18. Romania's EU-accession - University of Amsterdam [PDF]

Romania and the European Union changes and challenges

EUROPEAN POLICY STUDIES

CoRe Studies I

Romania and the European Union Changes and Challenges

Country Report Series II (CORE-series) European Policy Studies Universiteit van Amsterdam

© 2009, E. Albers, H. Annaji, N.A. Beek, W. Beeking, J.R. Boerman, J.M.F. den Bouwmeester, E. de Mol, S. Rossitto, K.S. Schipper, S. Schreuder, R.J.C. Schroevers, O.E. Spiekman, J.G. Suiskind, M.J.B. van der Vorle, C. de Waal. Alle rechten voorbehouden. Niets uit deze uitgave mag worden verveelvoudigd, opgeslagen in een geautomatiseerd gegevensbestand, of openbaar gemaakt, in enige vorm of op enige wijze, hetzij elektronisch, mechanisch, door fotokopieën, opnamen of enig andere manier, zonder voorafgaande schriftelijke toestemming van de auteurs. Voor zover het maken van kopieën uit deze uitgave is toegestaan op grond van artikel 16B Auteurswet 1912 j°, het besluit van 20 juni 1974, Stb. 351, zoals gewijzigd bij het Besluit van 23 augustus 1985, Stb. 471 en artikel 17 Auteurswet 1912, dient men de daarvoor wettelijk verschuldigde vergoedingen te voldoen aan de Stichting Reprorecht (Postbus 882, 1180 Amstelveen). Voor het overnemen van gedeelte(n) uit deze uitgave in bloemlezingen, readers en andere compilatiewerken (artikel 16 Auteurswet 1912) dient men zich tot de uitgever te wenden. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system of any nature, or transmitted in any form or by any means, electronic, mechanical, now known or hereafter invented, including photocopying or recording, without prior written permission of the authors. ISBN 978-90-807611-5-5

Romania and the European Union Changes and Challenges

Country Report Series II (CORE-series) European Policy Studies Universiteit van Amsterdam Supervisor: dr. A.C. van Wageningen July 2009

Acknowledgement We, fifteen students enrolled in the Master programme European Policy of the University of Amsterdam, examined the changes Romania has gone through and the challenges it continues to face in Romania’s accession and integration into the European Union. We would like to thank all persons, organisations, companies and public administrative bodies that have assisted through cooperating and sharing their knowledge (see appendix 3). Without their support this research project would not have been possible. Our special thanks go out to Gabriël Badescu, Toma Burean, Florin Fesnic, Carmen Greab, Irina Kantor and the students of the Faculty of Political Science and Public Administration of the University Babes-Bolyai of Cluj-Napoca who contributed to our project. Furthermore, we would like to thank Mioara Pitut of the Romanian Embassy in the Netherlands and Dorin Perie of the University of Amsterdam. We would also like to thank our course supervisor Anne van Wageningen for his support and for giving us the opportunity to carry out this research project. This report is a collective effort for which we all take responsibility. It should be emphasised that this report must be seen as a study project as it is part of the Master programme European Policy.

Preface I am proud to present the second of a series of country reports, in short the CORE series, of the master European Policy Studies. This report is about Romania. In 1989 Romania has changed dictatorial rule to democratic rule. Since 1989, Romania has also been engaged in a transition from a state led economy to a market economy. In 2007 Romania joined the European Union as a member state. It is safe to say that Romania has made some enormous changes in a period of no more than 20 years. Under my supervision and as a part of their master European Policy Studies, 15 students of the Universiteit of Amsterdam have organised a field research trip to Romania to investigate the aforementioned transitions and to address the question of the Romanian integration in the European Union. They had a political, legal and economical focus underpinned by a cultural and historical background. Their research has been interdisciplinary and this report shows just that. They combined desk research with interviews in Cluj-Napoca, Jucu-de-Sus and Bucarest. In only 14 weeks they have obtained insight in the internal affairs of Romania, its relationship with the European Union and some important problems still waiting to be solved. Romania has changed enormously. The cover photos resume these changes well. Still, some serious endeavours lie ahead for the Romanian people. Corruption, the modernisation of the infrastructure, the quality and content of education, the improvement of the judicial procedures and the development of a competitive agriculture are some of the Herculean tasks ahead for Romania. A mentality change is another. Romanian society at large could benefit from a more proactive attitude. Nevertheless, after obtaining the membership of the European Union, the same Union and the other Member States were quick to withdraw their administrative support, leaving Romania on its own to comply with the acquis communautaire. Member States keep underestimating the impact of forty years of entirely different histories. The wealth of this report not only stems from the information that the students gathered and analysed, it also is the result of the chosen interdisciplinary approach. This enabled the students to draw conclusions surpassing a single disciplinary approach. They thus proved that some inferences about our complex social reality can only be made after interdisciplinary research. Therefore once again, the second CORE-study clearly demonstrates the necessity of and need for interdisciplinary studies like European studies, particularly European Policy Studies. I took pleasure in coaching and accompanying these students. They were very much involved in making a success of this course. For them, the course itself was an adventure, as no preset course material was available. They had to find their own information and make a comprehensive selection. They were not discouraged by last minute changes in organising their interviews. During their collaboration they showed a genuine team spirit. This report proves for it. Finally, I want to thank Dr. Dorin Perie, colleague and also expert on Romania, for his contribution to the field trip. His historical explanations were of great help to the students to understand some complex issues of Romanian society. Of course I want to thank the fifteen participating students for their enthusiasm and their infinite dedication, which by far exceeded the demands of a compulsory assignment. Dr. A.C. van Wageningen Amsterdam, July 2009

Contents Acknowledgement ......................................................................................................................... 4 Preface ............................................................................................................................................ 5 List of figures ............................................................................................................................... 12 List of abbreviations.................................................................................................................... 13 Introduction ................................................................................................................................. 17 1 History of Romania and the Romanians ................................................................................ 19 1.1 Earliest roots: Daco-Romans .................................................................................................................. 19 1.2 The Middle Ages and the rise of the Great Empires............................................................................... 19 1.3 The First World War and the formation of Greater Romania................................................................. 21 1.4 The interwar period and the Second World War .................................................................................... 22 1.5 Communism: 1944 – 1965 Gheorghiu-Dej’s rule .................................................................................. 23 1.6 Communism: 1965-1989 Ceausescu’s rule ............................................................................................ 26

2. Romanian national identity .................................................................................................... 31 2.1 Before communism ................................................................................................................................ 31 2.2 From communism to the European Union.............................................................................................. 32 2.3 Religion and folklore.............................................................................................................................. 32 2.4 Perception of Romania abroad ............................................................................................................... 34 2.5 National Minorities................................................................................................................................. 35 2.5.1 The legal and institutional framework as regards minorities............................................................... 36 2.5.2 Hungarians........................................................................................................................................... 36 2.5.3 Roma ................................................................................................................................................... 39 2.6 Cultural Policy........................................................................................................................................ 43 2.7 Conclusion.............................................................................................................................................. 44

