Friday, October 26, 2012

The Curse of Corruption in Europe's East


By DAN BILEFSKY
Published: October 26, 2012

BUCHAREST — This summer, after the police arrived at the handsome villa of the former Romanian prime minister Adrian Nastase to arrest him on corruption charges, he apparently pulled out a revolver and tried to kill himself. Millions of Romanians watched on television as Mr. Nastase, 62, was carried off on a stretcher, a Burberry scarf wrapped around his neck. He survived, and one week later was behind bars.

Analysts say the case of former Prime Minister Adrian Nastase reveals as much about Romania’s political polarization and dysfunction as its steps to greater democracy.

But this is Romania, where everything, it seems, is a matter of dispute.

Anti-corruption advocates hailed Mr. Nastase’s downfall as a seminal moment in the evolution of a young democracy. Others have called his conviction for siphoning $2 million in state funds for his presidential campaign a show trial. Mr. Nastase’s opponents now allege that he faked a suicide attempt in an effort to avoid prison. His son Andrei Nastase, who was at the house at the time, said the accusation was absurd.

Whatever the truth, Adrian Nastase now occupies a cell measuring 4 square meters, or 43 square feet. On his jailhouse blog, he recently recounted how prisoners ate cabbage and potatoes, braved rats and had hot water for two hours twice a week.

Today, analysts here and abroad say the Nastase case has come to reveal as much about Romania’s political polarization and dysfunction as its halting steps toward greater democracy. It comes amid heightened fears in theEuropean Union that its newest and weakest members are not up to the task of rooting out corruption that is a legacy of decades of Communist rule and, indeed, of weak governance before that.

Across Eastern and Central Europe and the Balkans, countries are experiencing a surge of instability that, analysts say, stems almost in equal parts from endemic corruption and the sometimes ham-fisted efforts to combat it in the context of bitter political rivalries.

The European Union, with 27 member nations, is so concerned about creeping lawlessness among its new members that Romania and its neighbor Bulgaria, which both entered in 2007, have not joined the bloc’s passport/visa-free travel area. On Thursday, the European Commission, the executive body of the European Union, said concerns about corruption and fraud in Romania had prompted it to block E.U. development aid, potentially worth billions of euros.

In Croatia, which is set to join the European Union next year, former Prime Minister Ivo Sanader has been charged with embezzlement.

Romania, in particular, has struggled to overcome the aftermath of the ruthless, corrupt dictatorship of Nicolae Ceausescu. Over the past six years, 4,700 people have gone to trial on corruption charges, including 15 ministers and secretaries of state, 23 members of Parliament and more than 500 police officers.

To many, Mr. Nastase, a former member of the Communist elite who was prime minister from 2000 to 2004, is emblematic of a generation of still active politicians who assumed that power and influence could shelter them from the law. Once asked to account for his apparent wealth, he defiantly roared, “Count my eggs!” a Romanian slang word for genitals.

Monica Macovei, a former justice minister who is close to Mr. Nastase’s archrival President Traian Basescu, said that “There are too many people from the Communist era like Nastase who are still in power, and this has polluted the political class.”

She said the former Communist bloc was struggling to root out corruption, in part because in the push to join the European Union, the new member states of the east had rushed through judicial reforms it had taken Western Europe centuries to put in place.

Mr. Nastase’s suicide attempt, she said, was pure “theater.”

While few but Mr. Nastase’s closest allies — including the current prime minister, Victor Ponta — have sympathy for a man known as “Seven-Houses Nastase” by the Romanian news media because of his opulent lifestyle, some have questioned the zeal of his prosecution.

Mr. Nastase’s lawyers gave a litany of judicial abuses in his case, chief among them that the prosecution called 972 witnesses — more than in the Nuremberg trials — while the defense was permitted to call only 5. They said prosecutors had brazenly charged Mr. Nastase as leader of a party rather than as a former prime minister to avoid the required parliamentary approval of the charges.

Victor Alistar, head of the Romanian branch of Transparency International, an anti-corruption watchdog, said the lopsided nature of the prosecution raised questions about whether Mr. Nastase had received a fair trial, regardless of his reputation.

“If you are going to catch a big fish,” Mr. Alistar said, “you need to do it properly.”

Prosecutors said so many had testified against Mr. Nastase because the corruption was so widespread. During his trial, they charged that under Mr. Nastase’s influence, companies were pressured into taking part in a 2004 construction conference whose participation fees were used to help finance his failed presidential campaign in 2004.

He also received a separate three-year suspended prison sentence for blackmail and was acquitted of corruption in a case involving a suspicious $400,000 inheritance left to his wife.

All the while, Mr. Nastase has declared his innocence, calling the charges against him a preposterous “political game.” In court this month, Mr. Nastase asked that the week he had spent in a hospital after shooting himself be subtracted from his two-year sentence. The motion was rejected.

He declined to be interviewed. But his 26-year-old son, Andrei, a businessman, said in an interview that his father had been despondent after becoming the victim of a political witch hunt by Mr. Basescu, the president.

Andrei Nastase said in the interview that the notion that his father had faked his own suicide to escape prison was both hurtful and abhorrent. In August, the general prosecutor’s office said that Mr. Nastase’s “act” had been voluntary and that police had respected legal procedures.

“I saw with my own eyes — it was not a magic trick,” the younger Mr. Nastase said, showing blood residue on the back of his father’s silver-colored watch, which he now wears. “Mr. Basescu saw my father as a threat and these charges were created as a means to get him out of political life.”

The Romanian government recently drew European criticism for trying to influence Romania’s constitutional court after a failed effort to impeach Mr. Basescu, who himself was under fire for trying to influence prosecutors and judges.

Some analysts said Mr. Ponta, the prime minister and a former protégé of Mr. Nastase, had wanted to remove Mr. Basescu from office before he could target other senior officials in the Social Democratic Party.

In an interview, Mr. Ponta, who visited Mr. Nastase in hospital, said the attempted suicide had shocked him. Calling Mr. Nastase “the best prime minister Romania ever had,” he said the case showed how justice in Romania had become politicized.

Those skeptical about Mr. Nastase’s suicide attempt say he conspired with the police and doctors to fake a shot wound that might keep him from going to prison.

The anti-corruption agency is now investigating whether a doctor and three police officers colluded to help Mr. Nastase evade prison. Witnesses outside the villa on the evening of the apparent suicide attempt said they had never heard a gunshot. Mr. Nastase, an experienced hunter, is right-handed, but shot himself with his left hand.

Ioan Rus, then the interior minister, told Romanian reporters that he had spoken to Mr. Nastase on the eve of his arrest because he feared he would do something drastic. When Mr. Rus offered to spirit him out of his house in a police car to avoid a public arrest, Mr. Nastase declined, he said.

“‘This will never happen,”’ Mr. Rus said Mr. Nastase had told him. “‘I will never leave my home. I will decide by myself what’s to be done.”’

George Calin contributed reporting.

Romania government honors ex-king on 91st birthday

(Reuters) - Romania renamed a square in central Bucharest after former King Michael to celebrate his 91st birthday on Thursday, 65 years after Soviet-backed communists forced him to abdicate.

Although a return to monarchy is not on the public agenda in the EU member state, Romanian politicians are divided over their attitudes towards Michael.

While right-wing President Traian Basescu has criticized the former king for leaving the throne and last year did not attend Michael's first speech in parliament since his 1947 abdication, a leftist government showed support for the former monarch.

"Let's send him the warmest birthday wishes and sincere congratulations for what he did for Romania throughout history," said Prime Minister Victor Ponta, who is favored to win a December election against Basescu's rightist allies.

"King Michael I is a living symbol of Romania," Ponta said on his Facebook page.

Born in 1921 in the Peles castle in the Carpathian mountains, Michael is a descendant of the German Hohenzollern dynasty and a cousin of Britain's Queen Elizabeth.

The king played a major part in changing Romania's fate in the World War Two, participating in a 1944 coup to overthrow fascist wartime leader Marshal Ion Antonescu, after which Romania broke with Nazi Germany and switched to the Allied side.

After communist dictator Nicolae Ceausescu was overthrown and executed in a violent revolution in 1989, Romanian politicians fearing Michael's influence blocked his first few attempted visits after decades of exile in Switzerland, Britain and the United States.

He finally returned to Romania in 1992 and regained citizenship in 1997 after reformist President Emil Constantinescu took over from former communist Ion Iliescu.

Michael made several appeals for the restoration of the monarchy in the early 1990s. Iliescu deported him on several occasions and even deployed tanks on one occasion to prevent him from touring the eastern Balkan country.

Many Romanians respect Michael, but too few support the restoration of the monarchy to make it a possibility.

Some 200 supporters of the aged king, who walked without support to greet the small crowd in the square, located in an upscale Bucharest neighborhood close to government headquarters.

They chanted his name and sang "Happy Birthday" after Bucharest mayor Sorin Oprescu revealed a bust of Michael.

"I came here because my father gave the military salute to the king in the 1940s," said Filip Atanasiu, a 69-year old pensioner.

"And I am looking with sadness at the royal family, at what they meant to the country and how now they are not at all involved in ruling Romania."

