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| THE WEEK IN REVIEW 26/01/-01/02/2009 |
| (2009-01-30) |
| Last updated: 2009-02-02 12:37 EET |
A month after taking office, the Romanian government is still working on the 2009 draft budget. The only certainty we have is that Romania will rely on a crisis budget this year, with the authorities in search of resources in order to offset the significant budget deficit, almost double than initially estimated, while the scarce funds the state owns, will be invested in certain economy sectors generating new jobs and financial resources. President Traian Basescu says the state should first make payments to private companies, so that the economy may be set into motion. The president believes another priority is to reduce redtape. He says he would back a government decision on a 6 month salary and pension freeze.
International financial institutions and rating agencies have again issued warnings against a sharp economic slowdown. This week the European Bank for Reconstruction and Development EBRD has for the second time in the past two months downgraded Romania’s economic growth rate from 3% to 1%. According to a Standard & Poor’s analyst, in 2009 the Romanian economy will face a significant slowdown; although the phenomenon does not mean the economy could slide into recession. In another development the EU has issued a series of recommendations to Romania so that it may improve its economic situation: to continue structural reforms, particularly in administration, to tighten fiscal policy in order to curb the current account deficit and keep inflation at bay, reduce the number of taxes in an attempt to improve the business environment and living standards.
Economists warn about social discontent likely to be triggered by budget cutbacks as unemployment is on the rise with production cutbacks and extensive layoffs. According to official data, the number of unemployed has recently hit 400 thousand, standing at 4.4%. Over 600 companies across Romania have so far announced layoffs, which might exceed 57 thousand by March. The most affected fields remain constructions, the automotive, chemical and oil industries. Meanwhile trade unions and employers associations are waiting for the government’s economic stimulus package.
On Monday in Baghdad, Romania and Iraq signed a memorandum regulating the status and activities of the Romanian contingent stationed in that country. The document stipulates that a 350 strong Romanian contingent should be maintained until July the 31st 2009. The Romanians will carry out non-combat missions, such as delivering humanitarian aid and medical assistance in the south eastern region of Talil, and around Baghdad. They will also provide training and counseling to the Iraqi security troops. The memorandum has already been approved by the country’s Higher Defence Council and by the Romanian Parliament. The authorities in Baghdad have called on several countries, among which the United States and Romania, to join the effort of stabilizing and normalizing Iraq. The call came after the international coalition’s UN mandate expired late last year.
The recent row between Russia and Ukraine over the gas deliveries to Europe has, indirectly, given a new impetus to the 10 billion euro Nabucco project. This week, the Hungarian capital, Budapest hosted a conference on this project. The pipe line is to convey Caspian gas to EU member states and thus reduce their dependence on Russian gas. The participants have issued a joint declaration on ways to establish the political, legal, economic and financial framework for the construction of this pipe line. The participants have agreed that Nabucco is a political and commercial project, which once implemented, would solve part of the European Union’s energy problems, also standing proof of solidarity among the union bloc’s members. The Romanian economy minister Adriean Videanu reiterated Bucharest’s commitment to this initiative, underlining that gas resources from Azerbaidjan, Turkmenistan, Kazahstan are essential for Europe’s energy security and for the completion of the Nabucco project.
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