3. Constitution of Romania......................................................................................................... 47 3.1 Constitutional order of Romania ............................................................................................................ 47 3.2 The Constitution before 1991 ................................................................................................................. 47 3.3 The transition and the establishment of the new Constitution after 1991............................................... 47 3.3.1 The Constitution of 1991..................................................................................................................... 48 3.4 Current Constitution ............................................................................................................................... 48 3.5 Separation of Powers within the Constitution ........................................................................................ 49 3.5.1 The role of the people in the dismissal of the President ...................................................................... 50

4. Romanian Polity ...................................................................................................................... 51 4.1 Executive power ..................................................................................................................................... 51 4.1.1 Head of State ....................................................................................................................................... 51 4.1.2 Government ......................................................................................................................................... 51 4.2 Legislative Power ................................................................................................................................... 52 4.2.1 Parliamentary History.......................................................................................................................... 52 4.2.2 Organisation and Functions of the Parliament..................................................................................... 52 4.3 Local Administration.............................................................................................................................. 53 4.4 Electoral system...................................................................................................................................... 54 4.4.1 Effects of the new electoral system ..................................................................................................... 55 4.4.2 Candidates for the presidential elections 2009 .................................................................................... 56

5. Judicial system ......................................................................................................................... 57 5.1 Courts ..................................................................................................................................................... 57 5.2 Constitutional Court ............................................................................................................................... 58 5.3 Public Ministry ....................................................................................................................................... 58 5.4 The Superior Council of Magistracy ...................................................................................................... 58 5.5 Police ...................................................................................................................................................... 59

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5.6 Conclusion.............................................................................................................................................. 60

6. Political parties in Romania ................................................................................................... 61 6.1 From a one-party system to a multiple party democracy........................................................................ 61 6.1.1 The National Salvation Front (FSN).................................................................................................... 61 6.2 Current represented parties in the parliament ......................................................................................... 62 6.2.1 Democratic-Liberal Party (PD-L)........................................................................................................ 62 6.2.2 PSD-PC ............................................................................................................................................... 63 6.2.2.1 The Social Democratic Party (PSD) ................................................................................................. 63 6.2.2.2 Conservative Party (PC) ................................................................................................................... 63 6.2.3 Democratic Union of Hungarians in Romania (UDMR) ..................................................................... 64 6.2.4 National Liberal party (PNL) .............................................................................................................. 65 6.2.5 National minorities` organisations....................................................................................................... 65 6.3 Other parties ........................................................................................................................................... 66 6.3.1 Greater Romania Party (PRM) ............................................................................................................ 66 6.3.2 The New Generation Party - Christian Democratic (PNG-CD) .......................................................... 66

7. Romania in the European Parliament ................................................................................... 69 7.1 Before the elections ................................................................................................................................ 69 7.2 The elections of 2007 ............................................................................................................................. 70 7.3 Expectations elections 2009 ................................................................................................................... 70

8. Political identity, ideology and stability................................................................................. 73 8.1 Political identity and a lack of ideology ................................................................................................. 73 8.2 Political stability..................................................................................................................................... 74

9. The state of Romanian democracy......................................................................................... 75 9.1 National democratic governance ............................................................................................................ 75 9.2 Local democratic governance................................................................................................................. 75 9.3 Elections ................................................................................................................................................. 76 9.3.1Coalition for a Clean Parliament .......................................................................................................... 76 9.4 Media: freedom of speech and self censorship....................................................................................... 77 9.5 Media: private ownership structures....................................................................................................... 78 9.6 Media: public ownership ........................................................................................................................ 79 9.7 Media: conclusion .................................................................................................................................. 80 9.8 Politics and anti-corruption efforts ......................................................................................................... 80

10. Foreign Policy ........................................................................................................................ 81 10.1 Membership of international organisations .......................................................................................... 81 10.1.1 Romania and the NATO .................................................................................................................... 81 10.1.2. Current NATO missions................................................................................................................... 81 10.2 Regional Cooperation........................................................................................................................... 82 10.3 Relations with Russia ........................................................................................................................... 82 10.4 Conclusion............................................................................................................................................ 83

11. Social Structures.................................................................................................................... 85 11.1 The non-profit sector in Romania......................................................................................................... 85 11.1.1 Law on the non-profit sector ............................................................................................................. 85 11.1.2 The civil society ................................................................................................................................ 86 11.1.3 Funding.............................................................................................................................................. 87 11.1.3.1 Pre-accession assistance ................................................................................................................. 87 Romania and pre-accession assistance ......................................................................................................... 88 Structural and Cohesion Funds..................................................................................................................... 88 11.1.3.2 Romania and the Structural and Cohesion Funds ........................................................................... 89 Applying for EU funds ................................................................................................................................. 89 11.2 Romania and its citizens ....................................................................................................................... 90 11.2.1 The state and its citizens.................................................................................................................... 90 11.2.2 Citizens and their rights..................................................................................................................... 91

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11.2.3. The national Ombudsman................................................................................................................. 92 11.3 Daily corruption.................................................................................................................................... 93 11.4 Education.............................................................................................................................................. 94 11.4.1 Romanian educational system ........................................................................................................... 94 11.4.2 Quality of education .......................................................................................................................... 95 11.4.3 Human resources in education........................................................................................................... 96 11.4.4 Quality of human capital ................................................................................................................... 96 11.5 A few remarks on the future of civil society in Romania ..................................................................... 97

12. Human Rights ........................................................................................................................ 99 12.1 Political and Social Rights.................................................................................................................... 99 12.2 Children’s rights ................................................................................................................................. 100 12.3 Women’s Rights ................................................................................................................................. 102 12.4 Minority Rights .................................................................................................................................. 105 12.4.1 Post-1989: the rise of nationalistic extremism................................................................................ 108 12.4.2 Nationalistic actors: PUNR, PRM and Orthodox extremism ......................................................... 108

13. Corruption and judicial reforms........................................................................................ 111 13.1 Corruption in the judicial system in Romania after 1989 ................................................................... 111 13.2 National Anti-Corruption Directorate................................................................................................. 113 13.3 Challenges for the judicial system in the years before accession into the EU .................................... 114 13.4 The pre-accession process of Romania and the 2006 Monitoring Report .......................................... 115 13.4.1 Justice system .................................................................................................................................. 116 13.4.2 Superior Council of Magistrates...................................................................................................... 116 13.4.3 Budgetary and planning................................................................................................................... 116 13.4.4 Points of concern ............................................................................................................................. 116 13.4.5 Fighting corruption.......................................................................................................................... 117 13.4.6 DNA investigations ......................................................................................................................... 117 13.4.7 DGA ................................................................................................................................................ 118 13.4.8 Points of concern ............................................................................................................................. 118 13.4.9 Effective restitution of property....................................................................................................... 118 13.5 EU reports on judicial reforms and corruption after Romania’s accession ........................................ 119 13.6 Main problems in the judicial field and fight against corruption today.............................................. 120 13.6.1 Capacity problem............................................................................................................................. 120 13.6.2 Case problem and lack of transparency ........................................................................................... 121 13.6.3 Lack of support and lack of accountability...................................................................................... 122 13.6.4 Implementation problem.................................................................................................................. 122 13.6.5 Lack of confidence in judicial system ............................................................................................. 123 13.7 Progress in the judicial field ............................................................................................................... 123 13. 8 Conclusion......................................................................................................................................... 125 13.8.1 Education......................................................................................................................................... 126 13.8.2 Human rights ................................................................................................................................... 126 13.8.3 Nationalism extremism.................................................................................................................... 127 13.8.4 Judicial Reforms and Corruption..................................................................................................... 127 13.8.5 Current situation .............................................................................................................................. 128 U