(Reporting by Ioana Patran; Editing by Paul Casciato)

Thursday, October 25, 2012

EU Commission to withhold development funds from Romania

BRUSSELS, Oct 25 (Reuters) - The European Commission said on Thursday it intended to withhold European Union development funds from Romania, saying it had identified serious problems in the country's anti-corruption procedures.

An EU source said the amount to be withheld was about 500 million euros ($648 million), funds originally meant to reimburse part of the costs of transport, regional, economic development and environmental projects undertaken in Romania.

The Commission, the EU's executive, said it had also decided to block the bulk of future EU structural funding under three of the four programmes because of "serious deficiencies" in Romania's management and control systems.

"The problems lie in the areas of public procurement, sound financial management and in the prevention and detection of fraud and conflicts of interest," the Commission said in a statement.

"The steps taken today are part of a regulated procedure to protect the financial interests of the EU and the way taxpayers' money is used."

Romania, a former Soviet state which joined the EU in 2007, has so far been allotted about 20 billion euros of EU funds to bring its economy and infrastructure up to date.

But the European Commission has grown increasingly concerned about how the funds have been administered and how successfully they are being deployed. It interrupted payments in mid-2011 and has now decided to take similar steps again.

No further payments will be made until Romania remedies the faults, said the Commission, which last audited the payments to Bucharest in June and July of this year.

On Wednesday, Romanian Prime Minister Victor Ponta, speaking ahead of the formal announcement, said the Commission was taking the decision because it judged the country's use of EU funds was too inefficient.

The withheld funds amount to between 10 and 25 percent of total payments to Romania under the four programmes, it said.

Five years after joining the EU, Romania has made little progress under a series of short-lived governments in reforming its state-dominated economy and fighting widespread corruption.

Brussels is monitoring its respect for the rule of law and its drive against corruption. Romania remains excluded from the passport-free Schengen area and some EU diplomats believe it and Bulgaria should never have been allowed to join the EU.

FT: Romania: high marks from the IMF

Romania: pulling out of a serious crisis fairly successfully, but with a long way to go to attain rude economic health. That’s the International Monetary Fund’s conclusion following its latest staff visit to the country.

“Following the severe downturn in 2008–09, the Romanian economy has undertaken a large adjustment to restore macroeconomic stability,” the statement said in its opening line.

After pausing briefly to praise its own role in supporting recovery through stand-by arrangements – as well as that of the EU and World Bank, the Fund continued:


Sustained fiscal consolidation, mainly achieved through spending constraints of the wage bill and public pensions, has resulted in a significant reduction of the fiscal deficit. Growth resumed in 2011 and annual inflation has declined to record lows earlier this year. Unemployment remains high, but labour market reforms have contributed to a better-functioning labour market and a recovery in employment.

The IMF appears particularly pleased with Romania’s fiscal tightening, which is partly linked to the Fund’s standby packages. The Fund expects that the government can meet its target of keeping the deficit within 2.2 per cent of GDP this year, despite the appeal of loosening in the run-up to the general election slated for December 9.

The country’s tough austerity programme brought protestors to the streets earlier this year, and led to the toppling of the previous centre-right government.

Having followed a pro-cyclical loose fiscal policy in the boom years of the last decade, Romania is now locked into a similarly pro-cyclical process of cuts and tax rises at a time when the eurozone crisis is casting a long shadow over the economy, and the effects of the country’s own crunch in 2009 are still feeding through.

The “social-liberal” government of Prime Minister Victor Ponta may feel that it has enough of a cushion in the polls to allow it to please the IMF rather than Ponta’s socialist vote base.

The IMF also has plenty of caveats: as it states, “the post-crisis recovery remains fragile and the outlook is challenging”. It forecasts only 0.9 per cent growth for this year, and 2.5 per cent in 2013 – not bad by EU standards, perhaps, but low for an emerging market which is one of the EU’s poorest countries.

And as usual, the Fund also urged “accelerating the pace of structural reforms”, particularly in labour markets, and pushing forward privatisation, a process that has been wrought with difficulties and controversy for the past two decades. There was also a warning about possible relapses into political turmoil, following the fall of two governments, the attempt to impeach President Traian Basescu and some controversial constitutional reforms by Ponta’s government

Dumitru Dulgheru, head of fixed income research at BCR, Romania’s largest bank, argues that, fundamentally, Romania suffers from its economy having both the characteristics of an emerging market (structural weaknesses, patchy infrastructure, concerns about corruption), and the problems of being linked to the crisis-hit eurozone, which accounts for more than 50 per cent of exports and 80 per cent of FDI.

Dulgheru and BCR think the IMF’s forecasts on the optimistic side, and expect 0.7 per cent growth this year and 1.9 per cent next. Dulgerhu is also sceptical about whether the government will keep the deficit within target range, and warns that the IMF may be too incautious about inflationary pressures. He says that risks to growth “are on the downside”.

“My view is that Romania will be inching forwards with moderate growth,” Dulgheru says, with performance closely linked to the eurozone.

As a report by Moody’s published last week noted, Romania has a diversified economy with good potential for long-term increases in incomes and competitiveness. The country is far from out of the woods yet, and the IMF’s praise will come as cold comfort to Romanians who have seen their wages and living standards fall under austerity. But Romania has reason to be hopeful.

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The Economist: Back in the trenches

ELECTIONS are nearing and Romanian politics is heating up. On October 17th the ruling Social-Liberal coalition (USL) gathered 70,000 people from all over the country to launch their parliamentary candidates for the December 9th vote. Some participants from remote villages admitted to reporters they had taken the free bus trip to see Bucharest and the new football stadium where the rally was taking place.

But most polls give the Social-Democrat leader and Prime Minister Victor Ponta every reason to enjoy the cheering crowds. With a rating of 54.5% he is the country's most popular politician and over half of those polled say they will vote for the USL. Barely 20% prefer the centre-right coalition that was in government until spring this year. President Traian Băsescu, the champion of the centre-right, enjoys plaudits from foreign counterparts such as the German Chancellor Angela Merkel, who visited Bucharest last week. But his domestic popularity is only 19.3%.

The 40-year-old Mr Ponta's main campaign message continues to be "Down with Băsescu". In overheated rhetoric all too characteristic of Romania's political culture, he labelled him "the last Communist of Europe, the last Securitate member". (The Securitate was the old regime's secret police. Many believe its members retain sinister influence two decades after its supposed demise.)

Some see pots and kettles in the USL's approach. Its leading members include senior apparatchiks of the Communist regime, including Dan Voiculescu, once in charge its foreign trade. His ardently pro-Ponta TV stations are the most popular in Romania. He himself has battled allegations of Securitate ties.

Presidential elections are due only next year. So months of acrimony loom. Mr Ponta's attempt to impeach and oust Mr Băsescufrom office this summer failed. Now he wants to change the constitution and limit the powers of the country's top court, which had decided in August that the turnout was insufficient to validate the referendum aimed at ousting Mr Băsescu.

"We started together on this road, I am not abandoning my travel partners," Mr Ponta said in an attempt to dispel rumours that he may consider a grand coalition with Mr Băsescu's centre-right party (PDL) if elections prove inconclusive. It would not be for the first time, the PDL governed with the Social-Democrats until 2009, also under Mr Băsescu's presidency. Mr Băsescu himself had offered this some time ago in return for his resignation and early presidential elections, but the plans have been abandoned after the impeachment attempt.

The USL's man for the top job is Crin Antonescu, who served briefly as president during Mr Basescu's suspension. He did not cover himself in glory, making some notable gaffes and anti-European remarks. During the Wednesday rally, Mr Antonescu claimed that the European centre-right leaders gathering in Bucharest were discussing plans for the "federalisation" of Romania with Mr Basescu as an accessory.

"Romania is and remains a model in treating minorities, but will always be a single national state," he said in a speech abounding in nationalistic jibes. "We, who will run Romania, shall be the partners, not the servants of EU institutions," he promised. Anti-European sentiments, even if low by British or Greek standards, have however grown in recent years in Romania. The EU was popular among 65% of citizens in 2007, when the country joined the club; now only 48% still trust it and 43% do not, according to the European Commission's latest Eurobarometer biannual survey.

The political squabbles would matter less if the economy were solid and public administration working properly. A condition of a €3.2 billion ($4.14 billion) precautionary loan from the International Monetary Fund was that Romania had to privatise some failing state companies. It has failed to do so. It must also meet a deficit target of 3% of GDP this year. But failure to spend EU funds properly (not least because of fraud) means that Romania has to pay penalties that could mean it misses that target. On Friday, Mr Pontasaid he was trying to convince the EU commission to postpone the fines until next year But that would also hold up other EU funds.

Public administration remains cumbersome and oldfashioned. Mr Ponta makes a youthful impression, but shows no sign of modernising zeal. Cristian Hostiuc, editor-in-chief ofZiarul Financiar, an economics newspaper, says Mr Ponta "owes his generation a change in administration, transforming Romania into a digital economy and finally, saying where he wants to lead the country and in what state he will leave it in four years." That, rather than empty sloganising, would be a suitable discussion for an election campaign.

