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Romanian report Romanian report
by Euro Reporter
2012-10-27 10:56:21
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Romania hires four banks for new euro-denominated bond

Romania (has hired Barclays, Citigroup, Deutsche Bank and HSBC to manage a potential new Euro-denominated bond, according to sources. The banks declined to comment.

The sovereign was last in the international capital markets in September when it tapped its 6.50% 2018 note for EUR750m, doubling the size of the note. Deutsche Bank was also on the deal, together with BNP Paribas, JP Morgan and UniCredit.

In January, Romania made its debut in the US dollar market when it raised USD1.5bn through a 10-year note, which it subsequently tapped for a further USD750m. Citigroup, Deutsche Bank and HSBC were in charge of those trades.


High marks from the IMF

pulling out of a serious crisis fairly successfully, but with a long way to go to attain rude economic health. That’s the International Monetary Fund’s conclusion following its latest staff visit to the country. “Following the severe downturn in 2008–09, the Romanian economy has undertaken a large adjustment to restore macroeconomic stability,” the statement said in its opening line. After pausing briefly to praise its own role in supporting recovery through stand-by arrangements – as well as that of the EU and World Bank, the Fund continued: Sustained fiscal consolidation, mainly achieved through spending constraints of the wage bill and public pensions, has resulted in a significant reduction of the fiscal deficit. Growth resumed in 2011 and annual inflation has declined to record lows earlier this year. Unemployment remains high, but labour market reforms have contributed to a better-functioning labour market and a recovery in employment.

The IMF appears particularly pleased with Romania’s fiscal tightening, which is partly linked to the Fund’s standby packages. The Fund expects that the government can meet its target of keeping the deficit within 2.2 per cent of GDP this year, despite the appeal of loosening in the run-up to the general election slated for December 9. The country’s tough austerity programme brought protestors to the streets earlier this year, and led to the toppling of the previous centre-right government. Having followed a pro-cyclical loose fiscal policy in the boom years of the last decade, Romania is now locked into a similarly pro-cyclical process of cuts and tax rises at a time when the eurozone crisis is casting a long shadow over the economy, and the effects of the country’s own crunch in 2009 are still feeding through. The “social-liberal” government of Prime Minister Victor Ponta may feel that it has enough of a cushion in the polls to allow it to please the IMF rather than Ponta’s socialist vote base. The IMF also has plenty of caveats: as it states, “the post-crisis recovery remains fragile and the outlook is challenging”. It forecasts only 0.9 per cent growth for this year, and 2.5 per cent in 2013 – not bad by EU standards, perhaps, but low for an emerging market which is one of the EU’s poorest countries. And as usual, the Fund also urged “accelerating the pace of structural reforms”, particularly in labour markets, and pushing forward privatisation, a process that has been wrought with difficulties and controversy for the past two decades. There was also a warning about possible relapses into political turmoil, following the fall of two governments, the attempt to impeach President Traian Basescu and some controversial constitutional reforms by Ponta’s government.

Fundamentally, Romania suffers from its economy having both the characteristics of an emerging market (structural weaknesses, patchy infrastructure, concerns about corruption) and the problems of being linked to the crisis-hit eurozone. According to Dumitru Dulgheru, head of fixed income research at BCR, Romania’s largest bank, the single currency area accounts for more than 50 per cent of exports and 80 per cent of FDI. Dulgheru and BCR think the IMF’s forecasts on the optimistic side, and expect 0.7 per cent growth this year and 1.9 per cent next. Dulgerhu is also sceptical about whether the government will keep the deficit within target range, and warns that the IMF may be too incautious about inflationary pressures. He says that risks to growth “are on the downside”. “My view is that Romania will be inching forwards with moderate growth,” Dulgheru says, with performance closely linked to the eurozone. As a report by Moody’s published last week noted, Romania has a diversified economy with good potential for long-term increases in incomes and competitiveness. The country is far from out of the woods yet, and the IMF’s praise will come as cold comfort to Romanians who have seen their wages and living standards fall under austerity. But Romania has reason to be hopeful.


Ethnic Hungarian parties in Romania meet, aim to heal rift

Representatives of the ethnic Hungarian parties in Romania RMDSZ (Democratic Union of Hungarians in Romania) and MPP (Hungarian Civic Party) held talks in Cluj on Thursday to discuss possibilities for cooperation. RMDSZ said after the meeting that it was dedicated to representing all members of the Hungarian community and was therefore seeking cooperation and a formal framework for joint action with MPP.

Hunor Kelemen, the head of RMDSZ, speaking about preparations for the parliamentary elections, said that major legislative decisions were expected next year, making it necessary to maximise Hungarian representation in parliament. “The Democratic Union of Hungarians in Romania is aware of the responsibility attached to its 86 percent support among ethnic Hungarians and we will remain dedicated to representing the Hungarian ethnic community of Transylvania after December 9,” Kelemen said referring to the date of the elections.

MPP head Zsolt Biro said technical obstacles remained to setting up “a national team” proposed by the party to run at the parliamentary elections in December. He added that MPP maintained the view that ethnic Hungarian parties in Transylvania should only compete with each other at the local council elections and should cooperate for the parliamentary elections.

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