14. Privatisation and restructuring.......................................................................................... 129 14.1 The privatisation pipeline ................................................................................................................... 130 14.2 Acceleration of privatisation .............................................................................................................. 131 14.3 The steel industry in transition ........................................................................................................... 132 14.4 Future restructuring and macro-economic stability ............................................................................ 132

15. Macro-economic situation................................................................................................... 133 15.1 Overview of macro-economic indicators 2000-2008 ......................................................................... 133 15.2 Romania and the financial crisis......................................................................................................... 133 15.2.1 Building up imbalances 2002-2007 ................................................................................................. 134 15.2.2 Emerging financial crisis ................................................................................................................. 134

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15.2.3 IMF Loan 2009................................................................................................................................ 135 15.3 Adoption of the Euro .......................................................................................................................... 135 15.3.1 Inflation ........................................................................................................................................... 136 15.3.2 Budget deficit .................................................................................................................................. 137 15.3.3 Public debt....................................................................................................................................... 138 15.3.4 Exchange rate .................................................................................................................................. 138 15.3.5 Interest rate ...................................................................................................................................... 139 15.4 Romanian view of the Euro ................................................................................................................ 140

16. Fiscal policy.......................................................................................................................... 141 16.1 Analysis of tax revenues and tax rates 1990-2006.............................................................................. 141 16.2 Overview of main taxes...................................................................................................................... 142 16.2.1 Personal income tax......................................................................................................................... 142 16.2.2 Health and social security contributions.......................................................................................... 143 16.2.3 Corporate income tax....................................................................................................................... 144 16.2.4 Tax incentives for enterprises.......................................................................................................... 144 16.2.5 Employment incentives for specific categories of employees ......................................................... 145 16.2.6 State aid ........................................................................................................................................... 145 16.2.7 EU funds.......................................................................................................................................... 146 16.2.8 Indirect taxes ................................................................................................................................... 146 16.2.8.1 VAT.............................................................................................................................................. 146 16.2.8.2 Excise duties................................................................................................................................. 147 16.2.9 Other taxes....................................................................................................................................... 147 16.2.9.1 Car registration tax ....................................................................................................................... 148 16.2.9.2 Environmental fund contribution.................................................................................................. 148 16.2.9.3 Local taxes.................................................................................................................................... 148 16.2.9.4 Other taxes.................................................................................................................................... 148 16.3 Challenges with respect to taxation in Romania................................................................................. 148 16.3.1 Complexity of tax system................................................................................................................ 148 16.3.2 Collection of taxes........................................................................................................................... 150 16.3.3 Problem of non-compliance............................................................................................................. 151 16.3.4 Stability of tax environment ............................................................................................................ 151 16.3.5 Low corporate tax rates vs. high social security contributions ........................................................ 151 16.4 Romanian tax system in comparison with EU15................................................................................ 152

17. Social Policy ......................................................................................................................... 153 17.1 Social security system ........................................................................................................................ 153 17.1.1 EU legislation .................................................................................................................................. 153 17.1.2 Romania’s social security system.................................................................................................... 153 17.2 Demographic situation........................................................................................................................ 154 17.3 The labour market............................................................................................................................... 155 17.3.1 The free movement of workers........................................................................................................ 155 17.3.2 Free movement of workers – Transitional arrangement Romania................................................... 155 17.3.3 The Romanian labour market .......................................................................................................... 156 17.3.4 Romanian labour market policies .................................................................................................... 157 17.4 Income differentiation ........................................................................................................................ 157 17.4.1 The Romanian situation................................................................................................................... 157 17.4.2 Romanian programme for the reduction of poverty ........................................................................ 159 17.5 Pensions.............................................................................................................................................. 160 17.5.1 The Romanian pension system ........................................................................................................ 161 17.5.2 Reformation after EU-accession...................................................................................................... 162 17.5.3 National strategy regarding pensions............................................................................................... 162 17.6 Freedom to engage in trade union activity.......................................................................................... 163 17.7 Health care.......................................................................................................................................... 163 17.7.1 The Romanian health care system ................................................................................................... 164 17.7.2 National Strategy for health............................................................................................................. 164

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18. Romania’s EU-accession: the role of the EU in Romania’s transition to a modern democratic state and the implementation of the acquis communautaire .............................. 167 18.1 The theory: conditionality’s use and effectiveness............................................................................. 167 18.2 The practice: Romania’s track record................................................................................................. 168 18.2.1 Romania’s progress: Pre-Accession Treaty ..................................................................................... 168 18.2.2 Romania’s progress: Post-Accession Treaty ................................................................................... 169 18.3 Assessment of the EU’s role in Romania’s progress .......................................................................... 170 18.4 The implementation of the acquis communautaire ............................................................................ 171 18.4.1 Police and Judicial Cooperation on Criminal Matters ..................................................................... 171 18.4.2 Data Protection ................................................................................................................................ 172 18.5 Free movement of persons.................................................................................................................. 172 18.6 Romania and The Schengen acquis.................................................................................................... 172 18.7 Some final remarks on the implementation of the acquis................................................................... 173

19. Agriculture ........................................................................................................................... 175 19.1 General aspects of Romanian agriculture ........................................................................................... 175 19.1.1 Agricultural share in territory, GDP and labour force ..................................................................... 175 19.1.2 Commercial and subsistence agriculture ......................................................................................... 176 19.2 CAP related payments ........................................................................................................................ 177 19.2.1 First pillar of the CAP: direct payments .......................................................................................... 178 19.2.2 Second pillar of the CAP: rural development.................................................................................. 179 19.2.3 Consistency of pillar II of the CAP with national programmes....................................................... 180 19.2.4 Absorption of CAP-related funds .................................................................................................... 180

20. The energy sector................................................................................................................. 183 20.1 Overview of the Romanian energy sector........................................................................................... 183 20.1.1 Reform in the energy sector............................................................................................................. 185 20.2 Problems and challenges .................................................................................................................... 185 20.3 Development and prospects for the future.......................................................................................... 187 20.3.1 The Nabucco project........................................................................................................................ 187

