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| The Week in Review 01-07/11/2010 |
| (2010-11-11) |
| Last updated: 2010-11-11 16:48 EET |
The Constitutional Court this week ruled that the procedure by which the government called for a vote of confidence on the new education bill is unconstitutional. According to the court, a legal constitutional conflict has been created between Parliament and the government because the latter called for a vote of confidence on a law that was still being debated in Parliament, more precisely in the Senate.
The government said it would hold consultations with Parliament about the procedure to pass the education bill. The court’s decision generated a lot of tension in the ruling coalition. For the Democratic Union of Ethnic Hungarians, passing the bill as soon as possible was a priority because the Union had secured the right of the ethnic Hungarian minority to study Romania’s history and geography in their mother tongue.
The Union is even considering leaving the ruling coalition. The opposition parties hailed the court’s ruling, saying that under the circumstances, the motion of no-confidence they had filed in Parliament was no longer relevant. President Traian Basescu sees the court’s ruling as an important test for the solidity of the governmental coalition and says he is convinced this coalition will maintain the country’s political stability.
Following tough negotiations, the International Monetary Fund reached an agreement with the government in Bucharest over the disbursement of the next payment of a 13 billion euro-loan, of which Romania has already received 11 billion. Romania must meet a number of conditions in order to receive the payment.
The priority is to adopt the 2011 state budget bill with the deficit targets set by the Fund, the bill on the introduction of a single salary scheme in the public sector and a bill on the reform of the pension system. On the other hand, the International Monetary Fund will continue to keep a close eye on ten public companies that are making losses and accumulating debts, mostly in the transport and energy sectors.
The Fund recommended the government to restructure, privatise or close down these companies and says the continuation of the loan agreement depends on the payment of arrears. At the end of an evaluation mission, the head of the International Monetary Fund delegation to Romania, Jeffrey Franks said the country’s economy would shrink by 2% this year, but would gradually start growing to reach a growth rate of 1.5% of the GDP in 2011.
At the beginning of next year, the Fund will start talks with the Romanian authorities over the potential signing of a new loan agreement. This will most likely be of a precautionary type, whcih means the money stays in Washington and will only be made available in unforseen situations.
Romania’s central bank has revised its inflation rate forecast for this year from 7.8% up to 8.2%. For 2011 the figures have been revised from 3.11% to 4.3%. Central Bank governor Mugur Isarescu said the main cause of the price hikes in the third quarter of the year were increases in VAT from 19 to 24%, food price increases and the price of crude on the global markets.
And there is more bad news to come, says the governor. Meanwhile, the national bank’s decision to keep the monetary policy interest rate at 6.25% has been described by pundits as precautionary amid mounting uncertainty regarding fiscal measures.
The Romanian president Traian Basescu has sent back to Parliament bills providing for a 5% VAT reduction on food and tax exempting pensions under 2000 lei (the equivalent of 500 euros). The opposition has criticises president Basescu’s move. Liberals have blamed him for toeing the IMF line, while the social democrats hope the bills will be passed again in the same form.
After talks with ruling coalition parties, Romanian president Basescu announced the ordinance regulating contractual relation between banking institutions and clients would not be applied retroactively. The move is one of the conditions required for the release of the next instalment of the loan contracted by Romania with the IMF.
On, Wednesday Romanian president Traian Basescu paid a visit to Slovenia, as part of a diplomatic campaign meant to assure Romania’s accession to the Schengen area in March 2011. During the talks with his Slovenian counterpart, Danilo Turk, the Romanian president reiterated the fact that Bucharest had met all the conditions required for accession and ruled out the idea that any European government would veto it on other grounds, such as the Roma issue.
Boosting partnership between eastern countries, security issues at the EU’s eastern border as well as frozen conflicts were also high on the agenda. Basescu has also visited the mausoleum in Ljublijana in memory of the country’s WWI heroes, where the remains of 80 Romanian soldiers are also buried. He also met with members of the Romanian community in Slovenia.
Romanian football squad Steaua Bucharest on Thursday clinched a 3-1 home win against Dutch side FC Utrecth in Europa League group K. After four games Steauaş ranks second in the group with five points and will take on group leader FC Liverpool from Britain also in a home game. Romania’s champions CFR Cluj came a cropper four-nil on their own turf to German side Bayern Munchen in Champions League’s group E.
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