Category: Today in the News

The European Union may guarantee the repayment of bank loans to companies in an attempt to improve the latter’s access to crediting, especially in southern Europe, said the European Commission President, Jose Manuel Durao Barroso. Easier access to credit is essential to getting Europe’s economy on the growing path again. Xxx brings you a commentary on the issue written by Corina Cristea.

Romania is not unlike other European countries when it comes to bank loans for the population, which are currently at a very low level. Romanians’ reticence towards banks is explainable. Although the unemployment level in Romania has not yet reached alarming levels, the effects of the crisis are still visible, while job uncertainty makes people in need of a loan think twice before asking for money from banks. Banks, on the other hand, are mainly focused on loans to firms because the risks of giving loans to private persons are too high at the moment. In most such cases, the application for credit comes from people in desperate situations, explains the president of the Romanian Association of Banks, Radu Gratian Ghetea. He told a specialist forum that the relaunch of loans is closely linked to the restart of sustainable economic activity in Romania and that in his opinion, although banks have enough funds at the moment, there are few solvent applications for loans.

“The moment we see signs of economic growth and we have constant economic growth over several quarters, applications for bankable loans will start to appear as a result of the creation of a market, of a demand. Very few projects are considered bankable at the moment, and they only appear in areas that are safe. One such area is related to European funds, so a project that involves European financing has more chances to be considered bankable. Other relatively safe areas are agriculture, which is much more performing than other sectors, and local public administration.”

The main challenges facing the banking sector in the coming period, experts say, are the management of growing non-performing credits, the need to regain customer trust in lending institutions and the large number of insolvent cases among companies. On the other hand, bankers say there is room for the development of loans in the national currency, lei, all the more so as the fluctuations of the trade exchange rate puts people who have contracted loans in hard currency at a disadvantage. Moreover, interest rates for loans in lei will drop below 10% in the coming period, thus leading to a reduction in the cost difference compared to loans in hard currency.

The European Parliament on Wednesday approved the Schengen Governance Package, two sets of regulations related to a new mechanism meant to assess the observance of the free movement area rules in each member country and to the temporary setting up of checks on internal borders in exceptional situations. According to the package, inspection teams will pay unannounced visits to monitor any attempt to introduce illegal verifications at the internal borders.

The second set of regulations stipulates that the temporary re-introduction of checks on internal borders is a “last resort” measure. In the event of a serious threat to internal security and public order, checks could be re-introduced for 30 days and extended for a maximum period of 6 months. When certain unexpected events require immediate action (for instance a terrorist attack) member states can re-introduce unilateral border checks for a maximum of 10 days. Any extension of this period must be monitored at EU level. The Schengen candidate and member states will be assessed in the same way and will abide by the same rules. The package mentions that “migration and crossing of external borders by a great number of third countries nationals should not be considered a threat to public order and internal security.”

The two sets of regulations could be approved by the European Council this autumn. The Mediafax news agency reports that several Romanian euro MPs have hailed the adoption of the Schengen Governance Package. The Liberals expressed hope that the implementation of this package of measures, which has triggered heated polemics over the past 2 years within the European Council and the European Parliament, would boost Romania’s negotiations for Schengen accession. The Social Democrats believe that the new rules will put an end to the double standards that Romania and Bulgaria were faced with in their attempt to join the Schengen area.

In turn, the Liberal Democrats say that Romania is better off than many other countries in terms of border security, which could be an additional argument in favour of Romania’s Schengen accession by the end of the year. Romania’s and Bulgaria’s Schengen accession has so far been blocked due to reservations expressed by some states, which called for a radical reform of the Romanian judiciary. We recall that Romania complies with all technical requirements for Schengen accession.

The lull on the Romanian political scene was broken on Tuesday evening by President Traian Basescu’s announcement that he plans to call a referendum on the introduction of a single-chamber Parliament and the reduction in the number of MPs to 300. The electorate answered positively to a referendum on the same issue held in 2009, also initiated by President Basescu. For this reason the head of state deems as unacceptable the intention of the Social Liberal parliamentary majority to revise the constitution without taking into account the will of the people, which was clearly expressed in 2009.