21. Infrastructure and transport............................................................................................. 189 21.1 Analysis of the current situation ......................................................................................................... 189 21.1.1 Road transport ................................................................................................................................. 189 21.1.2 The railway transport....................................................................................................................... 189 21.1.3 Air transport..................................................................................................................................... 190 21.1.4 Waterborne transport ....................................................................................................................... 190 21.2 Problems and challenges .................................................................................................................... 190 21.3 Development and prospects for the future.......................................................................................... 192 21.3.1 Road transport ................................................................................................................................. 192 21.3.2 Railways .......................................................................................................................................... 192 21.3.3 Waterways ....................................................................................................................................... 193

22. Competition, Small and Medium-sized Enterprises and investment.............................. 195 22.1 Competition policy ............................................................................................................................. 195 22.2 Declining state involvement? ............................................................................................................. 196 22.3 Product market regulation obstacles................................................................................................... 197 22.4 Small and Medium-sized Enterprises ................................................................................................. 198 22.4.1 Difficulties caused by government (in)action.................................................................................. 198 22.4.2 Problems at SME level .................................................................................................................... 200 22.5 Romania’s investment climate............................................................................................................ 200 22.5.1 The influence of Foreign Direct Investments in Romania............................................................... 201 22.5.2 Legal framework regulating the direct investments......................................................................... 201 22.5.3 Dominant sectors ............................................................................................................................. 202 22.5.4 Positive spill-over effects on the local Romanian economy ............................................................ 203 22.5.5 Contribution to GDP and EU........................................................................................................... 203 22.5.6 FDI cash flow as the principle for redeem of Romania’s deficit ..................................................... 204

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22.5.7 The evolution of FDI in Romania between 2000-2008 ................................................................... 205 22.5.8 FDI and the current financial crisis 2009......................................................................................... 205 22.5.9 Romania as a strategic partner in investing ..................................................................................... 206 22. 6 Conclusion......................................................................................................................................... 207 22.6.1 Conditionality .................................................................................................................................. 207 22.6.2 Acquis Communautaire ................................................................................................................... 207 22.6.3 Economy.......................................................................................................................................... 208

Final Conclusion ........................................................................................................................ 211 Changes ...................................................................................................................................................... 211 Challenges .................................................................................................................................................. 212 Recommendations ...................................................................................................................................... 213

Bibliography............................................................................................................................... 215 Primary literature........................................................................................................................................ 215 Secondary literature.................................................................................................................................... 215

Appendix 1: Romania’s public sector...................................................................................... 237 Appendix 2: List of interviews.................................................................................................. 238 Appendix 3: List of interviewees .............................................................................................. 239

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List of figures Figure 1.1 Roman Dacia................................................................................................................ 19 Figure 1.2 Romania at the beginning of the 19th century .............................................................. 20 Figure 1.3 The Romanian Kingdom.............................................................................................. 21 Figure 1.4 Romania during the second World War....................................................................... 22 Figure 4.1 Composition of Romanian government per May 2009................................................ 52 Figure 4.2 Administrative map of Romania .................................................................................. 54 Figure 6.1 National minorities organisation in the Parliament...................................................... 66 Figure 7.1 Results elections European Parliament Romania November 2007 .............................. 70 Figure 11.1 Educational Attainment: Active population 15-29 years (2005) ............................... 97 Figure 12.1 Women in Romania: statistics.................................................................................. 102 Figure 14.1 Direct and indirect state subsidies in Romania ........................................................ 130 Figure 15.1 Macro-economic figures 2000-2008 ........................................................................ 133 Figure 15.2 Inflation target, variation band and actual inflation ................................................. 136 Figure 15.3 Inflation projection and uncertainty interval............................................................ 137 Figure 15.4 Exchange rate RON ................................................................................................. 139 Figure 15.5 Interest Rate of NBR................................................................................................ 140 Figure 16.1 Evolution of tax revenues as percentage of GDP..................................................... 141 Figure 16.2 Relative rate of taxation: 2004-2006........................................................................ 142 Figure 16.3 Excise duty rates ...................................................................................................... 147 Figure 16.4 Rank Romania as regards the ease of paying taxes.................................................. 149 Figure 16.5 EU comparison of total tax rates.............................................................................. 150 Figure 17.1 Expenditure on Social Protection (2005) ................................................................. 153 Figure 17.2 Expenditure on Social Protection (2006) ................................................................. 154 Figure 17.3 Regional distribution of the relative poverty, 2005.................................................. 158 Figure 17.4 Number of social aid applications............................................................................ 159 Figure 19.1 Share of agriculture in total employment and GDP (%) in Romania....................... 176 Figure 20.1 Overview of Romanian energy sector: statistics ...................................................... 183 Figure 20.2 Overview of Romania’s renewable sources ............................................................. 183 Figure 21.1 Nadlac-Constanta motorway.................................................................................... 192 Figure 22.1 Public ownership and state involvement in business operations.............................. 196 Figure 22.2 The evolution of FDI in Romania between 2000 and 2007 ..................................... 201 Figure 22.3 Values of Foreign Direct Investments in Romania .................................................. 203 Figure 22.4 Outflow of FDI’s to the new member states ............................................................ 204

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List of abbreviations ADP AFIS AFR ALAR ALDE AMR ANA ANI ANRE APADOR-CH

Asociatia Pro Democratia Automated Fingerprint Identification System Women Association of Romania Association League of Albanians in Romania Alliance of Liberals and Democrats for Europe Association of Macedonians in Romania National Anti-Drug Association National Agency for Integrity Heat and Electricity Regulatory Authority Association for the Defence of Human Rights in Romania – Helsinki Committee APAPS Authority for the Privatisation and Management of State Assets APSS Association of Political Science Students ARIS Romanian Agency for Foreign Investment ASCOR Association of Christian-Orthodox Students in Romania AVAS State Assets Authority BNS National Trade Unions Block CA current account CAP Common Agricultural Policy CARDS Community Assistance for Reconstruction, Development and Stabilisation CARTEL ALFA National Trade Union Confederation - Cartel ALFA CC Competition Council CCP Coalition for a Clean Parliament CDR Romanian Democratic Convention CENTRAS Assistance Center for Nongovernmental Organisations CFR Romanian Railway Company CHP Combined Heat and Power CIA Central Intelligence Agency CIS Customs Information System CJI Centre for Independent Journalism CNA National Audiovisual Council CNSLR-Fratia National Confederation of Free Trade Unions of Romania - FRATIA COMECON Council for Mutual Economic Assistance CPSU Communist Party of the Soviet Union CRLR Community of Lipovan Russians in Romania CSAT Supreme Defence Council of Romania CSDF Civil Society Development Foundation CSDR Democratic Trade Union Confederation of Romania D.A. Alliance Justice and Truth Alliance DAHR Democratic Alliance of Hungarians in Romania DAP Decade Action Plan DGA Directorate General for Anti-Corruption DNA National Anti-Corruption Directorate EAFRD European Agricultural Fund for Rural Development EAGF European Agricultural Guarantee Fund EEA European Economic Area