Romania power trade law likely breaches EU laws-trade group

By Karolin Schaps

LONDON, Oct 24 (Reuters) - New legislation in Romania that has halted over-the-counter power trade likely breaches European Union laws and is hindering the goal of a liberalized EU energy market, the European Federation of Energy Traders said on Wednesday.

The Romanian government, facing a December parliamentary election, had wanted to promote transparency in wholesale trading after cancelling a number of highly-criticised contracts state-owned producer Hidroelectrica awarded at below market prices. Those deals had set off a European Union probe.

Regulator ANRE's decision to put into effect the law passed in July mandating that producers sell their output through the OPCOM exchange has ended all bi-lateral and brokered power contracts in the European Union nation of 20 million people.

Market participants had kept trading as they waited for the regulator to clarify the law many have described as confusing. But that loophole ended in September when ANRE told energy companies they could no longer trade outside OPCOM.

Since then traders say the government has been working to find a solution but screens remain blank because of the ban - something a spokeswoman for the European Federation of Energy traders said likely contravenes EU law.

"EFET is very strongly concerned about the amendments in the Romanian Energy Act," said a spokeswoman for the group that represents energy traders across Europe.

"We believe...amendments of the national law must be in contravention of (EU law). They are likely to impede rather than facilitate the realisation of the EU wholesale electricity target model."

She added she was unaware whether her group had contacted the European Commission about potential breaches of EU trade agreements and whether any members had been caught short in open positions before trading stopped.

An EU spokesperson could not immediately be reached for comment.

One potential solution could be that OPCOM creates some kind of a screen on its platform that would allow traders to do bi-lateral deals, traders say.

Market participants also say they are unsure what penalties they might incur for trading outside OPCOM. Some said they believed such a penalty could amount to 5 percent of a company's turnover, which would represent a death blow for many firms.

The ban has forced traders to look to other markets as they wait for regulators and lawmakers to figure a way to address the problems in the wholesale market stemming from the new law.

"We will likely only see some changes after the December elections," one trader said. "Until then nobody from the market expects any improvement of the situation." (Writing by Michael Kahn, additional reporting by Michael Kahn and Barbara Lewis, Editing by William Hardy)

Inefficiency to cost Romania some EU development cash- PM

By Luiza Ilie

CALAFAT, Romania, Oct 24 (Reuters) - The European Union will reduce development funds for Romania because it is judged too inefficient to use them properly, Prime Minister Victor Ponta said on Wednesday.

Romania, the EU's second-poorest member which joined in 2007, has struggled to use some 20 billion euros in development funds allocated by the bloc until 2013 - a quarter of it for transport - due to red tape and poor administration.

The EU money is designed to help emerging EU states to improve education and other projects, but Romania has used less than a tenth of its funds although the poor state of its infrastructure is stifling growth.

"We will receive official audit results which ... will not be encouraging," Prime Minister Victor Ponta told reporters in the southwestern border town of Calafat, where he inspected works on a bridge built largely with EU funds.

"The solution will be for Romania to accept financial corrections."

Poor rail and roads are among the chief complaints from foreign investors, who say decrepit transport cancels out Romania's advantageous location at a trading crossroads and relatively low labour costs.

Works have been marred for years due to poor legislation, slow land expropriations and poor allocation of funds. The World Economic Forum ranks Romania third lowest out of 144 countries for road quality and 132nd for overall infrastructure.

Earlier this year, the EU suspended payments to Romania on several programmes pending the results of an audit. Ponta - who is favourite to win a December parliamentary election - said he did not know by how much Romania's overall funding would be cut.

When the bridge at Calafat opens next year, it will be only the second permanent link along hundreds of kilometers of the river Danube between Romania and Bulgaria. It has no highway link on either side and is 320 km on bumpy roads from Bucharest.

The project was first agreed in 2000 by then Prime Minister Mugur Isarescu - now central bank governor - and would have made a big difference at the time, when a Serb trade embargo was still in force and goods had to travel through Romania.

"I am the fifth prime minister after the one who signed. That says a lot about how public administration works," Ponta said. (Editing by Stephen Nisbet)

Wednesday, October 24, 2012

Romanian cleric served as Communist informant

BUCHAREST, Romania (AP) — Romania’s highest court has upheld the conviction of a top Orthodox cleric that he secretly served as an informant for the country’s communist-era Securitate police.

The 83-year-old Archbishop Pimen was found guilty by a government council of serving as an informant sent by the church and the Securitate to spy on fellow clergy and members of Romania’s expatriate community in the United States in the 1970s.
Before the allegations emerged in 2007, he was considered one of the luminaries of the church and had hosted Romania’s former King Michael and Britain’s Prince Charles at famous painted monasteries in Romania.
The conviction carries no penalty.
The influential Romanian Orthodox Church has opposed opening the files of its senior clergy from Romania’s 1945-1989 communist era. Many priests are believed to have collaborated.

Monday, October 22, 2012

Moody’s: Romania’s not so bad

FT's BeyondBrics

A diversified economy with good potential for income growth and increased competitiveness, low government debt ratios and an improving fiscal situation. Not a bad report for one of the EU’s poorest countries, wracked in recent years by first economic and political crises.


These are the conclusions of the annual credit report on Romania published by Moody’s. says the country’s Baa3 government bond rating is supported by the fundamentals – which is reassuring even though Moody’s is keeping Romania on “negative” ratings watch.
The report is weighed down by the usual caveats about Romania – its bloatedpublic sector, exposure to the eurozone crisis, low levels of current GDP growth and a propensity for political wobbles.

Moody’s evaluates a country’s sovereign rating on its position in four areas: “economic strength, institutional strength, government financial strength and susceptibility to event risk – as well as the interplay between them”. In each, the agency currently rates Romania as “moderate”.

A press release issued publicising the report said that it took into account:


The country’s diversified economic base and potential for future increases in competitiveness and incomes, relatively low government debt ratios, access to multilateral financial support, and continued improvement in the fiscal balance despite political volatility this year. The rating agency notes the credit challenges posed by Romania’s balance-of-payments vulnerabilities manifested in its current account deficit and its relatively high level of external debt, with significant annual repayment obligations. Other credit challenges incorporated in the rating are the reliance of many of Romania’s banks on foreign (largely euro area) parent bank funding, as well as the country’s poor record in state enterprise performance and privatisation.

It’s been a grim few years for Romania: it enjoyed rapid growth in the last decade, but came a cropper in the wake of the global economic crisis, which exposed the economy’s weaknesses, and led to a deep recession in 2009, when the economy contracted by 7.1 per cent.

Pro-cyclical fiscal loosening in the boom years has been followed by equally pro-cyclical austerity, which led to street protests earlier this year and the toppling of the government in April. The new, socialist-led administration has been heaped with opprobrium by the EU and other international organisations for moves seen as attacks on the constitution and independent national bodies.

The Moody’s report thus serves as a useful reminder that Romania isn’t all bad. Economic growth is picking up, though forecast economic growth of 2.5 per cent next year is still pretty low by emerging market standards. Efforts to consolidate the budget have made progress, and while the deficit widened to 1.17 per cent in August, that’s a respectable figure by comparison with many European countries.

The eurozone crisis looms large over Romania. The Moody’s report suggests that if and when the crisis reaches resolution, Romania may be left in much the same position as it was in 2009: with plenty of potential, but some serious structural issue to address.


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NYT: Symbol of Romanian Leadership? Hands on a Throat

By DAN BILEFSKY
Published: October 19, 2012


BUCHAREST, Romania — Perhaps the best that can be said of relations between the president and prime minister of Romania is that they are unambiguous: they can’t stand each other.

That is less than surprising, given that one of the first major actions taken by Prime Minister Victor Ponta after he came to power in May was to push for a vote on whether to impeach the president, Traian Basescu. The attempt to oust Mr. Basescu failed in July, but the poisonous effects are still being felt.

The acrimony has dashed the high hopes that accompanied the electoral victory of the 40-year-old Mr. Ponta, who promised to usher in generational change in a country that has struggled to overcome one of the harshest Communist legacies among the former Soviet bloc states.

The two men are now locked in an uncomfortable cohabitation until elections in December, leaving this poor Balkan nation adrift. And even that vote, analysts say, may prove inconclusive.

In an interview at the gargantuan and opulent 1,100-room Palace of Parliament, built by the former Communist dictator Nicolae Ceausescu as a monument to his authority and grandeur, Mr. Ponta acknowledged mistakes but fell short of expressing outright regret.

He could barely conceal his contempt for Mr. Basescu, a former ship captain, whom he accused of brazenly clinging to power despite having been rejected by a majority of Romanians, calling the president politically “illegitimate.”

“My mentality as a new generation of politician is to respect the institution even if I don’t respect the person,” he said. “He will never give up. He is a former sea captain, and you won’t see a former sea captain being humble or giving up.”

Romania’s troubles have added to concerns in the United States and Europe about the political instability and threats to democratic institutions that are intensifying across the former Communist bloc.

In Hungary, Prime Minister Viktor Orban has come under criticism for flouting democracy with a series of measures that have brought the judiciary and the news media to heel. In the Czech Republic, the government has teetered on the edge of collapse with ministers involved in corruption scandals.

