Romania’s New Cabinet Approves 2010 Budget Hours After Approval

Dec. 23 (Bloomberg) -- Romania’s government approved a budget for 2010 to unlock a $30 billion international bailout loan hours after Parliament voted in the administration, ending a stalemate that left the country without leadership since October.

Parliament voted 276-135 yesterday to approve Emil Boc as premier, and 14 other proposed Cabinet members, allowing the new government to give its assent to a budget of spending cuts aimed at repairing relations with the International Monetary Fund.

“The government has the majority it needs to meet IMF criteria,” said Adrian Moraru, a political analyst at the Institute for Public Policies in Bucharest. “It is comfortable enough to ensure passage of the budget and other urgent issues. The majority will also probably increase with time.”

Romania has been without political leadership since Oct. 13 when Parliament voted out Boc amid increasing political infighting, prompting the IMF and the European Union to halt payments on a $30 billion bailout loan. Standard & Poor’s has warned the vacuum may trigger credit-rating downgrades.

“This will bring things back to normal and we can make the political decisions we need,” Boc said in a speech to Parliament. “In the coming years, we need a return to reason and stability.”

Boc predicted in an evening news conference in Bucharest yesterday that inflation will end 2010 at an annual 3.7 percent and the economy will grow 1.3 percent, after shrinking as much as 7 percent this year.

Budget Plan

The IMF said in an e-mail on Dec. 18 that, if Parliament approves a government and passes the budget, the fund’s board may meet in February to discuss resuming loan payments. It also raised Romania’s economic growth outlook for 2010 to 1.3 percent from 0.5 percent.

The 2010 budget plan foresees spending cuts to target a deficit of 5.9 percent of GDP next year, from a target of 7.3 percent this year. Finance Minister Sebastian Vladescu said the budget foresees reducing the 1.3 million-member public service by 100,000 people next year through a hiring freeze and attrition.

The Parliament now needs to approve the 2010 budget by Jan. 16 to release two loan payments the following month totaling 2.3 billion euros ($3.3 billion). That would include a delayed December transfer and advance payment of one slated for March. The EU said it may also release 1 billion euros as part of the delayed package.

Boc said he will maintain the 16 percent flat tax and 19 percent value-added tax next year and direct 20 percent of the budget toward investment. He also said today he will extend a tax exemption on re-invested profit into his new term.

Political Backdrop

Parliament originally ousted Boc in October, leading to the collapse of his Cabinet. Opposition lawmakers then rejected other candidates for premier nominated by President Traian Basescu before Basescu was re-elected in Dec. 6 elections.

Basescu, won the election with 50.3 percent against 49.7 percent for opposition leader Mircea Geoana, a difference of 70,000 votes in the nation of 22 million. Geoana claimed fraud and appealed to the Constitutional Court, which upheld the results more than a week after the election. Basescu then re-nominated Boc, 43.

Romania is the most corrupt nation in the European Union, according to Berlin-based monitor Transparency International. The Balkan state joined the EU in January 2007 along with southern neighbor Bulgaria. More than 20 Cabinet ministers and former ministers have been accused by prosecutors of corruption and the EU in July warned Romania to accelerate steps to fight graft.

The vote backing the government included 167 members of Boc’s Liberal Democratic Party, which is loyal to Basescu, as well as 31 from the Democratic Union of Hungarians in Romania, an ethnic minority party. The rest came from independent lawmakers, other representatives of ethnic minorities, and defectors from the opposition.

‘Traitors’

Geoana, president of the Social Democratic Party, and Crin Antonescu, leader of the opposition National Liberals, said they will remain in opposition. The government has an “unstable” majority based on “traitors,” Geoana said.

“The anti-crisis and economic plans of this government are unclear and that is a principal reason for voting against this government,” Geoana said in a speech before the vote. “What we see he is a recipe for repeating mistakes of government in recent years.”

The leu strengthened as much as 0.7 percent to 4.1915 per euro, the highest intraday level since Sept. 30, in Bucharest after the vote. The currency fell to a seven-month low and bonds plunged after the Oct. 13 government collapse. The BET stock index rose 0.2 percent to 4661.38 after today’s vote.

ANALYSIS -- Democratic reforms at stake in Romanian election

Romania, Nov 17 (Reuters) - Romania's presidential election may decide whether the European Union's second poorest state will embark on real reforms and could shake up a political class whose bickering has stalled progress and hurt the economy.

If opinion polls prove correct, tough-talking incumbent Traian Basescu will get another try at building political support for combating pervasive corruption and fraud when Romanians go to the polls in a first round on Sunday.

But to succeed, the former sea captain may have to change his confrontational governing style that has alienated politicians across the spectrum during his five-year mandate.