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EBRD EC ECTS ECOFIN EEUU EIB EPP ERDF ERM ESF ESP ESU ETS EU EURODAC FCER FDGR FDI FDSN FSN FSS GDP GDS GNP HCCJ HR IACS ICJ IFC IFI ILO IMF INM IO IPA IPCC ISAF ISPA JBIC KFOR MEP MP MW NAFA NAP NATO NBR NGO NHPSIR NIS NPO

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European Bank for Reconstruction and Development European Community European Credit Transfer System Directorate-General for Economic and Financial Affairs European Union Monitoring Mission European Investment Bank European People’s Party European Regional Development Fund Exchange Rate Mechanism European Social Fund European Socialist Party European Size Unit European Treaty Series European Union European Dactyloscopie Jew’s Communities Federation in Romania Democratic Forum of Germans in Romania Foreign Direct Investment Democratic National Salvation Front National Salvation Front Farm Structure Survey Gross Domestic Product Group for Social Dialogue Gross National Product High Court of Cassation and Justice human resources Integrated Administration and Control System International Court of Justice International Finance Corporation International Financial Institutions International Labour Organisation International Monetary Fund National Institute of Magistracy International Organisation Instrument for Pre-Accession Assistance International Police Cooperation Centre International Security Assistance Force Instrument for Structural Policies for Pre-Accession Japan Bank for International Cooperation Kosovo Force Member of the European Parliament Member of Parliament Megawatt (one million watts) National Agency for Fiscal Administration National Agency for Privatisation North Atlantic Treaty Organisation National Bank Romania nongovernmental organisation National House of Pensions and other Social Insurance Rights National Institute for Statistics non-profit organisation

NRSLSP NSRF OECD OLAF OSCE OSF PAS PAYG PC PD PD-L PDSR PES PHARE PIN PLD PNA PNG PNG-CD PNL PNT-CD POF p.p.p. PRM PRPE PSD PSDR PUNR PUR PWC R&D RCI RCP RO.AS.IT ROL RON SAPARD SAPS SAR SCM SEEREM SIS SME SOE SOF SOP-T SPS TAD TENT-T TIR TTR

National Research Institute for Labour and Social Protection National Strategic Reference Framework Organisation for Economic Cooperation and Development European Anti-Fraud Office Organisation for Security and Co-operation in Europe Open Society Foundation Socialist Alliance pay as you go Conservative Party Democratic Party Democratic Liberal Party Party of Social Democracy in Romania Party of European Socialist Poland and Hungary: Assistance for Restructuring their Economies National Initiative Party Liberal Democratic Party National Anti-corruption Prosecutor’s Office New Generation Party New Generation Party - Christian Democratic National Liberal Party Christian-Democratic National Peasants' Party Private Ownership Funds Purchasing power parity Greater Romania Party Partida Romilor ‘Pro-Europe’ Social Democratic Party Social Democratic Party in Romania Party for the National Union of Romanians Romanian Humanist Party PricewaterhouseCoopers research and development Romanian Cultural Institute Romanian Communist Party Association of Italians in Romania 0.0001 RON 10,000 ROL Special Accession Programme for Agriculture and Rural Development Single Area Payment Scheme Romanian Academic Society Superior Council of Magistracy South-East Europe Regional Energy Market Schengen Information System small and medium-sized enterprises state owned enterprises State Ownership Fund Sectoral Operational Programme – Transport Single Payment Scheme Tax Administration Department Trans-European Transport Networks Transparency International Romania total tax rate

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TVR TWh UAR UBBR UCR UCRR UDMR UDSCR UDTR UDTTMR UER UNCHR UNCTAD UNPO UPR USR USSR UvA USA USAID USD UUR VAT VERDE VIS

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Romanian State Television Terawatt hour (one trillion watt hours) Armenians Union of Romania Union of Bulgarians in Banat – Romania Union of Croatians in Romania Cultural Union of Rutens in Romania Democratic Union of Hungarians in Romania Democratic Union of Slovaks and Czechs in Romania Turkish Democratic Union of Romania Democratic Union of Turkish –Muslim Tartars in Romania Hellenic Union of Romania Office of the United Nations High Commissioner for Human Rights United Nations Conference on Trade and Development Unrepresented Nations and Peoples Organisation Union of Poles in Romania ‘Dom Polski’ Union of Serbs in Romania Union of Soviet Socialist Republics University of Amsterdam United States of America United States Agency for International Development United States dollar Union of Ukrainians in Romania value-added tax Green Party Visa Information System

Introduction On 1 January 2007, Romania acceded to the European Union (EU). Over the last twenty years, Romania experienced a profound reorganisation of its society in order to transform from a communist regime into a democratic system. In this report, the important changes which Romania has gone through and the remaining challenges that Romania faces in order to consolidate its modern democracy will be discussed. Romania is situated in South-Eastern Europe and shares borders with Hungary, Ukraine, the Republic of Moldova, Bulgaria and Serbia. The Black Sea forms a large part of the eastern border. Romania’s territory covers 238,391 square kilometres. It is made up by mountains, hills and plains. The Carpathian Mountains constitute approximately a third of it, with the Eastern, Southern and Western Carpathians and the Transylvanian plain in the centre. The Danube river, originating in the Black Forest in Germany and flowing out in the Black Sea, forms a part of the natural border with Bulgaria and Serbia. Just before the Danube river culminates in the Black Sea, the Danube Delta is located; a UNESCO biosphere reservation. The Danube Delta serves perfectly for fishing and stockbreeding (though these economic activities are being carried out today within the scope of a natural reservation), and of course, it is an interesting area for tourists as the Delta offers possibilities for a wide range of activities. Although Romania is a quite large country, its population is not spectacularly large. According to the Romanian National Institute of Statistics, Romania had, in round figures, 21,500,000 inhabitants on 1 July 2007. The Romanian Embassy in the Netherlands states that there were 21,528,600 inhabitants in January 2008. If we compare these figures with those of the last census held in Romania - the census of 2002 - we see that the Romanian population has decreased slightly, as the 2002 census counted 21,680,974 inhabitants. Around ninety per cent1 of the population is of ethnic Romanian origin, while the rest of the population is made up by the national minorities, which play an important role in Romania’s history, identity and everyday life. Romania is a country of many contrasts. Great differences for example exist as regards life on the countryside compared to life in large cities. The countryside of Romania is still underdeveloped. Farmers often still work on their land with horses and a lot of roads are not even asphalted. In addition, the countryside is often inhabited by the elderly. Cities, on the contrary are often more developed, appear to be more ‘western’ and are inhabited by relatively young people. This difference is also translated into differences as regards income. Poverty is less likely occur in cities and can predominantly be found on the countryside. These contrasting images made Romania a really interesting country to study. This report is divided in six sections. The first section gives a brief overview of Romania’s history from Romania’s first traces until 1989 when the collapse of the communist regime paved the way for accession to the European Union. Furthermore, it will concentrate on Romania’s national identity, national minorities and cultural policy. The second section discusses Romania’s form of government, constitution and judicial system. The third section describes Romania’s political system, including political identity, political parties, foreign policy and democratic governance. In the fourth section social structures, human rights, judicial reforms and corruption are discussed. The fifth and sixth section examine the Romanian economy. The fifth section examines the privatisation process which the Romanian economy has gone through, as well as the current macro-economic situation and Romania’s fiscal and social policy. The sixth section describes the current state of affairs as regards the agricultural, energy, transport and Small and Medium Sized enterprises sector. In the last section, a conclusion will be drawn in order to analyse the changes Romania has gone through and the challenges it still faces today.

