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| THE WEEK IN REVIEW 1-7/02/2010 |
| (2010-02-05) |
| Last updated: 2010-02-08 14:08 EET |
Romania has accepted the US proposal to participate in the anti-missile defence shield plan - the Romanian president Traian Basescu announced on Thursday, in Bucharest, at the end of a meeting of the Higher Defence Council. President Basescu pointed out that a new deployment will provide Romania with total coverage in case of an attack. He also noted that the anti-missile shield is not intended to protect against Russia. The Romanian president said that bilateral negotiations would start for the conclusion of the necessary accords that are to be approved by the Romanian Parliament. Traian Basescu:
”The decision we have made is critical for consolidating our relationship with the US, but the most important thing we have achieved, following a long period of talks with our American partners, is that making this decision and making these systems operational will boost the security of Romania. This is our biggest gain”.
The rating agency Fitch has this week improved the prospects of Romania’s rating from “negative” to “stable”. The reason behind this decision is that Bucharest has overcome the political uncertainties preceding the presidential election, passed the 2010 budget and resumed the foreign loan agreement with the IMF, the EU and other international financial institutions. According to Fitch, the improvement of the foreign economic and financial environment helped to stabilise the national currency the Leu, which led to diminished pressure from the banking system. The agency confirmed the ratings given for the long term debts in hard currency and the national currency, as well as those for short term debts in hard currency.
However, Fitch experts warned on possible risks related to the implementation of difficult measures, from a political point of view, that are included in the 2010 budget, which refer, among other things, to the freezing of salaries in the public sector and the laying off of as many as 100 thousand employees. The Romanian authorities have been recommended to continue to toughen their fiscal policy in order to support the external adjustment of the economy and to reduce the increase in public debt as a proportion of Gross Domestic Product.
The National Bank of Romania on Wednesday cut the monetary policy interest rate by 0.5% to reach 7% per year, in order to boost loans. It also decided to maintain the rates for minimum obligatory reserves applicable to liabilities in the national currency at 15% and in hard currency at 25%. Analysts say that following these measures commercial banks might cut interest rates on loans in the national currency, the leu, only if uncertainties on the labour market are resolved. Analyst Radu Craciun explains:
“Nothing spectacular will occur in short term, the banks’ loans policy is likely to be influenced more in the medium term. Such a decision by the National Bank of Romania is necessary for interest rates on loans to fall, but besides this there’s still the need for greater demand in the banking system in order to offer loans. Demand is limited at present due to uncertainties on the labour market, such as the increase in unemployment and in the number of economic uncertainties, since growing unemployment will curb Romanians’ appetite for consumption.”
PM Emil Boc has presented to senators and deputies with the government’s legislative priorities for 2010. He underlined that the Parliament should reduce the number of MPs and create a one-chamber Parliament; he added that postponing these reforms would mar the credibility of this institution. Last year Romanians voted in a referendum for a one-chamber parliament and for the reduction of the number of MPs from 471 to 300. Other priorities of the government are the national education and pension law, the status of national minorities and the codes of criminal and civil procedure. On the other hand PM Boc announced the start of a war against tax evasion and underlined that the Government would no longer accept the failure of companies to pay their financial obligations to the state.
The announced redundancies in the public sector and the unified salary law, whose enforcement is feared to lead to discrimination and lower incomes, are the main reasons for discontent among unionists, who initiated a number of protests on February the 1st. The civil servants who went on a token strike on Monday, were followed by the teaching staff. Unions have little confidence in the promises of the government, which undertook to pass an emergency ordinance which regulates temporary redundancies and which will be applied retroactively, starting February the 1st. Consequently, unionists announced they would protest until the emergency ordinance takes effect. Pensioners also oppose the government's decision to keep pensions at the same level as in 2009.
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