recession. In 2010, the government slashed public wages by one-fourth, a year after it took a (EURO)20 billion ($25 billion) loan from the International Monetary Fund, the European Union and World Bank

Romanian Social-Liberals Keep Lead In Opinion Polls, IMAS Shows

Romania’s Social Democrats and the Liberals, who back Prime Minister Victor Ponta, kept their lead in opinion polls before local and general elections this year, a new survey found.

The two parties, who now form the Social-Liberal Union and will run together in elections, would win 59.4 percent, according to the May 9-15 survey of 1,038 people, Adevarul newspaper reported. It had a margin of error of 3 percentage points.

Support for the current governing parties decreased from 61 percent in a May 2 poll done by pollster IRES and is higher than the 48.4 percent result the two parties had in an IMAS poll done in March, before Ponta took office. The former ruling Liberal Democratic Party would get 14.5 percent of the votes, down from 15 percent in May 2, the survey showed.

The new People’s Party, founded by media owner Dan Diaconescu, would garner 12.8 percent of the votes, compared with 10 percent in the previous poll. The opposition Democratic Union of Hungarians in Romania, an ethnic minority party, would get 5.5 percent, up from 4 percent.

Ponta, a former prosecutor, gained Parliament’s support for his new government on May 7 after his Social democrats and the Liberals ousted former Prime Minister Mihai-Razvan Ungureanu in a no-confidence vote held less than three months after he came to power. The new Cabinet pledged to continue Romania’s precautionary accord with the International Monetary Fund and the European Union and partly restored public-sector wages after a 25 percent cut in June 2010.

Romania plans to hold local elections on June 10, with general elections probably following in November.

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