1

The figure is 89.47 per cent exactly.

17

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1 History of Romania and the Romanians 1.1 Earliest roots: Daco-Romans The territory of present-day Romania has been inhabited for a very long period of time. Although the first roots of the Romanians date back to the Old European Civilisation (6500-2500 BC), of which the present Romanian territory constituted the heart, the history of the Romanian people is generally said to have started with the presence of the Thracians in the area. The migration of the Getae and the Dacians - Thracian tribes from Indo-European origin - into the region, started round the year 2000 BC. They settled on both banks of the Danube River and were united round 100 BC, laying the foundation for a powerful kingdom called Dacia which existed from 70 until 44 BC. The centre of this Kingdom lay in Transylvania, but its whole territory extended from the Carpathians until the Danube River and the Black Sea. 2 The Dacian Kingdom was able to resist the expansion of the Roman Empire for a long period, but after the second Daco-Roman War Dacia lost a large part of its territory to the Roman Empire and became a Roman province. (see figure 1.1) During the Roman rule of Dacia (106-271 AC), the Dacians and Romans mingled and made up a new language, people and culture which were highly influenced by the Latin culture and language. In 270-275 the Roman army left Dacia and the Daco-Roman population continued its life in the sphere of influence of the Roman-Byzantine Empire. 3

0.1Figure 1.1 Roman Dacia Source: Treptow (1996), p. 40.

1.2 The Middle Ages and the rise of the Great Empires In the following centuries, Dacia experienced various invasions from the Visigoths, the Huns and the Slavs. The Slavs have been particularly important for the formation of the Romanian people as they were the most numerous and longstanding people in the Dacian territory. Both the Slavs and the Daco-Romans belonged to the Eastern Orthodox Church, which made their mingling not only easier but also had an influence on the language: although the Slavs adopted Latin as the oral language, the written language of the Daco-Romans was in turn influenced by the Slavonic 2 3

Rustoiu (2006), pp. 37-39. Constantinescu (1999), p. 34.

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language. 4 The coming of the Slavs also provoked a separation between the Daco-Romans living north and south of the Danube; the people living north developed into the Romanian nation of modern times. 5 Another important migratory group were the Hungarians. The Hungarians settled in the province Panonia between 869 and 900 and King Stephan the Holy Christianised them in the year 1000. From then on, the Hungarian Kingdom expanded its territory and the region of Transylvania, inhabited by the Romanians (Daco-Romans), fell under Hungarian rule. To consolidate their position in Transylvania, the Hungarian rulers adopted a policy to settle Hungarians in many parts of the principality, alongside Szeklers and Germans or Saxons, which explains the multi-ethnic diversity of Transylvania. 6 By the fourteenth century, Transylvania was completely Hungarian. The other principalities that constituted the old Dacia, Wallachia and Moldavia, remained independent for the moment. From the second half of the fourteenth century, a new threat arose for the three principalities: the Ottoman Empire, which after the fall of Constantinople in 1453 advanced in the direction of the borders of Wallachia, Moldavia and Transylvania. However, by acknowledging the Ottoman suzerainty, the Romanians could preserve their own political, judicial and social system. 7 This explains why there has not been a process of Islamisation in Romania, with the exception perhaps of Dobrogea, the only province that fell directly under Ottoman rule. The Romanian principalities became the source of struggle between the Ottoman and Habsburg Empire in the 17th century. By then, the Ottoman Empire had already started to decline, and in 1699, Transylvania came under Habsburg rule. In 1775, the northern part of Moldavia – Bucovina - was also annexed to the Habsburg Empire. The third great power of that time, the tsarist Russia, annexed Bessarabia, the eastern part of Moldavia in 1821. (see figure 1.2)

0.2 Figure 1.2 Romania at the beginning of the 19th century Source: Treptow (1996), p. 214.

4

Rustoiu (2006), p. 131. Constantinescu (1999), p. 35. 6 Constantinescu (1999), p. 36. 7 Bos (2007), p. 46. 5

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1.3 The First World War and the formation of Greater Romania An important step towards modern Romania was the unification of Wallachia and Moldavia in 1859, inspired by the rise of national consciousness which developed throughout the whole of Europe in that period, as a product of the Romantic Movement. In Romania, the achievements of national hero Michael the Brave, who had united the three principalities for a while in 1600, constituted one of the symbols of this national consciousness. 8 From 1866 onwards, Wallachia and Moldavia were ruled by Prince Carlos I, who proclaimed Romania’s independence. Due to his contributions in the war against the Ottoman Empire, Romania achieved political independence in 1877. A few years later Carlos I was crowned the first king of the Romanian Kingdom. (see figure 1.3) In 1883, Romania signed on as a partner in the Triple Alliance between Germany, Austria-Hungary and Italy 9 , but as the ministers did not share Carlos I’s opinion to enter the Alliance, Romania remained neutral in first instance. This decision has to be seen in the light of public resentment felt toward Austria-Hungary, the anti-Hungarian sentiment and the perception that Russia "might be less of a threat to Romanian national interests than AustriaHungary.” 10 After Carlos I’s death in 1914, Romania decided to enter the war after all, but it did so alongside Russia, Great Britain and France, not alongside Austria-Hungary. The decision to declare the war to Austria-Hungary was made with a view to acquire Transylvania and Bucovina; regions were the population was predominantly Romanian and which still belonged to the Great Austrian-Hungarian Empire. 11 As the Russians and Austro-Hungarians lost their powers in the First World War, Romania was able to achieve its goal in 1918: the unification of all Romanian provinces – Moldavia, Wallachia, Transylvania, Bucovina and Bessarabia – into a unitary national state; Greater Romania. The claims of Romania to these territories were affirmed by the peace treaty of St. Germain in 1919 with Austria and the peace treaty of Trianon in 1920 with Hungary.