After sweeping into power in 2004 on a promise to reform a democracy steeped in interest-based politics, Basescu has seen his public support crumble to around 35 percent, from 50 percent at its peak, as voters grew angry over slow progress.

A foreign shipping official under communism and former Bucharest mayor, Basescu stormed onto the national scene as a hard-talking opposition figure who promised to jail 'big fish' politicians suspected of enriching themselves through graft.

But corruption is still widespread three years after the country of 22 million joined the European Union, and parliament is actively blocking efforts to investigate senior politicians.

Some commentators warn Basescu's main election rivals, leftist Mircea Geoana and centrist Crin Antonescu offer few convincing solutions to political reform.

Geoana, who heads the ex-communist Social Democrat Party mired in sleaze scandals, is trailing Basescu in close second, winning voters' hearts by promising social protection in the face of a deep economic contraction.

'Basescu's popularity is down (in part due to his) lack of social skills. He is perceived as a troublemaker,' said Laura Stefan of the Romanian Academic Society.

'But in all honesty I believe his line you can't do reforms without kicking and screaming.'

Analysts hope the winner of the election, likely to be chosen in a Dec. 6 runoff if someone does not win 50 percent of the vote, can name a new head of government and end a political crisis that began when opposition parties ousted the Basescu-allied Democrat-Liberal cabinet in October.

TOUGH CHOICES

The political standoff, stemming from inter-party conflict during Basescu's rule that toppled two of his cabinets, has stalled reforms and delayed payments of aid from Romania's 20 billion-euro, International Monetary Fund-led rescue package.

Coming off 7.1 percent growth in 2008, the economy is now expecting a drop of up to 8 percent this year.

Graft is a major problem. Romania was ranked at the bottom of the EU on corruption perceptions by Transparency International in 2009, along with Bulgaria and Greece.

'I feel cheated. I've seen only unfulfiled promises,' said Dumitra Chivulescu, a 76-year-old farmer in Schitu, a muddy farming village 80 km south of Bucharest.

Basescu hopes to address the issue with a referendum tacked on to the Nov. 22 first round by taking on what he says is the biggest roadblock -- elected officials hampering policy-making.

If passed, it would eliminate one of parliament's two chambers, which he says could break a struggle in the ruling elite over money and influence and jumpstart stalled reforms.

But commentators also say it can fan distrust in politicians and fuel voter apathy, giving politicians a free run. Low turnout could scupper the plebiscite, which needs at least 50 percent of voters to take part to be valid.

'Young people are deeply disillusioned,' said Bruno Stefan, of pollster BCS. 'Romania has managed to remain a state where (ex-)communist cliques seem to control the economy. It would be probably too optimistic to see turnout exceeding 40 percent.'

POLITICAL BAGGAGE

Since taking power, 58-year-old Basescu has endorsed criminal probes against top officials, including former premier Adrian Nastase and other ministers.

But some say he was doomed to fail. Opposition parties have blocked prosecutors' efforts to investigate top officials and tried to impeach Basescu in 2007, saying he was abusing power.

He has been praised for condemning communism, and he opened the files of the feared communist-era Securitate secret police in an effort to clean up the political classes.

But he is no stranger to scandal. Opponents have criticised him for racial slurs and insults against journalists, as well as nepotism after his daughter rose quickly through the political class to become an EU parliamentarian.

He was filmed driving after drinking alcohol, and, under pressure from media, asked his brother Mircea to give up his shareholder position in a military hardware firm after reports said it was seeking state contracts.

'Basescu has been seen as a strong father figure,' said Alina Inayeh, director of the Black Sea Trust for Regional Cooperation. 'But I don't think he's perceived as a good father anymore. The fact is that he refuses to answer legitimate questions in the end, which has shaken his image.'

For his opponents, Antonescu's Liberal Party has warred with Romania's European Commission-backed anti-graft prosecutor and Geoana suggests cutting red tape is the best way to fight corruption, which analysts say may signal a softer approach.

But Basescu's patchy record remains the linchpin of the election, analysts say. He has polarised Romanian society after thousands put their hope in him for genuine reforms.

By Radu Marinas (for REUTERS)

Getting closer to Russia? Not yet –

Recently – as runoffs for Romania’s presidency are heating up --, some SocDem and National Liberal politicians lauds the need for closer relationship with Russia – mainly because energy security reasons, they say. But, in our opinion, Moscow cannot provide its neighbours with a mutual profitable co-operation paradigm, as the Russia's contemporary leaders have chosen a model that cannot hold longer – i.e. growth without development, capitalism without democracy, and great-power policies without international appeal.