Ignoring the result of the referendum, the president says, is incompatible with the state of law. However, he doesn’t rule out the possibility for the Social Liberal Union to eventually consider people’s will, or face the prospect of the Constitutional Court invalidating their proposed revision of the constitution. This is why Traian Basescu made it clear that whether or not he calls for a new referendum depends on the developments in Parliament and the Constitutional Court.

Traian Basescu: “The revision of the Constitution has not been completed yet and there is always the possibility for Parliament to reconsider its attitude towards the Romanian people. It’s also possible for the Constitutional Court to reject a law on the revision of the constitution that ignores the outcome of a referendum.”

The criticism voiced by the president, which indirectly targeted the co-president of the Social Liberal Union and head of the committee for the revision of the constitution, the Liberal Crin Antonescu, made the latter say that the 2009 referendum, so strongly invoked by Traian Basescu has been nothing but an undemocratic trick, for it was held on the same day with the presidential elections. In Crin Antonescu’s opinion, Romanians were poorly informed on what a single-chamber parliament involves. As for President Basescu’s objections to the revision of the constitution, Crin Antonescu says Basescu’s only reason is that this is a project over which he doesn’t have any control.

Crin Antonescu: “I believe our top priority should be to strengthen and continue our projects, and not a polemic with Traian Basescu, who, in a way is only speaking to himself. We’re talking about a project here and this project, with or without Crin Antonescu or Victor Ponta is something that Traian Basescu simply cannot tolerate.”

Romania and Germany want to continue their partnership in all fields of interest with an emphasis on economic cooperation, based on the fact that Germany is Romania’s most important partner in the field. This is one of the conclusions of a meeting between German Chancellor Angela Merkel and Romanian Prime Minister Victor Ponta on Monday in Berlin.

The talks took place against the background of Romania’s trying to improve its image abroad by presenting its western partners the picture of a country, which, by taking the right measures, managed to cope not only with an economic and financial crisis, but also with a political crisis. Talking about it, Prime Minister Ponta has said:

Victor Ponta: “My message to the German government is that Romania, after several years of economic, social and political crisis, has regained stability and wants to become a reliable strategic partner.”

Berlin seems to be taking the Romanian government’s offer realistically. Chancellor Merkel voiced her country’s interest in developing the political and economic ties, which she defined as friendly, as well as the wish for the reforms of the Romanian justice system to be more visible.

Angela Merkel: “I want your country’s economic construction to be a success and Germany wants to be a partner to it. For the German economy it is important that the rule of law should be observed and the legal system should work properly. Also important is to eliminate corruption and ensure transparency.“

Prime Minister Victor Ponta in turn confirmed the guidelines of Bucharest’s interior policy.

Victor Ponta: “I also want you to know that the government and the ruling coalition have committed themselves to strengthening the rule of law, to fighting corruption and to drawing up a legal framework that is as transparent and efficient as possible. I, personally, and the government I’m heading strongly believe in Romania’s European destiny and in the fact that we should all be partners in the construction of the future European project.”

We recall that Romanian-German ties have always had a special character, drawing on joint historical elements and the presence of a strong community of German ethnics in Romania.

Three quarters of Romania’s territory is under code yellow alert for heavy rain, strong gales and hail. According to weather experts, storms will quickly spread to the south and east as well. A code yellow flood alert has been issued for several rivers in 13 counties in the north, northwest and southwest as well. Two people have been killed last week by floods and landslides caused by torrential rain, with dozens of households, hundreds of hectares of farmland and several local roads destroyed.

The focus of attention is now the river Danube, closely monitored now on its Romanian course, after going on record for high levels in Bratislava, Vienna and Budapest. Romanian experts assured everyone that the debit of the Danube would not overcome the one recorded in April, however. The government, preventively, has however called on local authorities and everyone involved to take measures on time. The head of the government, Victor Ponta, called on the Minister of the Interior to get in touch with Hungarian authorities in order to check if help from Romania is needed, considering the neighboring country is facing the worst flooding in decades.