Romania, in particular, lacked a history of stable, enlightened governance even before it endured World War II and then decades of the Ceausescu dictatorship, which ended with his violent overthrow in 1989.

Since then, Romanians have labored to build democratic structures virtually from scratch, finding themselves in a far more challenging position than almost any of their post-Communist neighbors. Romania’s foibles have provoked debate about whether it and Bulgaria, which both entered the European Union in 2007, were invited too soon, before their cultures of lawlessness, corruption and winner-take-all politics had been uprooted.

The vociferousness of the domestic battle in Romania has overshadowed policy-making; rattled the currency, the leu; and undermined investor confidence in a country that is the second poorest in the European Union after Bulgaria.

Mr. Ponta’s government has issued more than two dozen emergency decrees — moves that, while legal, have alarmed Western diplomats and many Romanians. The government dismissed the speakers of both chambers of Parliament, which the opposition said was unconstitutional. And amid accusations that it was pressuring the Constitutional Court, the government ousted the ombudsman, who has the power to challenge emergency legislation before the court.

Some members of the progovernment media have accused foreign journalists of being anti-Romanian agents. The public remains largely disgusted with endemic graft and corruption. Adding to the mistrust are accusations that Mr. Ponta, a former prosecutor, plagiarized parts of his doctoral thesis. (He says the accusations were politically motivated, but an academic panel at the University of Bucharest, where he was awarded the Ph.D. in 2003, upheld them. Yet, he has not been stripped of his title.)

Romania’s mercurial president has also played a key role in fomenting crisis.

The move for impeachment was prompted by accusations from the government that Mr. Basescu had overreached his mandate by, among other things, refusing to appoint ministers chosen by the prime minister, pressuring prosecutors in legal cases and using the secret services against enemies.

Mr. Basescu, who has denied the accusations, accused Mr. Ponta — already being criticized for abusing the system of parliamentary checks and balances — of orchestrating a “coup d’état.”

Mr. Ponta said his main shortcoming had been to not effectively communicate the reasons behind the impeachment vote. To repair the nation’s image, Mr. Ponta said, he was studiously avoiding confrontations with the president, and had recently removed himself from an acrimonious meeting about foreign policy to avoid another public and damaging altercation.

“Our European and American partners appreciate stability and predictability, and the lack of these two leads to overreaction and misunderstanding,” Mr. Ponta said, explaining the lessons he has learned since becoming prime minister.

Mr. Basescu declined an interview request, in keeping with the conspicuously low profile he has maintained since the referendum on his impeachment, which was favored by an overwhelming majority in July, even though the turnout of 46 percent was below the 50 percent needed to make the vote valid.

Western diplomats were so concerned in August that the country was teetering toward lawlessness that in August, Washington dispatched Philip H. Gordon, the assistant secretary of state for European and Eurasian affairs, to Bucharest, where he met both men and warned that Romania must uphold the rule of law.

Chancellor Angela Merkel of Germany and José Manuel Barroso, the European Commission president, have also voiced concerns. Talks on Romania’s bid to join the European Union’s coveted visa-free zone, scheduled for September, were postponed.

Romania has to “remove all doubts on its commitment to the rule of law, the independence of the judiciary and the respect for constitutional rulings,” Mr. Barroso warned Mr. Ponta last month in Brussels.

Monica Macovei, a former minister of justice and close ally of Mr. Basescu, argued in an interview that the breaches of the rule of law in the run-up to the impeachment referendum were worse than anything since the Ceausescu era, referring to the government’s measures to consolidate its power.

But she insisted that Romania’s membership in the European Union had been instrumental in overcoming the political showdown. The European Union closely monitors Romania’s justice system and also gives Bucharest much-needed financing. That gives Brussels significant leverage over the country.

“We joined the E.U. to follow the rules, not to destroy them,” she said.

There is little indication, however, that the political tumult will end soon. Mr. Ponta’s leftist coalition is expected to do well in the December elections, analysts say, but may fall short of winning a majority. Voters appear even more disenchanted with Mr. Basescu and his rightist party, which they associate with punishing austerity measures.

More than anything, the relentless sparring and stalemate have engendered deep disappointment among Romanians in the promise of their young democracy and disillusionment with their political leadership.

“Our politicians behave like children fighting over a toy,” said Monica Cristea, 43, a manicurist from Poenari, a village near Bucharest. “They have destroyed our international reputation,” Ms. Cristea said. “I am outraged. I don’t like any of them. I don’t trust them.”

Thursday, October 18, 2012

Feud flares again between Romanian PM, president

(Reuters) - A bitter dispute between Romania's president and prime minister resurfaced on Wednesday, raising doubts over the running of the country with an election due in December.

Leftist Prime Minister Victor Ponta tried to remove Traian Basescu from office in the summer in a spat which angered the EU and raised questions over policy and an International Monetary Fund deal that shores up investor confidence.

Basescu attended a meeting of the European centre-right parties in Romania's parliament building, a huge marble palace built by communist dictator Nicolae Ceasescu that dominates the city, and Ponta said his presence was inappropriate because the president is supposed to be politically neutral.

"I think the best would be to call out to all of them - down with Basescu," Ponta told a cheering rally of some 60,000 supporters at the national stadium, staged at the same time.

"They have to listen to you, to millions of Romanians, to what you say about Basescu."

Ponta's Social Liberal Union (USL) drew on discontent with austerity and cronyism to dispatch an old Basescu-allied government in a parliamentary confidence vote in April then moved against the president.

The dispute brought sharp European Union criticism of Ponta's tactics, forcing his government to back down and respect a Constitutional Court requirement for minimum turnout of at least half to make a referendum on Basescu's impeachment valid.

Although 88 percent of those who voted wanted the president removed, he survived because turnout was only 46 percent. While the enmity has since simmered down a little, Ponta says Basescu is an illegitimate president and the two men can still barely stand to be in the same room.

Basescu can only delay laws rather than block them but he nominates prime ministers and has control over the appointment of judges, prosecutors and secret service heads.

"Thank you very much for the support you gave our institutions to remain in position at a difficult moment in the summer," Basescu told German Chancellor Angela Merkel, who also attended the centre-right meeting.

The turbulence and approaching election have raised doubts among investors over how closely Romania will stick to reforms required under its 5 billion euro aid deal led by the IMF. The cost of insuring Romanian debt against default rocketed over the summer and the leu currency remains near all-time lows.

The USL has opinion poll ratings of more than 50 percent but the failed impeachment has knocked its popularity and if it fails to win an outright majority in December, Basescu may have room to appoint one of his allies to form a coalition.

Romania asks companies to reconsider nuclear plan

BUCHAREST Oct 17 (Reuters) - Romania has asked four of Europe's largest power companies to reconsider a plan to build two nuclear reactors after it failed to find other investors, the Eastern European nation's deputy economy minister said on Wednesday.

Romania, which must replace a third of its plants by 2020, needs new power generation or faces future supply shortages and rising import costs.

However, many power companies have been scaling back investment in central and eastern Europe in light of the euro zone debt crisis and with a renewed focus on wind and solar capacity.

"Last week there was a meeting and... we decided to retry attracting investors because the reasons why they withdrew are no longer current," deputy Economy Minister Rodin Traicu was quoted as saying by state news agency Agerpres."

"We are waiting for an answer."

French GDF Suez, Spanish Iberdrola, Germany's RWE and Czech CEZ all withdrew from the project over the past two years, citing economic and market uncertainties.

Left with only Italy's Enel and a local unit of ArcelorMittal, Romania looked for new investors, but no offers were made before its own mid-September deadline.

Without new investors, the project will probably remain on hold and Romania would have to find other ways to generate power.

Asked on Tuesday whether the government can build the reactors alone, Prime Minister Victor Ponta said: "No. By itself, never. We are talking about several billion euros which can only come from a partnership with a private investor."

Romania already has two 706 megawatt reactors at Cernavoda on the Danube, accounting for a fifth of its power output. (Reporting by Luiza Ilie; Editing by Mike Nesbit)

Wednesday, October 17, 2012

AFP: Calls to bar 'racist' soccer boss from Romania polls

BUCHAREST — Rights groups called on Romania's left-wing ruling coalition Tuesday to bar the accused-racist owner of Steaua Bucharest football club from running in December 9 parliamentary polls.

Members from several groups forming an "anti-discrimination coalition" wrote a letter to the ruling Social Liberal Union (USL) citing several of Gigi Becali's discriminatory remarks targeting women, homosexuals and Arabs.

"He has turned discrimination into his main political platform," the letter stated, adding that accepting Becali's candidacy would be "shocking and intolerable."

"We hope you will not help a misogynist, homophobic and racist politician become the Bucharest voters' representative in parliament," the groups said.

Becali did not immediately issue any public response.

The call came a day after the Liberals, who are part of the USL, said they wanted Becali to run for parliament as a USL candidate.

Prime Minister Victor Ponta and Senate speaker Crin Antonescu, who are also USL co-presidents, on Monday said they had nothing against Becali's candidacy.