0.3Figure 1.3 The Romanian Kingdom Source: Treptow (1996), p. 332. 8

Treptow (1996), p. 240. Treptow (1996), p. 353. 10 Treptow (1995), p. 367. 11 Winkler Prins Encarta Encyclopedia (2000a). 9

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1.4 The interwar period and the Second World War After the First World War, democracy began to develop in Romania. The first general elections were held in 1919 and in 1923 a new constitution was adopted which acknowledged democratic rights and freedom for all citizens, “irrespective of their origin, language, or religion.” 12 New political parties arose. Politicians were largely divided into two groups: the progressives and the traditionalists, of which the former praised the industrialisation and the settlement of capitalism in Romania and the latter promoted agricultural life and cultural and religious traditions. 13 Due to external influences right-wing parties also appeared. The democratic tendencies would, however, not last long. Romania’s new king, Carol II, who had succeeded his father King Ferdinand after his death, believed in an authoritarian government, in which “the king had to be the supreme source of political decision-making.” 14 Thus, in 1938 he turned Romania into a royal dictatorship by abolishing the Parliament and censoring political life. In Romania’s relations with other countries, the wish to protect its territorial integrity was the leading aim underlying all Romanian actions. Two events are important in this respect. In 1939, the Ribbentrop-Molotov Pact had been concluded between the Soviet Union and Germany. Under the pact it was decided that the Soviet Union could occupy the Romanian regions of Bessarabia and Northern Bucovina. (see figure 1.4) Romania continued claiming its rights on these territories but in 1940, the Soviet Union set an ultimatum to Romania demanding the immediate evacuation of Bessarabia and Northern Bucovina. Since opposing evacuation would have indisputably led to the division of Romania among the surrounding countries, Romania accepted the ultimatum. In the meantime, Hitler had started to worry about a possible war between Hungary and Romania. Therefore, he wanted to solve the conflict between the countries by dividing Transylvania between them. 15 Romania had no choice; if it denied the ultimatum, Romania would enter into war not only against the Soviet Union but also against Germany.

0.4Figure 1.4 Romania during the second World War Source: Treptow (1996), p. 470. 12

Treptow (1996), p. 403. Bos (2007), p. 57. 14 Salagean (2006a), p. 595. 15 Salagean (2006a), pp. 604-605. 13

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The loss of these territories led to the abdication of King Carol II in 1940. He was succeeded by his son Michael, but the real power lay in the hands of General Ion Antonescu. Antonescu’s military dictatorship tried to recover the lost territory by entering the Second World War as Germany’s ally, fighting against the Soviet Union. 16 After Germany’s defeat in Stalingrad, in which Romania also lost thousands of soldiers, Antonescu realised that Germany could not win the war and he tried to negotiate a truce with the Allied Powers. Parallel to this, King Michael planned a coup against Antonescu which was carried out on 23 August 1944. Subsequently, the Germans were requested to pull back from Romanian soil, but the Nazis reacted to this by starting bombardments. Thus, in August 1944, Romania was fighting on two fronts: against the Soviet Union and against Germany. Romania was in no position to defend itself. The war had been harsh on the Romanian army and the troops were severely weakened. The Soviet Union took advantage of the lack of Romanian defence and occupied large parts of the country which were now considered legitimate Soviet territory. Although Romania contributed to the defeat of Germany and Italy in 1944, Stalin cleverly portrayed the Romanians as aggressors for their pre-1944 actions and subsequently occupied the entire country, something to which the British and Americans did not object. This laid the basis for the coming decades of communism.

1.5 Communism: 1944 – 1965 Gheorghiu-Dej’s rule The Romanian communist party was founded in 1921 in a political and economic climate which was little fertile for the spread of Marxist thought. The Romanian, predominantly agrarian, society was characterised by political apathy and large discrepancies between the urban and rural life. The Romanians living in the countryside rarely visited the city which they considered to be a place of immorality and loose living. Moreover, the city was full of foreigners, “especially Jews, who were admired, despised, and resented on economic, social, and religious grounds.” 17 Therefore, the Romanian peasants distrusted the people of the city together with their urban lifestyle. Obviously these were not fruitful conditions for the spread of Marxist thought. Moreover, it were principally foreigners who espoused Marxism and few Romanians. 18 Even when Romania embarked upon industrialisation, albeit slowly, the mutual alienation between the countryside and the city remained to a great extent in place since the new city dwellers kept close ties to the villages, thereby keeping intact their ‘peasantness’. 19 Another factor contributing to the unpopularity of the communist movement was its almost slavish endorsement of Russian territorial claims on Bessarabia after the First World War. This was seen by the Romanian population as a betrayal of the national cause by the communists. 20 The ideological appeal of the communist party remained low, by 1944 only 1,000 persons held membership of the Romanian Communist Party (RCP). 21 To make up for their small membership base, the communists set up various instrumental organisations through which they could exercise considerable influence. The communists moreover capitalised on the public sentiment by accusing the government, established after the 1944 coup, that not enough was done to persecute fascist sympathisers. With the support of the Soviets, the RCP’s leader Gheorghe Gheorghiu-Dej did everything to undermine the rule of the sitting government. Meanwhile, the 16

Salagean (2006a), p. 608. Gilberg (1990), p. 30. 18 Gilberg (1990), p. 40. 19 Gilberg (1990), p. 41 20 Chen (2003), p. 176. 21 The original name was the Romanian Worker’s Party, but in 1965 Ceausescu changed the name in the Romanian Communist Party (RCP). The idea behind this was that the party represented the entire nation and not just the working class. In this report the term RCP is used in order to avoid confusion. 17

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Soviet Union itself tightened its grip on Romania through economic domination. For example, Stalin “demanded three hundred million dollars in reparations, with the goods delivered being valued at 1938 prices which were two or three times below the 1945 level.” 22 Furthermore, joint stock companies were created. In reality, however, these ‘joint’ ventures were intended to let Russia gain control over the Romanian oil and timber industries and the Black Sea ports. In November 1946 elections were held. Before the elections, however, the communists introduced a new electoral law, making the registration for voting for anyone opposed to the communist ideology extremely difficult. The RCP won the elections and increasingly attacked other parties, organisations and individuals to consolidate its power. Other parties were dissolved or forced to fuse, and by 1948 the RCP was the only political party left. Aided by the forced abdication of King Michael in December 1947, the communist takeover was completed. After 1944 the membership base of the RCP grew quickly. This increase in membership cannot be contributed to the sudden appeal of Marxism: more important was the awareness of the Romanian people that the RCP would play a major role in post-war politics. From 1921 until 1944 the highest ranks of the RCP were dominated by foreigners, mostly of Russian, Ukrainian, Jewish, Hungarian and Bulgarian origin. The end of the war did more than just increase enrolment figures, it also led to the coming to power of Romanians in the RCP. Gheorghiu-Dej, who was incarcerated from 1933 until 1944 for taking part in a railway strike, freed himself from prison and would become general secretary of the RCP the same year. 23 Gheorghiu-Dej consolidated his power by carrying out the process of ‘Romanianisation’ of the party leadership. The first step in this process was the replacement of all foreigners within the party leadership. Second, he fired those Romanians who returned in 1944 to Romania after having spent communist exile in the USSR. By 1952 all non-Romanians were removed from the higher ranks of the party and the Politburo. Gheorghiu-Dej had successfully Romanianised the party. The implications of this process were great: “In accepting the loss of his most faithful supporters in Romania, Stalin thus accepted the indispensable precondition for the future separation of Romania from the USSR.” 24 By 1952 Gheorghiu-Dej had successfully consolidated his power, but the next threat to his rule would follow soon in the form of Khrushchev’s Secret Speech in which he denounced certain aspects of Stalin’s rule. 25 Paradoxically, the speech posed both a danger to Gheorghiu-Dej, a genuine Stalin admirer himself, and an opportunity to escape from Moscow’s grip. The threat lay in Khrushchev’s part of the speech in which he indirectly stated that “the party was not always right, and the leaders, the local little Stalins, might have erred as much as their protector in the Kremlin.” 26 On the other hand, by criticising Stalin’s leadership, Khrushchev also implicitly questioned the legitimacy of the Kremlin’s supremacy over the other European communist parties. Fearing to fall victim to the process of de-Stalinisation, GheorghiuDej discussed Khrushchev’s speech at home in well-orchestrated sessions: Gheorghiu-Dej stated that the party had already purged the Stalinist within the RCP during the process of Romanianisation. Thus, Gheorghiu-Dej had embarked upon “de-Stalinisation avant la lettre.” 27 Formerly a loyal adherent of the policies dictated by Moscow, after the speech Gheorghiu-Dej became to distrust Khrushchev and slowly began to orientate himself toward a more independent line from Moscow’s supremacy. The subsequent Hungarian uprising of 1956 truly opened the way for national sovereignty in Romania. During the Hungarian Revolution Romania presented itself as a close 22