Hungary has prolonged its state of emergency until 19 July, a move made by Parliament on Monday. The central European country has called on its armed forces and on volunteers to consolidate 800 km of levees, after the level of the Danube reached record levels in several sectors, higher than in 2006. The floods in Hungary have been affecting train travel between Romania and Austria, with several trains being diverted temporarily. Germany has also been facing its worst flooding in the last 10 years.

The worst affected were the south and the east, where thousands have been evacuated for fear of the river Elba overflowing. 20,000 soldiers and thousands of volunteers have been deployed in the operation. Other countries in Central Europe have also been affected, to the point where the most recent European count shows that at least 20 people have lost their lives, tens of thousands have been evacuated, and hundreds of thousands of hectares of land have been left under the water in Germany, the Czech Republic, Austria, Hungary, Slovakia and Switzerland, with damages estimated at billions of Euro.

In 2011, only one in two students passed the baccalaureate. In several high schools throughout the country, not a single student passed the exam, and in most counties, the percentage of students passing it was lower than in the previous year. In fact, it was the worst graduation exam in 20 years. The situation was the same in 2012. It remains to be seen what happens this year, and everyone is waiting for the final results of the exam for which 190,000 young people have registered.

Oral exams will be held until the 28th June. They are meant to verify the oral communication competence in Romanian for most students, or in their mother tongue, if other than Romanian. They also verify computer skills and competence in speaking an international language. Then follow the written exams, starting the 1st of July. In the Romanian language they check language and literature skills, and the same skills in the native language if other than Romanian, followed by the compulsory subjects and the elective subjects.

This year, depending on the orientation of the high school the students went to, compulsory subjects will differ. Students who have graduated from high schools oriented towards the humanities and pedagogy will take the exam in different topics than those who went to science, technology and vocational schools. In mathematics, subjects will differ for natural science oriented high schools and technology high schools. The grades will be posted on July 12.

As every year, the question on everyone’s mind is: why such dismal results in this exam? Many blame the large-scale fight against corruption. A former minister of education a few years ago said that the nation had to choose between honesty and trickery. In line with that principle, for a few years now the exam has been taken under video surveillance, and there has been a crackdown on currying lenience or favor with the people responsible for administering the exam by gifts of all sorts.

The real answer, though, seems to lie with the lack of interest of teachers and students, as well as the shortcomings of a system that is unable to adjust to the needs of present society. Since 1990, when the regime changed, the public education system has been in a constant state of change and reorganization. This year, some high school students, after seeing the abysmal results at the exam simulation, have given up on it altogether and didn’t register. They took up a trade, convinced that there must be more demand for people who build or fix things. Many parents are supportive of that, believing it a better effort to learn a trade than to fail the baccalaureate with a terrible grade.

From an institution that in theory should have been present in the media only in exceptional cases, the Constitutional Court has turned into a main and sometimes uneasy player on the Romanian political scene. Over the past years the Constitutional Court’s frequent interventions, following equally frequent appeals to its rulings, have been interpreted by politicians according to their interests. The idea that even the Constitutional Court of Romania is subject to political interference, like any other Romanian public institution, is no surprise. The 9 judges of the Constitutional Court are appointed on purely political criteria, something that has become a Romanian trademark. The Presidency, the Chamber of Deputies and the Senate have the right to appoint 3 representatives each. The suspicion that the 3 new members of the Court have also been appointed by political criteria seems to be confirmed.

The 3 new members are Daniel Morar, the former head of the National Anti-Corruption Directorate and allegedly a close associate of the Romanian President, Mona Pivniceru, a former justice minister who has the support of the Liberals in the ruling coalition, and Valer Dorneanu, backed by the Social Democratic Party, also in the governing coalition. The latter were nominated and validated by the Senate and the Chamber of Deputies. The interest in the Constitutional Court and in the appointments to the Court is fueled by the tough political wrangling.