Becali has been repeatedly fined by the national anti-discrimination council (CNCD) and by the professional soccer association for racist and insulting remarks.

Last week he picked on CNCD president Csaba Asztalos, a Hungarian ethnic. A few days later, four men attacked Asztalos in the street.

A wealthy businessman and member of the European parliament, Becali is facing trial over charges of graft and unlawful confinement.

Ponta's government has come under fire from international observers including the European Union after the coalition tried to remove the country's President Traian Basescu, a centre-right politician, in July.

Tuesday, October 16, 2012

Romania Borrows Less Than Planned to Keep Costs Under Check

Romania sold less debt than planned at an auction today as investors demanded higher yields after the central bank capped funding for lenders for the second time this month and accelerating inflation posed a risk to fixed- income returns.

The Finance Ministry sold 625 million lei ($177 million) of 11-month Treasury bills, less than the 1 billion lei targeted. It rejected offers from investors who demanded yields higher than the average 6.08 percent paid at today’s sale, the bank said in an e-mailed statement. Bids came in at 1.6 billion lei.

The bank limited its lending at the one-week repurchase agreements auction to 6 billion lei today to support the leu as commercial banks’ demand increased to a record high of 21.4 billion lei. The currency had traded to a 2-month low before the bank capped funding on Oct. 8. Romania’s inflation rate rose to 5.3 percent in September, the highest in more than a year.

The increase in yields results from “a combination of tighter liquidity and increasing inflation” which have “put leu bonds under pressure,” traders at Vienna-based Erste Group Bank AG (EBS) said in a note to clients today.

The last time Banca Nationala a Romaniei cut repo lending was on Aug. 6 and it followed through with lower funding for lenders for the rest of the month, which in turn led to the currency gaining 2.6 percent in August.

The leu weakened 0.2 percent to 4.5732 per euro by 4:26 p.m. in Bucharest, depreciating for a second day.

The yields on 2018 euro-denominated bonds were little changed at a record low of 4.097 percent, according to data compiled by Bloomberg.

The average yield at today auction was below the estimates of analysts from Erste Group Bank AG, Piraeus Bank Romania SA and ING Bank Romania SA of 6.2 percent to 6.25 percent. That’s higher than the 6.02 percent and 5.53 percent paid on similar- maturity bills auctioned on Oct. 8 and July 9, respectively, according to central bank’s data.

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, October 15, 2012

FT: Fund file: Romania privatisation hope

Given all the eurozone bad press, it is unusual to hear from a man who can’t wait for the day when his country enters into the single currency.

But, as a report in Monday’s FTfm explains, for one Romanian fund manager euro entry would usher in a future with more freedom.

“Our lives should be less in the hands of the politicians and more dependent on the real economy,” says Dragos Valentin Neascu, chief executive of Erste Asset Management in Bucharest.

To achieve that, Romania needs more developed financial markets – hence Neascu’s dream of euro entry.

“The technical criteria associated with euro adoption are very important,” says Neascu. “They are more important than the euro itself. They will make us more predictable as a [bond] issuer. Then companies can finance themselves on the local market and internationally.”

For the moment, however, Romania is lurking in a no-man’s land from an investment point of view.

Changes of government and political squabbling have meant that a programme of reforms agreed with the IMF, including a series of privatisations, has stalled. The Romanian currency, the leu, has also come under pressure against the euro, falling 5.3 per cent this year and hitting a record low in July.

The privatisation programme is seen as critical to broadening choice on the stock market and improving liquidity. Overall, the market capitalisation and liquidity of the equity market would have tripled had the programme gone ahead, says András Szálkai, fund manager in the emerging markets equities team at Raiffeisen Capital Management.

The disappointment is palpable. “At the beginning of the year, it looked like Romania would be a good story for equity investors,” says Szálkai. “Until May the stock market was up 25 per cent in US dollar terms.”

Hopes are now pinned on the December 9 general election. If it delivers a clear result and the privatisation programme resumes, managers are expecting a range of benefits including a number of new listings on the stock exchange.

“Investment bankers have drawn up plans to list family businesses that have developed over the past 10 to 15 years in sectors such as pharmaceuticals and tourism, but these exercises have not been concluded,” says Neascu.

Deepening the stock market could draw some investors in from the sidelines. Foreign investors are currently deterred, not only by Romania’s many well publicised problems, but also because “it is difficult to invest in domestic consumption stories or companies offering strong top-line growth”, says David Wickham, investment director, emerging markets at HSBC Global Asset Management.

A broader listing base could also help the development of domestic institutional investors such as pension funds and mutual funds, which would boost liquidity.

Until then, Romania must grapple with its reputation of being in the wrong place at the wrong time. Its near-term performance is seen as being closely tied to the eurozone crisis with close links to Greece, particularly in the financial sector. GDP, from a healthy 7 per cent before the financial crisis is now struggling to reach 1 per cent.

For emerging market investors all that bad news might sound like good news. Prices, they might reason, are probably depressed. Indeed, even those who bet on Romanian equities this year, would not have lost their shirts.

While it is true that the Bucharest Stock Exchange Trading Index suffered a fall of nearly 20 per cent from May to its low in June but it has since recovered to a respectable gain of about 11 per cent year to date.

But for the Romanian based managers looking at long term business models, a fortunate result from the December elections sounds like a must-have.



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Friday, October 12, 2012

NYT: Romania Strains to Build True Democracy

By DAN BILEFSKY
Published: October 12, 2012

BUCHAREST — Victor Ponta came to power in Romania in May amid high hopes that the boyish-looking 40-year-old — the youngest prime minister in the European Union — would usher in a generational change in a country that has struggled to overcome one of the harshest Communist legacies of the former Soviet bloc.

Instead, Romanian politics have seldom been more poisonous. After Mr. Ponta’s failed attempt to impeach President Traian Basescu in July, the two men can barely stand being in the same room with each other, according to associates. They are now locked in an uncomfortable cohabitation until elections in December. And even that vote, analysts say, may prove inconclusive.

The upheavals of this country of 22 million have added to concerns in the United States and Europe about the political instability and threats to democratic institutions that are intensifying across the former Communist bloc.

In Hungary, Prime Minister Viktor Orban has come under criticism for flouting democracy with a series of measures that have brought the judiciary and media to heel. In the Czech Republic, the government has teetered on collapse with ministers involved in wire-tapping and corruption scandals.

But Romania, in particular, lies in a region without a history of stable, enlightened governance, even before it suffered through the ravages of World War II and then decades of the meglomaniacal Communist dictatorship under Nicolae Ceausescu, who was overthrown in the most violent of the revolutions that undid the Soviet bloc beginning in 1989.

Since then, Romanians have labored to build democratic structures virtually from scratch, finding themselves in a far more challenging position than almost any of their post-Communist neighbors. Romania’s foibles, then, have provoked debate about whether it and Bulgaria, which both entered the European Union in 2007, were invited in too soon, before their cultures of lawlessness, corruption and winner-take-all politics could be uprooted.

The vociferousness of the domestic battle in Romania has overshadowed policy making, rattled the currency, the lei, and undermined investor confidence in a country that is the second poorest in the European Union after Bulgaria.

Mr. Ponta’s government issued more than two dozen emergency decrees since it took office, allowing it to bypass Parliament. It replaced the country’s ombudsman, who has the power to challenge emergency legislation before the Constitutional Court. Opposition politicians routinely accuse each other of being stooges and liars.

Some members of the pro-government media have accused critical foreign journalists of being anti-Romanian agents. The public remains disgusted with endemic graft and corruption. Adding to the mistrust are accusations that Mr. Ponta, a former prosecutor, plagiarized his doctoral thesis (he has acknowledged some shortcomings).

In an interview at the gargantuan and opulent 1,100-room Palace of Parliament — an architectural monstrosity built by Mr. Ceausescu as a monument to his authority and grandeur — Mr. Ponta acknowledged mistakes, but fell short of expressing outright regret.

He showed barely concealed contempt for Mr. Basescu, a former ship captain, whom he accused of brazenly clinging to power, despite having been rejected by a majority of Romanians, calling the president politically “illegitimate.”

“My mentality as a new generation of politician is to respect the institution even if I don’t respect the person,” he said, referring to the president. “He will never give up. He is a former sea captain and you won’t see a former sea captain being humble or giving up.”

Mr. Ponta said his main shortcoming had been not to effectively communicate the reasons behind the impeachment vote. To repair the country’s image, Mr. Ponta said he was studiously avoiding confrontations with the president, and had even recently removed himself from an acrimonious meeting about foreign policy to avoid another public and damaging bust-up.

Mr. Basescu declined an interview request, in keeping with the conspicuously low profile he has maintained since the referendum on his impeachment, which was favored by an overwhelming majority, even though the turnout of 46 percent was below the 50 percent needed to make the vote valid.

“Our European and American partners appreciate stability and predictability, and the lack of these two leads to overreaction and misunderstanding,” Mr. Ponta said, explaining the lessons he has learned since then.

Indeed, Western diplomats were so concerned that the country was teetering toward lawlessness that in August Washington sent the U.S. assistant secretary for European affairs, Philip H. Gordon, to Bucharest, where he met with both men and warned that Romania must uphold the rule of law.