“Two decades after the withdrawal of Soviet troops from Afghanistan and the fall of the Berlin Wall, and nearly 20 years after the breakup of the Soviet Union, Russia has shed communism and lost its historical empire. But it has not yet found a new role. Instead, it sits uncomfortably on the periphery of both Europe and Asia while apprehensively rubbing shoulders with the Muslim world.”

“Throughout the 1990s, Moscow attempted to integrate into, and then with, the West. These efforts failed, both because the West lacked the will to adopt Russia as one of its own and because Russian elites chose to embrace a corporatist and conservative policy agenda at home and abroad.”

“As a result, in the second presidential term of Vladimir Putin, Russia abandoned its goal of joining the West and returned to its default option of behaving as an independent great power. It redefined its objectives: soft dominance in its immediate neighbourhood; equality with the world's principal power centres, China, the European Union, and the United States; and membership in a global multi-polar order.”

“Half a decade later, this policy course has revealed its failures and flaws. Most are rooted in the Russian government's inability and unwillingness to reform the country's energy-dependent economy, the non-competitive nature of Russian politics, and a trend toward nationalism and isolationism. In terms of foreign policy, Russia's leaders have failed to close the book on the lost Soviet empire. It is as if they exited the twentieth century through two doors at the same time: one leading to the globalized market of the twenty-first century and the other opening onto the Great Game of the nineteenth century.”

“As the current global economic crisis has demonstrated, the model that Russia's contemporary leaders have chosen -- growth without development, capitalism without democracy, and great-power policies without international appeal -- cannot hold forever. Not only will Russia fail to achieve its principal foreign policy objectives, it will fall further behind in a world increasingly defined by instant communication and open borders, leading to dangers not merely to its status but also to its existence. Russia's foreign policy needs more than a reset: it requires a new strategy and new policy instruments and mechanisms to implement it.” *

*) “RUSSIA REBORN”, by DMITRI TRENIN (Director of the Carnegie Moscow Centre), in Foreign Affairs – November / December, 2009 issue.

U.S. Vice President Joe Biden thanked Romania's President Traian Basescu for "embracing" the new proposal for missile defense system

BUCHAREST, Romania — A U.S. army official in Romania says an American military base near the Black Sea port of Constanta will become a permanent facility in the spring and be jointly used with Romanian forces, AP reported yesterday.

Lt. Col. Daniel Herrigstad says the U.S. government invested $48 million to modernize the base.

Herrigstad told the news agency Agerpres on Friday that the base would initially host up to 1,700 U.S. and Romanian soldiers.

U.S. Vice President Joe Biden visited Romania on Thursday to discuss the new missile defense system, and thanked Romania's President Traian Basescu for "embracing" the new proposal.

It is unclear what role, if any, Romania will play in the revamped U.S. missile shield.

***

Romanian President Traian Basescu hosted a meeting with U.S. Vice President Joe Biden in Bucharest. The talks focused on the revamped missile defense system unveiled by Washington last month. On October 22, Biden praised Romania for accepting the new arrangements.

[Joe Biden, U.S. Vice President]:
"I really appreciate your embrace, your government's embrace of the new missile defense architecture that we are introducing into Europe. There is the SM-3... will replace what was originally going to be intended to provide for security. But it will in fact... it is a much better architecture. It has the benefit of protecting Europe physically as well as the United States. And I must tell you I appreciate your almost instant embrace of this new architecture. As well as was embraced by our colleagues in Poland and others. As people look at this... you understood from the beginning, that this makes more sense."

The revamped missile defense system is superior to a previous version that had caused friction with Russia.

Eastern European nations are still getting used to U.S. President Barack Obama's decision to scrap Bush-era plans.

But Russia strongly opposed the new plans, fearing they would neutralize its own nuclear arsenal.

Obama plans to roll out sea-based interceptors first, followed by land-based systems. Under this arrangement, Poland could host SM-3 interceptors targeting short and medium-range missiles.

PRAVDA: "USA Prepares to Attack Russia in 3 or 4 Years?"

(23.10.2009 Source: Pravda.Ru)

US army bases will appear on the Black Sea Coast – in Bulgaria and Romania. About $50 million will be assigned to build the base in Romania, and the Pentagon plans to spend $60 million more for the same purpose in Bulgaria.

The Romanian base is expected to be put in operation in 2010, whereas the second one will most likely be launched in 2011 or 2012. Over 4,000 US military men are expected to serve at the two bases: 1,600 in Romania and 2,500 in Bulgaria. The authorities of the two nations expect that the US military men will settle there for a long time.

Col. Gary Russ, commander of Joint Task Force-East, sad that no one in Bulgaria and Romania had anything against the US military presence in the two countries. Vice President Joseph Biden, who recently visited several countries of Eastern Europe, including Romania, stated that the European nation supported a new configuration of the US missile defense system.

