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Romanian report Romanian report
by Euro Reporter
2010-11-14 08:36:00
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Romania: GDP contraction deepens further in Q3

On November 12th, the statistics service released the preliminary flash estimate of GDP in Q3. According to the flash estimate, GDP on an unadjusted basis declined by 2.5% yoy in Q3, following a 0.5% yoy contraction in the prior quarter. On a seasonally adjusted basis, GDP declined by -0.7% qoq, compared to a marginally positive (+0.3% qoq) increase seen in Q2. The latest reading brings the overall GDP contraction at -1.9% yoy on an unadjusted basis and by -2.3% yoy on a seasonally adjusted basis in the first nine months of 2010.
The news that recession is deepening in Q3 did not come as a surprise for analysts. According to the poll conducted by the Romanian Financial-Banking Analysts' Association (AAFBR), GDP contraction was expected to reach 0.7% qoq and 2.3% yoy respectively. The flash estimate is in line with our expectations as well. In our August issue of New Europe Economics & Strategy we had warned that the GDP growth acceleration in Q2 gave a false impression of improvement.
The reality is that the economy is still mired in recession, with the second quarter bounce being temporary. Although the breakdown of GDP figures is not available yet, it is quite obvious that the tough austerity fiscal package was the main reason for the deepening contraction in Q3.  The domestic downturn intensified on the back of steep cuts in public wages and the recently introduced VAT rate hike. The new austerity measures, put into effect on July 1st, had a dramatic impact on domestic demand, which is already the weakest link of the Romanian economy. The five percentage points VAT hike from 19% to 24% is eroding the purchasing power of Romanians. The public wage cuts by 25% and the slashing of public spending on goods and services by another 20% put disposable incomes under more pressure. For that reason, retail sales declined further by 4.3% yoy in Q3. The decline in the vital sectors of food goods was even steeper, reaching 8% yoy.


A Mass Grave Raises Ghosts of Romania's Holocaust Past

One day in 1941, Vasile Enache was tending his cows in the forest of Vulturi, near the city of Iasi, 260 miles (420 km) northeast of Bucharest, when he heard people sobbing. He went to investigate and saw hundreds of civilians being marched through the forest by Romanian army soldiers. Enache didn't know it at the time, but he was witnessing part of Romania's "Iasi pogrom," which resulted in the deaths of an estimated 14,000 Jews. For almost 70 years, successive Romanian governments have downplayed the nation's role in the Holocaust. But now a suspected mass grave has been found in the Vulturi forest, and some are hoping that the discovery will help Romania face up to one of the darkest periods in its history.

Rumours about a mass grave in the Vulturi forest had been circulating for years; when a similar grave was found near Iasi in 1945, it led to a trial that ended with several top military commanders being sentenced to jail. After persuading Enache to show him the exact location of the Vulturi grave, local historian Adrian Cioflinca organized a team of people from Romania's Elie Wiesel National Institute for Studying the Holocaust to start excavating the site last month. They uncovered the remains of 16 bodies — including the skeletons of children, a lady's shoe and Romanian-army bullets from 1939 — but have since called a halt to the dig while they wait for rabbis to bless the site. Now 86, Enache is a bit wobbly on his legs, but his eyes are still clear blue, and his memory of what happened that day in 1941 is fresh. He describes how he was grabbed by a couple of Romanian soldiers who said, "You are a Jew! Come with us." They arrived at a series of deep graves where the civilians were made to sit down, 10 at a time, and then shot. Others were ordered into the grave to arrange the bodies so more victims could be thrown in. The killings continued all day, but Enache managed to convince his captors that he was a local, an Orthodox Christian, and when this was confirmed by the local forester, he was released.

The Vulturi forester who saved Enache died in 1945, but his daughter still lives nearby. Sitting in her kitchen, Lucia Baltaru describes what she remembers from 1941, when she was 6 years old. "We used to go and play at the grave," she says. "There was a thin layer of soil over the grave, and when we played, the bodies would move around. I think there are thousands of bodies buried there."  The site is currently sealed off by the Romanian police, who are guarding the bones and artefacts still on the site, and both journalists and the public are forbidden access. Outside the forest, an old couple had walked up from a nearby village to look at the grave. Ioan Aftanase was 7 years old in 1941 and vividly remembers columns of civilians being marched through the village. "They were in a terrible state," he says. "They were obviously hungry and thirsty and were being marched to their deaths. It was a terrible thing to do." During Romania's communist regime, it was dangerous to talk about the country's role in the Holocaust, and as a result, says Aftanase, "The young people today in the village have no idea about what happened in this forest."


Romania struggles with integration of Roma into society

The European Union asked Romania to step up its efforts in integrating its large Roma minority. But the government in Bucharest has proven unable to get EU aid to the communities that need it most. Despite the smell of fresh paint, there is a pervasive stench of rotting garbage that litters the schoolyard at School No. 136, in Bucharest's Ferentari district. Starving stray dogs’ prowl around the building.  But School No. 136 is one of Ferentari's few success stories.
About 70 percent of the city's 90,000 inhabitants are Roma as are the majority of the 400 students at Scholl No. 136. As the European governments struggle to deal with their Roma populations living in their countries, a similar struggle is playing out across Romania, which joined the EU in 2007.  A group of organizations that aim to improve the lives of Roma in Romania have begun an education program with School No. 136 and 90 other schools across Romania to support the process of integration between Roma and the rest of Romanian society.
"We are trying to provide a safe place for children off the street," said Valeriu Nicolae of the Policy Centre for Roma and Minorities. "If they had the same, or better approach in every community, where children were happy to be in school, it would change the way these communities work." The education program targets kids aged 10 to 15, predominantly Roma, who are currently exposed to high risk behaviour like crime, drugs and prostitution. Most of the kids in the program are barely literate.  The aim is to keep these kids in school by providing opportunities like a football team, photography and film classes and peer mentoring. The club welcomes any kids from the ghetto who want to join.

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