Chancellor Angela Merkel of Germany and the European Commission president, José Manuel Barroso, have also voiced concern. Talks, which had been scheduled for September in Brussels on Romania’s bid to join the European Union’s coveted visa-free zone, have been postponed.

Romania has to “remove all doubts on its commitment to the rule of law, the independence of the judiciary and the respect for constitutional rulings,” Mr. Barroso warned Mr. Ponta last month in Brussels.

The move for impeachment was triggered by accusations from the government that Mr. Basescu had overreached his mandate by, among other things, refusing to appoint ministers chosen by the prime minister, pressuring prosecutors in legal cases and using the secret services against enemies.

Mr. Basescu, who has denied the accusations, accused the prime minister — already under fire for riding roughshod through parliamentary checks and balances — of orchestrating a “coup d’'état.”

Monica Macovei, a former justice minister and close ally of Mr. Basescu, asserted in an interview that the breaches of the rule of law in the run-up to the referendum were worse than anything seen since the Ceausescu era.

But she insisted that Romania’s membership in the European Union had been instrumental in overcoming the political showdown. Romania’s justice system is closely monitored by the European Union, which also gives Bucharest much-needed funding. That gives Brussels significant leverage over the country.

“We joined the E.U. to follow the rules, not to destroy them,” she said.

There is little indication, however, that the political tumult will end soon. Mr. Ponta’s leftist coalition is expected to do well in the elections in December, analysts say, but may fall short of winning a majority that might break the deadlock.

While the prime minister’s performance has generated doubts, voters appear even more disenchanted with the rightist party of Mr. Basescu, which they associate with deeply unpopular austerity measures.

More than anything, the relentless sparring and stalemate has engendered a deep sense of disappointment among Romanians in the promise of their young democracy and disillusionment in their political leadership.

“Our politicians behave like children fighting over a toy,” said Monica Cristea, 43, a manicurist from Poenari, a village near Bucharest, where many of her neighbors had left to find work in Germany and Italy. “They have destroyed our international reputation. I am outraged. I don’t like any of them.”

Thursday, October 11, 2012

Romania rising as New World of wine in 'old' Europe

By Isabelle Wesselingh (AFP)

FINTESTI, Romania — On the gentle slopes of the Dealu Mare (Big Hill) region, winemakers are striving to make Romania the New World of wine in Europe.

"The conditions to make wine here are world-class," says Walter Friedl, the Austrian co-owner of the Lacerta winery.

"We are here at 45 degrees of latitude and we have conditions like in Bordeaux or Tuscany," he adds, speaking from his vaulted cellar, where wine matures in oak barrels made in France, Hungary and Russia as well as Romania.

Outside, pickers are harvesting grapes on the picturesque hills.

Friedl and his Romanian business partner Mihai Banita run an 82-hectare (200-acre) estate in Romania's southern Dealu Mare region, about an hour's drive from Bucharest.

The winery has a state-of-the-art processing unit that uses gravity to process grapes and a terrace overlooking the hills to welcome oenophile tourists.

Forty percent of the eight million euros ($10 million) invested in the estate was provided by European funds for development granted to Romania as a new EU member.

With the exceptional sunshine of eastern Europe and Mediterranean air masses coming from the south, Dealu Mare is seen by specialists as one of the most favourable areas for wine.

Some influential oenologists, such as Bordeaux-based Michel Rolland, predict the Black Sea region -- countries such as Romania, Bulgaria, Moldova and Armenia -- will be the next big thing in the world of fine wines.

"We see a new world inside Europe. Romania, Bulgaria, they are... our Australia or our Chile," Friedl told AFP.

"In a way, you can say that Romania is the New World of the Old Wine World," says Bogdan Costachescu, oenologist for one of Romania's top quality winemakers, Davino, pointing to the growing success of the country's wines.

Romania grows international classics like Merlot, Cabernet-Sauvignon or Riesling, but also boasts unique local grape varieties.

"We are not only making the umpteenth quality Merlot," explains Banita, of the Lacerta winery. "We have our own Feteasca Neagra" -- a red -- "and its dried-prune aroma. (Also) Feteasca Alba or Tamaioasa," two white varieties.

"Some bottles are now selling for 60 euros and they deserve this price," says Cristian Preotu, the manager of Romania's Comtesse du Barry delicatessen stores.

But while Romania may look like a newcomer on the international wine map, the country is actually rediscovering a tradition dating back to antiquity and praised by the Latin poet Ovid.

That ancient wine-making tradition suffered a near-fatal blow during the Communist dictatorship that ruled the country from 1945 to 1989.

"The Communists collectivised the vineyards. They focused on quantity not on quality. Everything was poured into the same vat," Preotu explains.

After the fall of late dictator Nicolae Ceausescu, winemakers and oenologists started to strive for a renaissance.

A French earl and winemaker, Guy Tyrel de Poix, was one of the first to embrace the Romanian "terroir" and opened his Terra Romana winery in 1994.

"That was a turning point. He brought up a lot of savoir-faire," Banita says.

"When I decided to start making wine in the late 1990s, Romania was producing mainly white, sweet wine, in huge quantities, and cheap," recalls Dan Balaban, one of the co-founders of the Davino winery, also in Dealu Mare.

"I decided to do the opposite: produce mainly red, in small quantities, and to sell it for a higher price," he adds.

With France's prestigious Bordeaux estates as role models, Balaban is running a 68-hectare vineyard in the bucolic village of Ceptura.

He kept the estate's 40-year-old vines to produce the Davino label, which is sold only in delicatessens, top-end restaurants or to private customers. Recently, a French client bought 20,000 euros' worth of Davino wine in one go.

Despite their growing success, the owners of Davino and Lacerta complain Romanian wines have had trouble escaping their negative image.

"There should be a national campaign to help promote the quality of our wines abroad," says Balaban.

So far Romania, the sixth-biggest wine producer in the EU, is exporting only three percent of its wine output, far behind countries like France or Italy.

But with or without a public relations campaign, Bogdan Costachescu, the oenologist at Davino, says the estate will continue making wine with passion.

"Wine is like art, the essence of life. At every tasting, I feel like a painter before a private viewing, hoping the wines we make will touch the ones who drink them," Costachescu says.

Friday, October 5, 2012

Romania Economy Grew in Second Quarter on Rising Consumption

Romania’s economy grew in the second quarter, driven by an increase in domestic demand, according to the final figures from the National Statistics Institute.

Gross domestic product expanded a seasonally adjusted 0.5 percent from the previous quarter, matching reports on Aug. 14 and Sept. 6, and compared with revised growth of 0.1 percent in the three months through March, the Bucharest-based institute said in an e-mail today.

GDP grew a seasonally unadjusted 1.1 percent from a year earlier, lower than the 1.2 percent figure in previous reports, as the institute revised construction and consumption figures. Consumption increased 1.3 percent in the second quarter compared with a 1.1 percent estimate on Sept. 6, according to the statement. Construction output rose 3.6 percent, less than the 5.2 percent growth previously released.

The eastern European country’s economic growth quickened in the April-June period as the government increased state wages, boosting domestic consumption to offset a slowdown in exports, hit by the sovereign-debt crisis in Europe, its main trading partner.

Romania’s economy went through a recession from the end of 2008 until the first quarter of 2010, according to revised data from the Statistics Office.

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

Deutsche Welle: Romania's conservatives pull together

In Romania, an alliance organized by leftist Prime Minister Victor Ponta won local elections in a landslide. Now it's time for the conservatives - who have announced a grouping of their own.

In Romanian elections due on December 9, according to current polls, the tripartite alliance "Social Liberal Union" (USL) has emerged as the clear favorite. This ostensibly Social Democratic and pro-market group, led by Romanian Prime Minister Victor Ponta, among others, is an alliance of parties that brings together many of the country's corrupt networks. It caused the three-month political crisis that paralyzed Romania this summer and brought the country into international disrepute because of its "coup-like" behavior.

But the predictable success of the alliance, which already won a landslide victory in local elections in early June, is based primarily on the fact that a very large majority of the voters have grown weary of the policies of conservative President Traian Basescu and the Liberal Democratic Party, which supports him. They blame the president and the Liberal Democrats for austerity policies, an authoritarian leadership style and inaction on corruption in their own ranks.

Bucharest needs to meet European standards

Now, only two months before the elections, the conservative camp is attempting to pull off a major feat: Last weekend (29.9.2012), the Liberal Democrats combined with several other conservative and pro-market parties to form the "Right Romania Alliance" (ARD).

This is not just an attempt to stem the ongoing phenomenon of disintegration and dissolution in their own ranks and to do something at the last moment to prevent the seemingly certain absolute majority for the USL. Instead, the ARD is presenting itself as a radical political reform force that wants to bring about a fundamental shift in Romania: away from corruption, nepotism and informal, obscure power structures toward a modern European state characterized by the rule of law, transparency and openness.

One of the leaders and co-organizers of the ARD is Mihai Razvan Ungureanu, who was foreign minister from 2004 to 2007, head of the YOU foreign intelligence service from 2007 to 2012 and prime minister from February to April. Currently, the 44-year-old is serving as the chairman of the small breakaway party "Civilian Power" (PFC). He is said to have ambitions to run for president in 2014.