It is not ruled out that elements of the US missile defense system may eventually appear in Eastern Europe. US officials say that the appearance of army bases in Bulgaria and Romania strictly corresponds to the plans of the US administration to relocate troops in foreign countries (George W. Bush announced the plans in 2004).

It goes about the Pentagon’s intention to cut its 55,000-strong group in Germany and redeploy a part of the troops in several countries of Eastern Europe, including Bulgaria and Romania.

Alexander Khramchikhin, deputy director of the Institute for Political and Military Analysis, said in an interview with Pravda.Ru that the plans of the United States to build army bases in Romania and Bulgaria were exposed nearly a decade ago.

“Indeed, the Americans need more bases for their actions in the Middle East. They have bases in Bahrain, Qatar and Saudi Arabia, but they are not enough to satisfy all of Washington’s needs. The Pentagon needs new bases in Eastern Europe to maintain its troops in the Middle East,” the expert said.

Another expert, Konstantin Sivkov, told Pravda.Ru that the appearance of new army bases in Bulgaria and Romania would pose a threat to Russian interests.

“The number of US military men at the two bases is not going to be large, but who can say that it will not be doubled, tripped or quadrupled in the future? Furthermore, the appearance of NATO bases on the Black Sea coast will come as an addition to the US military objects in the Baltic region. As a result, Russia will find itself trapped.

“Why does the USA need these two bases on the Black Sea? To struggle against terrorism? This explanation does not withstand any criticism. There are nearly 4,000 kilometers between Romania and the Middle East. This distance is too large for the nation to maintain its groups in Iraq and Afghanistan.

“One should bear in mind the fact that the Americans started withdrawing their troops from Iraq. Therefore, there is no need to strengthen the infrastructure. To crown it all, American army bases in the Middle East are plentiful.

“I would also like to pay your attention to the fact that the US Military Academy at West Point has recently launched extensive courses to study the Russian culture and language. They started teaching the Iraqi culture and the Arab language three years before invading Iraq.

“Washington is also interested in the energy sources of the Caspian Sea. The bases will probably be established in Romania and Bulgaria to secure the transportation of the Caspian oil and gas,” the expert concluded.

Sergey Balmasov

Bucharest: US VP Warns Europe of Missile Threats

US Vice President Joe Biden and Romania’s President Traian Basescu – at Cotroceni Palace in Bucharest, Romania, 22 Oct 2009

U.S. Vice President Joe Biden has called on America's European allies to step-up their defense efforts in the face of security threats from outside Europe. Biden made the comments in Bucharest, Romania on Thursday, before ending his Central and Eastern European tour in the Czech Republic.

Biden spoke to political leaders and students at Bucharest's Central University Library, after receiving assurances from Romanian President Traian Basescu that Romania supports plans by the Obama administration to revise missile defense plans for Europe amid new concerns over the continent's security.

The system will replace the one proposed by former President George W. Bush. The Bush plan, which Russia strongly opposed, would have placed 10 interceptor missiles in Poland and a radar base in the Czech Republic to intercept long-range missiles from such states as Iran.

Although the revised plan involves anti-ballistic missiles installed at a former air base in Poland, defense experts say Moscow perceives the new project as less threatening to its security.

Biden said the defense system comes as Europe faces a serious threat. "Today, a new major threat is growing that could reach all our European allies well before it reaches the United States. It comes from ballistic missiles -- short-range and intermediate-range ballistic missiles. The technology has spread to many new countries and less stable countries since the end of the Cold War," he said.

Biden stressed that the new missile defense system would provide more security for the United States and the North Atlantic Treaty Organization, or NATO. "We are determined to ensure that our NATO allies have the protection they need, when they need it because that is our solemn obligation under Article 5. Our missile defense plan means greater security for Europe and greater security for America," he said.

His one-day visit to Bucharest was part of a trip through Eastern Europe intended to reassure Romania, Poland and the Czech Republic that America's commitment to the region remains strong.

The three countries are viewed as close U.S. allies. Romania hosts a small American base and training facilities.

Biden also expressed concerns about energy. He said the United States wanted to work with Europe on a new strategy that would provide energy security for the future. "One lesson we need to work together toward is a more secure energy future. We need sustainable energy security that includes diversification of supplies and transit routes," he said.

Energy has become a major concern in several Western countries, after a dispute between Ukraine and Russia over prices led to major natural gas shortages in Europe earlier this year.

Biden's trip to Eastern Europe comes as the region commemorates the 20th anniversary of the fall of communism.

The vice president said that the world watched in awe and admiration in 1989 as the men and women across the region broke the shackles of repression and emerged as free people.