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| THE WEEK IN REVIEW (18-24/05/2009) |
| (2009-05-22) |
| Last updated: 2009-05-25 12:24 EET |
Early this week, Romanian president Traian Basescu paid an official visit to France, with economic matters as the key topics of discussion. When speaking about French companies operating on the Romanian market, Basescu noted Renault, a company that has known an astounding growth rate in our country. He reminded that the Dacia Renault auto plant in Pitesti, southern Romania, is operating at full capacity, even with people working seven days a week in three shifts. Reminding of Romania' efforts to prevent an economic downfall, Basescu underlined that the IMF's agreement with the European Commission has allowed the Romanian economy to improve its credibility, and has prevented further depreciations of our national currency.
The head of state also said that authorities in Bucharest will now focus their attention on infrastructure, with the construction of motorways among their top priorities. Talks between the Romanian president and his French counterpart resulted in the agreement that quote “Romania and France both have the same stand on key Union-wide issues”. Nicolas Sarkozy proposed that some financial aid be given to Romania, seeking to build its second nuclear power plant. Several European power companies have expressed interest in this project, predicted to boast as much as three reactors, with a total capacity of 3000 MW. At the moment, the town of Cernavoda, in Southeastern Romania, is home to the country's only power plant, that covers some 17 percent of Romania's consumption needs.
The energy issue has also been tackled by the Romanian minister of the economy Adriean Videanu, who has held talks with Russian officials. During his two day formal visit to Moscow to prepare the future session of the Joint Russian-Romanian Intergovernmental Committee on Economic Cooperation, Videanu had talks with his Russian counterpart Serghei Smatko and Gazprom representatives. The two sides showed readiness to resume discussions on building the underground gas storage facility in Margineni.
But building that facility would be tantamount to additional gas deliveries to Romania, and in this respect Gazprom has voiced readiness to found a joint venture for direct deliveries. However the Russians hinted at the fact that they wouldn’t renounce the services of intermediary German company Wintershall, through which Russian gas is being delivered to Romania. The second cooperation direction is Gazprom’s participation in building a gas power plant in Romania, a project in which the Russian consortium can participate as a gas supplier, investor or even as provider of electricity on the Romanian market. The Russian energy giant has asked for technical support from Bucharest for drills in the Black Sea within the South Stream pipe line project.
The chances of Romania and the whole region passing through the economic crisis have this week been discussed by the Central and East-European Financial Forum in Bucharest. Nobel prize winner for economy, Joseph Stiglitz has pointed to the fact that the current economic downturn is very likely to be a lasting one and involve significant costs, quote:
“Eastern and South-eastern Europe is likely to be among the regions most affected by the crisis, whose effects will be lasting. Romania has some advantages though, as compared to other countries. First and foremost there was an excessive domestic demand, the economy was even overheated shortly before the onset of the crisis, which made the effects of the economic turbulence be felt easier than in other countries. The flexible exchange rate is another advantage, as it represents a major monetary instrument, but maybe the most important trump card Romania has up its sleeve is that it belongs to the European Union and that it is a relatively small country. To be part of a strong market, even if that market has registered a slight drop, is a very important element.”
Romanian central bank governor, Mugur Isarescu believes that Romanian economy can end the year with growth, as the crisis has been overcome in four of its five components.
“We can say there are five components of this crisis; in my opinion the exchange rate component has been overcome. The balance of payments - in the sense of a higher deficit which must be corrected - has also been overcome. Only the inflation remained, but even here the most difficult aspect has improved, and we expect prices to go down from now on, and there is also the crisis related to liquidities. I believe this aspect has also been improved. The only aspect left was the economic growth.”
In order to boost the economic sector, the executive has passed several decisions on financial support in various fields of activity. The government will guarantee mortgages of up to 60 thousand euros for the first house purchased, a measure aimed at breaking the lending deadlock, the relaunch of the real estate market and boosting the building sector. The state will also cover 30% of the loans granted to farmers, which are non-reimbursable funds just like the financial aid granted to small and medium size buildings whose value has been raised to 200 thousand euros.
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