The climax of political fighting in Romania was reached in the summer of 2012 when the current power, the center leftist Social Liberal Union, waged a bitter war on several institutional fronts, to impeach President Traian Basescu. The president’s seat was however saved by the Constitutional Court, which decided that for the impeachment referendum to be validated, half plus one of the voters on the electoral lists had to cast their vote. Political analysts say that although one year has passed, the hostility the Social Liberal Union shows towards the Constitutional Court is as fresh as it was back then, since the ruling parties are keen on reducing the powers of the Constitutional Court, as the opposition claims. However, the coalition in Power invokes the need to change the way the members of the Court are appointed and to clarify the court’s jurisdiction.

A meeting of European officials and food experts is due to take place this week in Brussels to analyze the case of the horsemeat sold in imported beef products. Over the last days several European countries including Romania have carried out investigations into this matter. Meanwhile all incriminated products have been withdrawn from European markets.

The scandal broke out in Britain and Sweden where pre-prepared frozen foods labeled as beef were found to contain horsemeat. The French supplier that had delivered the meat said the horsemeat actually originated in Romania. Romanian authorities have inspected the two abattoirs allegedly signaled to be the source of the meat, but have found no irregularities. Agriculture Minister Daniel Constantin:

Daniel Constantin: “There is no evidence at present in support of any mislabeled products in Romania, in any of our meat processing facilities. I would particularly like the highlight the fact that no mincemeat has ever been exported from Romania”.

In turn Prime Minister Victor Ponta said Romania was blameless in the horsemeat scandal in the UK.

Victor Ponta: “I don’t believe Romania should accept to be incriminated as the usual suspect, because our food industry is extremely transparent and measure up to all EU standards. It is very clear that the French supplier had no direct contract with any Romanian company. It is important for the entire Europe to reveal the source of the fraud and who bears responsibility for it. Our main interest was to verify if anything similar had ever happened in Romania, and based on our findings so far, there is no attested transgression of EU regulations and standards”.

The Prime Minister made it clear that the Romanian Ministry of Agriculture jointly with all the relevant bodies would call on behalf of Romania on all companies found at fault to assume responsibility for their wrongdoing. EU Commissioner for Agriculture Romanian Dacian Ciolos, now on a visit to Bucharest, has also expressed his view on this matter:

Dacian Ciolos: “There is nothing to suggest a health or food safety risk to consumers. It is a clear case of fraud. At this point, the European Commission has no data that should incriminate any Member State or one retailer or another. The European Commission is in permanent contact with all Member States involved in the matter. It is, of course, in our interest that this problem should be cleared up as soon as possible”.

It remains to be seen what decisions are to be taken at EU level so as to avoid such incidents in the future.

“The best possible budget at this moment” — this is how Social Democrat Prime Minister Victor Ponta has described the state budget for 2013, which Parliament passed with a wide majority. The budget is based on an economic growth rate of 1.6% of the GDP, an average inflation rate of 4.3% and a deficit of 2.1% of the GDP.

The average currency exchange rate is estimated in 2013 at 4.5 Romanian Lei against the Euro. Faced with time constraints but tapping into its overwhelming strength in Parliament, the Social Liberal majority passed the budget bill without adopting a single amendment of the over 10,000 proposed by the Liberal Democratic opposition. This has given rise to heated debates and harsh exchanges. The leader of the Liberal Democratic MPs, Mihai Stanisoara:

Mihai Stanisoara: “We have submitted over 10,000 amendments, each with good reason. They reflect the needs of all social categories of Romanians.”

In response, the head of the budget committee, the Liberal MP Dan Radu Rusanu said:

Dan Radu Rusanu: “It’s a survival budget because the Ponta government must now fix all the problems you created in your four years in government, including the arrears in the healthcare sector, projects that were started but never completed and especially loans you chose to spent on investments we still can’t identify, loans which we now have to pay back.”

The conflict between the power and the opposition over the structure of the budget was to be expected. While the former says the new budget stimulates development and investment, increasing pensions and restoring public sector salaries to the level prior to the cuts operated by the former government, the opposition describes it as a budget of poverty. The National Bank is keeping a safe distance from the political conflict and warns that the power of the Leu will depend in the coming period on the situation of the Euro, as well as the country’s agricultural output and structural reforms. Referring to the success of these reforms, National Bank governor Mugur Isarescu has shown reserve.