The youthful Ungureanu, whose personal integrity hardly an independent observer in Romania doubts, knows that in the past two decades fundamental change in Romania was often announced, but at best was only implemented in a piecemeal fashion, if at all. "We do not promise miracles," Ungureanu said in an interview with DW, "we promise that we will be consistent in our actions, honor our principles and pursue our goals, regardless of election dates. The politicians on our electoral lists should be like the Romania we want to build. "

Fight against corruption

Prime Minister Ponta was at the center of a political scandal to oust the president

An ethics committee within the party is meant to guarantee this propriety. It would prevent politicians from running for office if criminal investigations are pending against them, if they have been convicted of an offense, or if there is some conflict of interest.

Chairing the ARD ethics committee is Monica Macovei, justice minister of Romania from 2004 to 2007, who is currently a member of the European Parliament and one of the most indefatigable Romanian fighters against corruption. Macovei is unlikely to have big problems at work: Many suspected corrupt PDL parliamentarians have changed sides in recent months to join the USL.

Mihai Razvan Ungureanu says the cornerstones of a program the ARD intends to present include major constitutional reform, a reform of administrative competencies, a revamping of the civil service and changes to the tax and welfare system. And, of course, the priorities of an ARD government would be to continue the current judicial reforms and the fight against corruption initiated by President Traian Basescu.

So, what makes Ungureanu so sure that his Right Romania Alliance will succeed where others have failed - namely, to bring about change in Romania?

"I think that in Romania, good is in the majority," Ungureanu said. "A majority of citizens in Romania want to live in a country where there is the rule of law, in which order and integrity prevail. But the question is how to bring about this majority and give it legitimacy."

Thursday, October 4, 2012

Romania: The discreet tonic of monarchy

Newspapers in Romania have reported that Prince Nicholas, grandson of King Michael, will move his residency from England to Romania. His return may well show that people's appetite for monarchy has never been lost, says Ovidiu Nahoi.

Ovidiu Nahoi is a Romanian political analyst and journalist. He is also a talk show host for the Money Channel.
 
http://www.euractiv.com

King Michael, 91, is the last head of state from the Second World War still alive. Nicholas, 27, son of Princess Elena - the king's second daughter - has so far lived in London and first visited Romania 20 years ago. This was because only 20 years ago, the former sovereign was finally allowed to visit the country, for a few days, during the Easter holidays.

It is estimated that on that occasion, about one million people took to the streets to cheer the king, who appeared in public with his nephew. But the royal family had to wait almost a decade since then to be allowed to establish their residency in the country.

From a constitutional point of view, Romania is a republic. But in the Republic of Romania there is a king, as well as a royal family and a Royal House. The king spends time in between Aubonne, a small Swiss village on Lake Léman, and Săvârşin Castle, in Western Romania - a castle the royal family bought in 1943.

The Romanian Royal House family also enjoys the privacy of Elisabeta Palace, a beautiful property located in the green area north of Bucharest. There, on the first floor, King Michael was forced to abdicate on 30 December 1947, as he was blackmailed by Communists who threatened to kill the few hundreds of students they had arrested during the protests if he had not complied.

The government gave the palace back to the family to use as their royal residence in 2001, as enshrined in the law on the rights of former heads of state. Finally, the royal family of Romania received back the wonderful Peles Castle, built by King Carol I in the Carpathians, in the late 19th century.

But the Romanian royal family interests are far from just patrimonial propriety. The Royal House has engaged in intense activity at both civic and political level.

Still, so far, the Royal House has only take baby steps, preferring to stay, as a full-fledged institution, discreet and away from today's noisy political confrontations.

The activities of the royal family generally include visits abroad and hosting royal families visiting Bucharest. But between 2001 and 2007, King Michael and his family members toured many countries to promote Romania's accession to NATO and the European Union.

At home, the royals hold conferences, meet representatives of the local government or from business persons, artists and athletes. They hand out medals, orders, and give their royal support to cultural projects.

But then, one must mention the "Suppliers of the Royal House" – a number of people, designers, companies and shop which supply the royal family with products and services. In exchange, the royal family 'promotes' them.

From time to time, the king states his position on the internal social and political situation of Romania – the last time this happened was during the anti-government and anti-president protests in January 2012.

"Romanians have lost their trust. They are today asking politicians to engage in a a public behaviour that breaks from bad past habits completely and definitively. The entire royal family is with the souls of all those who in these times need encouragement and solidarity," the King said in a message.

Meanwhile, the royal family in Bucharest are sorting out their future. In 2007, exactly 60 years after the abdication, the king, who has daughters but no direct male descendants, signed a decree to abolish the salic law, therefore allowing women the right to accession.

And in 2010, Michael announced the breakup with all remaining relationships he might have with the House of Hohenzollern, to which he traditionally belonged. This way, access to the "throne" is allowed only descendants of King Michael.

The return of Nicholas

Nicholas is in the line of succession, after the King's daughters. However, his return might change this order of things, especially because Romania has always been dominated by political machismo.

So far, the only male figure of the family except, of course, the king, was represented by the husband of his eldest daughter, Princess Margaret - a Romanian actor who now plays a completely different role, but who is not popular amongst all the monarchy's fans.

Are all these efforts discrete preparations for a bright future of the Royal House of Romania? Or, in a republic, are they just part of the royal coquetry?

Opinion polls show that despite the existence of a compact group of monarchy enthusiasts, most Romanians would vote in favour of the republic. However, Republican leaders themselves seem to be working, albeit not consciously, in the interests of monarchy.

Recent years have brought a sharp drop in the public confidence of the institutions of the democratic state, with sinking support for the parliament, president and political parties.

Meanwhile, according to a barometer of opinion published at the end of last year, King Michael ranked first in public confidence. This was happening in 2011, at the same time with the king's 90th birthday. What is more, on this occasion, an initiative group managed to convince the Romanian Parliament to invite the former sovereign to make a speech on its premises, during a plenary.

The moment of the speech produced a strong wave of emotion amongst the members of society and propelled King Michael to centre stage, at a time of extreme dissatisfaction with the political, social and economic development of the country.

In a country where politicians stand out most often because of their extravagant behaviour and for being involved in public scandals, the king, with his serious face and a look that bares the marks of its historical burden, is seen, more and more, as a factor of equilibrium and good model that the Romanian society needs.

The idea of restoring the monarchy, a concern which has not for one moment left the busy minds and activities of the Romanian intellectual elite, received a new impetus on the occasion of the Jubilee. It was immediately followed in January, when the King spoke amidst the protests tearing up the capital.

Prince Nicholas' tonic figure may be a step forward in this direction, in a republic where the discreet scent of the monarchy has practically never been lost.

Danube Decay Hinders Rhine Link to Leave Shippers Blue: Freight

By Tom Metcalf and Roxana Zega on October 03, 2012

http://www.businessweek.com/news/2012-10-03/danube-decay-hinders-rhine-link-to-leave-shippers-blue-freight


European Union plans for a trade artery between the Black and North seas have stalled as an upgrade of the Danube waterway is held up by spats over funding, the environment and immigration, delaying work that would reduce transport costs for companies spanning BASF SE (BAS) to Ford Motor Co. (F)

The bickering has stymied moves to upgrade infrastructure and reverse a drop in water levels in the lower Danube, while comments from right-leaning Dutch politicians have upset plans for Rotterdam port to help modernize Romania’s biggest harbor.

Goods volumes on Europe’s longest river after the Volga are 80 percent lower than on the Rhine, the region’s busiest waterway, according to EU figures. About 45 million metric tons of cargo was transported last year, half the total moved before the disintegration of the Soviet bloc, said Manfred Seitz, director of Vienna-based lobby group Pro Danube International.

“Businesses are desperate,” said Karin de Schepper, director of Brussels-based Inland Navigation Europe, which promotes waterborne trade. “They’d like to use the Danube but they can’t so they’re looking at alternatives.”

Rising in the Black Forest in western Germany, the Danube flows for more than 1,750 miles (2,800 kilometers) through 10 European countries. Its catchment area covers one-fifth of the EU and has a population in excess of 100 million.
Canal Link

The river is also central to European Commission plans to create a new route from Asia to northwest Europe by utilizing the 106-mile canal between the German cities of Kelheim on the Danube and Bamberg on the Main -- the Rhine’s biggest tributary -- finished in 1992. The route would shave 2,100 miles from the standard sea passage via the Mediterranean and eastern Atlantic.

Even over the same distance, shipping by barge can be six times cheaper than road and three times less costly than rail, according to U.K. risk adviser Infospectrum Ltd.

Yet parts of a Danube, described by Napoleon Bonaparte as the “king of rivers,” verge on the unnavigable, with an absence of regular dredging resulting in some stretches becoming too shallow to pass, especially during periods of drought.