Mugur Isarescu: “We believe in the government’s programme, but we know from our post-1989 experience how difficult it is to carry out structural reforms. Problems appear every time, especially in state companies, and things become complicated because of social issues, political issues and aspects of a technical nature, so we can’t be very optimistic.”

The National Bank of Romania again underscored how important it was for Romania to attract European funds, which can be used to stimulate investment in key areas such as infrastructure and agriculture and generate economic growth.

The central bank has also decided to maintain the reference interest rate of 5.25%. The National Bank of Romania and the IMF agree that Romania’s economic growth stand at around 1.5% this year. Speaking of this, the bank’s governor, Mugur Isarescu, believes that reducing the reference interest rate would discourage domestic savings, which is now below par, and would cause economic shrinking, given the lack of financial resources.

For this reason, the central bank’s board has decided to keep the inter-bank loan rate at 5.25%. As for inflation, the banking authority expects it to be between 5 and 6 percent in the first part of the year, with a prospective value of around 3.5% towards the end. The national budget is built on a projection of 4.3% annual inflation rate and 1.6% economic growth. The inflation forecast, Isarescu has emphasized, also depends on the evolution of volatile prices, especially in agriculture. He has also stated that he doesn’t believe that the impact of scheduled price hikes in natural gas and electricity on food prices would be major. At the same time, Isarescu said that the domestic investment potential is insufficient, which affects economic growth:

“For many reasons, we cannot manage to absorb EU money. Economic growth, before everything, means investment. As we have insufficient domestic investment resources, this reflects in the fact that we still have a 4% current account deficit. In other words, we need investments worth around 4% of the GDP, which is more than we manage to save in this country. Therefore, the issue of policies for attracting foreign money, be it foreign loans, European Union structural money, direct foreign investments or other sources, such as portfolio investments, is vital.”

Mugur Isarescu also has pointed out, again, that Romania has a precautionary loan agreement with the IMF, the EU and the World Bank without having tapped the resources made available under it. The head of the central bank believes that an agreement with the IMF boosts Romania’s credibility on foreign markets.

The revision of the Constitution, territorial reorganization, the adoption of the MP’s status are just a few of the priorities of the new parliamentary session in Bucharest. Both the power and the opposition have stated that they want to amend the fundamental law. However, this is all they seem to agree upon. The opposition Liberal Democratic Party claims the 2009 referendum should be observed, when people voted in favour of a single chamber parliament, with only 300 MPs.

The Social Liberal Union, on the other hand, stands for two chambers, with different responsibilities. Following last December’s elections, the Senate and the Chamber of Deputies currently have a total of nearly 600 members. Another priority on Parliament’s agenda is the law on the status of the Romanian Member of Parliament, which President Traian Basescu sent back to Parliament.

He wants a reexamination of the provisions regarding incompatibility and conflict of interests, which, the president believes, run counter to the recommendations made by the European Commission in the recent justice report issued under the Cooperation and Verification Mechanism. The president of the Romanian Chamber of Deputies, Social-Democrat Valeriu Zgonea, has stated that some of the president’s requests have already been complied with.

Valeriu Zgonea: “The Presidency has recommended that we talk with the National Integrity Agency and the Public Ministry to take these measures, and we have already done that. Also, we have discussed with NGOs, as recommended. Another recommendation regards the implementation of the Code of Conduct, which means that the steps we have taken have been the normal and correct ones. “

In another move, the MPs are to discuss territorial reorganization. A project initiated by the Liberal Democratic Party aims at replacing the existing 40 counties with 8 bigger ones. According to the proposal set forth by the Social Liberal Union, there should be 8 development regions, as compared to 16 such regions, as suggested by the Democratic Union of Ethnic Hungarians in Romania.

Romanian Prime Minister Victor Ponta has stressed that this reorganization must be made in 2013 and, in the absence of a regional organization recognized by the Constitution, the absorption of European funds will no longer be possible in the 2014-2020 budget framework. If implemented, this administrative reorganization would be the first since 1968.