Seven sections regularly fall below the 2.5 meters (8.2 feet) of draught required of an “international waterway” as defined by the United Nations Economic Commission, according to the Budapest-based Danube Commission. Navigation on the lower river was impossible for more than 38 days in September and October last year because of insufficient water levels, according to the European Commission, the EU’s executive arm.
Theft

Vienna-based Helogistics Holdings GmbH, a subsidiary of Swiss iron ore producer Ferrexpo Plc (FXPO), halted shipments between Constantza, Romania’s No. 1 port, and Budapest in March, saying that shallow waters had made operations “almost impossible.”

Lack of clearance means barges are frequently loaded to only 50 percent of capacity to ensure a smooth passage, driving up costs and delaying deliveries, said Jurgen Sorgenfrei, a consultant on maritime and hinterland issues at IHS Global GmbH.

The disruption has led to a higher incidence of theft from barges forced to tie up along the river and at its ports, according to Edgar Martin, director for central and eastern Europe at London-based Infospectrum.

“Cargo ends up waiting at locks and gets stolen,” said Frankfurt-based Sorgenfrei. “The captain wakes up next morning and some of the containers are open.”
Low-End Goods

Timetabling and security concerns mean the Danube is rarely used to move high-value goods, with traffic generally made up of less time sensitive bulk commodities, he said.

Cargo flows at Constantza, a Black Sea staging post linked to the Danube by a 40-mile canal that allows vessels to avoid shallow delta channels, reveal the low-value nature of goods.

Port data shows that 11.5 million tons of cereals and seed passed through in 2011, equal to one-quarter of overall volumes. Containers at terminals including one operated by Dubai’s DP World Ltd. (DPW) comprised 14 percent of traffic, half the level at Rotterdam, Europe’s top port. Perishables such as fruit and vegetables amounted to 61,000 tons, 0.1 percent of the total.

Constantza is well placed to become “one of Europe’s biggest ports,” General Manager Decebal Serban said by e-mail, with the facility acting as an entrepot for southeast Europe just as Rotterdam does further the north. Frustrating that potential is a general lack of intermodal infrastructure that would allow the smooth transfer of containerized goods between ships, trucks and railway wagons, he said.
Spending Plan

Investment in the Danube appears adequate, with 700 million euros ($904 million) from EU structural funds designated for its development through the end of 2013 and the budget for 2014-2020 currently being negotiated. Cash from the bloc’s wider TEN-T infrastructure program, which aims to create transport corridors across Europe, totals 8 billion euros through next year and a proposed 32 billion euros for 2014-2020.

Yet wrangling over budgets, work commitments and national interests means projects are proceeding slowly at best. Slovakia and Hungary were found by the International Court of Justice to have committed “wrongful acts” in seeking to divert as much as 97 percent of the Danube’s flow to rival power plants, while in Germany environmental pressure groups have frustrated plans to deepen a section of the river through damming since the 1970s.

A deal according to which Rotterdam last year agreed to lend management expertise to Constantza faltered following a diplomatic spat after the Netherlands objected to Romania joining the Schengen travel area. Dutch Freedom Party leader Geert Wilders, then a member of the ruling coalition, also set up a website inviting complaints about East European migrants, prompting Romanian politicians to promote a trade boycott.

Efforts will be made to start talks with the new government and Constantza authorities via the Dutch embassy in Bucharest, Port of Rotterdam spokesman Tie Schellekens said in an e-mailed statement, adding that there is “much support” for the plan.

Without investment and infrastructure upgrades, the Danube may never get the chance to fulfill its potential as other modes of transport capture freight flows on a permanent basis.

“The trucking industry is very flexible and very aggressive,” IHS’s Sorgenfrei said. “A lot of the stuff that was once carried on the river today goes by road.”

To contact the reporters on this story: Tom Metcalf in London at tmetcalf7@bloomberg.net; Roxana Zega in London at rzega@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net

Wednesday, October 3, 2012

FT: Romanian tycoon goes to ministry cash in hand, but fails to save privatisation bid

Turning up on the doorstep of the economy ministry with €3m in banknotes withdrawn from a personal account is certainly an impressive stunt, even by Romanian standards.

But for media mogul Dan Diaconescu, it wasn’t enough to save his somewhat outlandish bid for Oltchim, a debt-laden state-owned chemicals firm where operations were suspended in August and wages are in arrears.

It is perhaps not such a setback for Diaconescu, a youthful-looking and energetic journalist-turned tycoon-cum-politician, who now gets to keep his cash while having raised both his own profile and that of the Oltchim workers whose cause he claims to champion.

But for Romania’s privatisation programme, another can has been kicked down the road, while it seems likely that Oltchim will continue to weigh on an overburdened public purse.

Diaconescu had his €45m bid for Oltchim (which is €700m in debt) accepted on September 21, but days later prime minister Victor Ponta announced that the deal would fail as Diaconescu lacked the funds to pay.

Diaconescu – the owner of television station OTV – launched a scathing attack on Ponta in an interview with beyondbrics on Friday, accusing the PM of deliberately undermining his bid, and saying that “you will be very, very impressed with our next steps”.

These involved carrying out a promise to bring “cash in bags” to the economy ministry. The €3m in notes may have been from Diaconescu’s own accounts and are possibly enough to cover Oltchim workers’ wages for the rest of the year, as he claimed. But it fell rather short of his offer for the chemicals company, which was well above the other three bids and the company’s market value.

Diaconescu’s move for Oltchim, based in the central Romanian city of Ramnicu Valcea, has widely been dismissed as either extremely ill-planned, or a political stunt in the run-up to December’s general election, which Diaconescu’s new PPDD party will probably contest in opposition to Ponta.

“People are growing more desperate in Ramnicu Valcea, where Oltchim is the main economic entity,” says Andrei Chirileasa, capital markets editor of Ziarul Financiar, a Romanian business newspaper. Privatisation will almost inevitably mean job losses, but Chirileasa sees it as the only option for the company in the long run.

The IMF is encouraging Romania to divest itself of a number of state companies, including airline Tarom, rail freight company CFR Marfa and postal operator Posta Romania, a process that is unlikely to become easier after the Oltchim shambles. But the stellar success of privatised car maker Dacia, now owned by Renault, shows that the country can get it right – provided that the company in question has a real economic future.



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Tuesday, October 2, 2012

Can Romania Become Eastern Europe's New Bordeaux?

By REUTERS

GURA VADULUI, Romania (Reuters) - Can the latest fad for wine enthusiasts possibly come from an eastern European country whose wine-growing traditions are as old as Christianity?

Romania is the sixth-largest wine grower in the European Union and its enthusiastic proponents say the aspect of its 180,000 hectares of vineyards, unique soil, unusual grapes and inexpensive costs make it a producer to watch.

"What is unique about Romania is certainly the soils that can give unique characteristics to the wine," said Stephen Donnelly, oenologist of the Budureasca vineyard some 90 km northeast of capital Bucharest.

Romania's wine region lies on its western coast alongside the Black Sea, where vineyards dot the mostly sunny slopes and play home to grapes with names such as Feteasca Neagra and Tamaioasa Romaneasca.

"The two varieties I get most asked for when I do shows in London are Feteasca Neagra and Tamaioasa Romaneasca, which are both indigenous varieties," Donnelly told Reuters. "Because everyone has tasted Merlot from Chile, Argentina, so it's nothing special there."

The Tamaioasa grape has ancient Greek origins and has been cultivated in Romania for more than two thousand years.

"Pale straw in color, strong aroma of elderflower, strong flavors of fresh lychee, and with a soft natural sweetness and a long finish," is how Donnelly described the wine.

LIMESTONE STRENGTH

Price-wise it's competitive with its established European rivals in the export market and one of the very few sectors of the Romanian economy that is attracting EU development funds.

A bottle of Budureasca's finest wine can be bought in EU shops for as little as 6 euros ($7.74). Compare that to a Carignan varietal particular to France's less-lauded Languedoc wine region which costs 7.49 pounds ($12.10) at a British online wine shop or a mid-level Margaux from Bordeaux at 14.99 pounds ($24.21).

The Budureasca winery, whose name comes from an ancient Dacian archaeological site, exports a meagre five percent of its wine to Canada, Belgium, Sweden and Germany and plans to expand its export base to United States and across northern Europe.

"Its soils, the southern exposure, on 45 degrees are on a parallel with Bordeaux ... and limestone gives strength and mildness to red wines," Budureasca director Dumitru Varga said.

Many western importers have yet to see Romania as a member of the world's select wine club and the country suffers from a reputation for widespread graft, cumbersome commercial practices and shaky political foundations.

"The problem we had and we are still having is the fact that Romania's image is a bit stained," said Gabriel Lacureanu, oenologist at the nearby Basilescu winery.

Although Romania uses modern wine-making technology, a winter freeze and this summer's scorching temperatures hit production, estimated to drop 30 percent from 4.1 million hectoliters in 2011 when it exported only 130,000 hl.

Imports were nine times larger.

"Romania has a great future. When I do (go to) London I see we have a nice big stand with Romania," Lacureanu said. "But we're standing there trying to literally grab people to come in and it's a shame." ($1 = 0.7749 euros) ($1 = 0.6192 British pounds)

(Reporting by Ioana Patran; Editing by Radu Marinas and Paul Casciato)