Almost a week since the European Commission made it public, the latest justice report issued under the Cooperation and Verification Mechanism is still in the focus of the Romanian politicians’ attention. The document, which reads that Romania has implemented some of the recommendations made by the European Commission with regard to the rule of law, but not all of them, on Monday was discussed by the European Commission President Jose Manuel Barroso and the Romanian Prime Minister Victor Ponta in Brussels.

The head of the European Commission urged the Bucharest authorities to make progress in ensuring the independence of the judiciary. He also said that Romanian members of government or parliament should set an example and give up their offices when charged with corruption or lack of integrity. In turn, Romanian Prime Minister Victor Ponta said that his government was fully committed to the effort of improving the functioning of the judiciary and that Romania would keep measuring up to the European standards with regard to the rule of law.

According to Romania’s President, Traian Basescu, the report is fair, but deeply politicized in terms of reactions. He has stressed that the public approach has often been insincere and has suggested that the current government should send a letter to the European institutions, committing itself to solving all the problems laid down in the report. The MEPs members of the National Liberal Party Ramona Manescu and Cristian Busoi have stated in the plenary session of the European Parliament that Romania’s monitoring through the Cooperation and Verification Mechanism should be stopped either right away, or in keeping with a clearly set timetable.

The reason for such a claim is that the report allegedly contains inadvertencies, untruths and also subjective evaluations, which are not real. In their opinion, this mechanism has turned into a pressure tool, which has strayed from its technical objective and has become 80% political. The EC report says that although the Constitution and rulings given by the Constitutional Court have been observed, there are still reasons to worry about the instability of legal institutions in Romania.

The European Commission has again hailed the activity carried out by the National Integrity Agency and the National Anti-corruption Directorate and has stressed that the number of sentences in cases involving corruption has doubled lately. The document also stresses the importance of appointing a new Prosecutor General and a new leading board of the National Anti-corruption Directorate, as this would stand proof of this body’s independence, integrity and professionalism. The European Commission calls on all MPs declared incompatible to resign, and urges that the immunity of those who are criminally investigated be lifted.

The political and institutional crisis Romania was confronted with last summer, when a referendum was held to impeach the country’s president, weighed heavily in the latest European Commission report under the Co-operation and Verification Mechanism for the judiciary. At the time of the referendum, the Commission made a series of recommendations to the Ponta cabinet related to the reinstatement of the rule of law and the respect for the independence of the judiciary.

According to the latest report made public on Wednesday, Romania has implemented some but not all of these recommendations. While the decisions of the Constitutional Court have been respected, the European Commission believes there is still insufficient progress when it comes to protecting judicial officials from attacks, many of which come from the media. Also, the report again praises the performance of the National Integrity Agency and the National Anticorruption Directorate and notes that the number of indictments in top-level corruption cases has doubled.

The European Commission also urges Romania to appoint the General Prosecutor and the head of the National Anticorruption Directorate as soon as possible through an open and transparent process, choosing candidates with irreproachable track records in terms of integrity and expertise. The European Commission also highlights that progress has been limited with regard to fighting corruption related to public procurements. It urges ministers with integrity rulings against them and MPs with final decisions on incompatibility and conflict of interest to step down, and calls on Parliament to lift the immunity of its members who are subject to criminal investigations.

Despite its criticism, the latest European Commission report is better than the previous one made public in July, according to the European Commission spokesman Mark Gray. He denied any formal connection between this report on the judiciary and Romania’s bid to join the free-movement Schengen area. However, there are still states that say they won’t vote in favour of Romania’s Schengen entry unless the country makes progress in the reform of the judiciary and the fight against corruption.

The Liberal Democrats in opposition have used this argument to blame the Social Liberal government of a new possible delay in Romania’s accession to the Schengen area as a result of the government’s unconvincing actions to consolidate the rule of law. On the other hand, the government rejects as ungrounded the implicit criticism contained in the European Commission report according to which some of the cabinet members are investigated for corruption or have integrity problems, and says the investigations targeting three cabinet members are of a different nature.

Up to a certain point, interpreting the European Commission report in political terms and using it as an opportunity to exchange criticism between the power and the opposition, is only natural. Beyond this point, however, the dispute becomes demagogical and especially unproductive.