Crampton (1997), p. 230. Already in prison he headed the prisoners faction of the RCP. 24 Campeanu (1991), p. 815. 25 In the speech Khrushchev criticised several aspects of Stalin’s rule and can be seen as the starting point of the process of de-Stalinisation. 26 Tismaneanu (2003), p. 138. 27 Tismaneanu (2003), p. 145. 23

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Soviet ally, although it was reluctant to assist with direct military support due to the large Hungarian minority in the Romanian army. Gheorghiu-Dej’s reasons for supporting the Soviet invasion were twofold. First, he feared that a successful revolt in Budapest might spread to the large Hungarian minority in Transylvania and initiate an anti-communist uprising in Romania itself. Second, a non-communist Hungary might make territorial claims on Transylvania. 28 Romania’s commitment in the suppression of the 1956 revolution plus its rigid domestic stance against the Hungarian minority was rewarded by the Soviet Union with the withdrawal of the Red Army from Romanian soil in 1958. Khrushchev decided to grant Romania’s requests for withdrawal since Gheorghiu-Dej had proven to be a reliable partner. Another explanation for the withdrawal is related with Khrushchev’s attempts to improve relations with the West. Khrushchev felt the need to show the West that Moscow “was able not only to send its troops into certain countries, but also withdraw them from others.” 29 Moreover the pull back of approximately 35,000 Soviets troops from Romanian soil was compensated by a large military presence in neighbouring Hungary. 30 The withdrawal of the Soviet troops represented the precondition for Romania’s own path toward socialism. Khrushchev’s decision to withdraw had a significant psychological effect in that it boosted Romanian self-confidence and courage to develop a more independent stance with respect of the Soviet Union. Also the events of the early 1960s created a favourable political climate to manifest Romanian aspirations for independence and to escape Russian domination. The first signs that Romania escaped Russian domination surfaced when Gheorghiu-Dej dared to criticise Khrushchev in 1963 for not informing the Romanian communists about the installation of the missiles in Cuba. On an official visit to Bucharest in June 1963 Khrushchev acknowledged the criticism: “Comrade Dej, you have criticised me for sending missiles to Cuba and not telling you. It is true, we should have told you.” 31 The break with ‘fraternal obedience’ became more apparent when Romania rejected Comecon’s plan ‘Principles for the International Division of Labour’. The plan outlined the idea of economic collaboration and would turn Comecon into a supranational institution. Under the plan Romania would become the ‘breadbasket’ or ‘vegetable garden’ of the Soviet bloc. Khrushchev envisioned Romania to transform into the agricultural base for the more industrialised countries like Czechoslovakia and to become a supplier of raw materials. According to this division of labour, Romania would abandon rapid industrialisation and the Romanians feared this would throw their economy into chaos. 32 Moreover, the Romanians perceived the plan as clandestine Soviet exploitation. Romania’s rejection of the plan can be described as “long-accumulated inferiority complexes of the Romanian leaders [which] exploded [. . . ]. For the first time in his political career, Gheorghiu-Dej decided to openly confront a Soviet diktat.” 33 In 1964 the RCP issued a statement which can be regarded as a ‘declaration of autonomy’. It is worth citing a fragment of the text: “Bearing in mind the diversity of the conditions of socialist construction, there are not and there can be no unique patterns and recipes; no one can decide what is and what is not correct for other countries or parties. It is up to every Marxist-Leninist party; it is a sovereign right of each socialist state, to elaborate, choose, or change the forms and methods of socialist construction. It is the exclusive right of each party independently to work out its political line.” 34

28

Deletant (1999), p. 93. Campeanu (1991), p. 816 30 Deletant (1999), p. 96. 31 Tismaneanu (2003), p. 177. 32 Crampton (1997), pp. 312-313. 33 Tismaneanu (2003), p. 179. 34 Tismaneanu (2003), p. 182. 29

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It has to be re-emphasised that Romania’s breakaway from Soviet dominance was to a great extent facilitated by the events of the early 1960s. The rather embarrassing outcome of the Cuban Missile Crisis, Khrushchev’s weakened position caused by increasing critics from within the Soviet Union on his leadership, and the Sino-Soviet conflict all contributed to the development of Romanian national communism. In the latter conflict the other Warsaw Pact countries broke of their relations with Peking while Romania extended them with haste. Khrushchev’s replacement by Brezhnev offered another possibility to consolidated Romania’s own path toward national communism. In the power vacuum that was created during the change of leadership in Moscow, Gheorghiu-Dej quickly ordered the withdrawal of KGB advisors from Romanian soil. Until 1989 the Securitate would be the only security and intelligence service that was liberated from direct KGB influence.

1.6 Communism: 1965-1989 Ceausescu’s rule On 19 March 1965 Gheorghiu-Dej died of cancer. Gheorghiu-Dej created Romania’s independent path and in doing so, he embarked upon national communism to escape Moscow’s supremacy and economic exploitation. He was succeeded by Nicolae Ceausescu who continued the line embarked upon by his predecessor. He made the break with the Soviet Union final with his famous balcony speech in 1968 in which he told an extensive crowd that Romania refused to join the invasion in Czechoslovakia. More importantly, he denounced the invasion. The 1968 denunciation yielded him both respect from the Romanian population and from the West and this allowed Romania to pursue and execute its plan for more autonomy. The difference between Gheorghiu-Dej and Ceausescu was that the latter soaked the independent path in a more nationalist flavour; both foreign and domestic policies became increasingly nationalistic. With regard to Romania’s foreign policy Ceausescu capitalised on the fear for the Soviet Union. Whether this fear was realistic is questionable, but of minor importance. 35 Ceausescu sought to legitimise his foreign policies by pursuing “nationalistic domestic policies that were clearly designed to tap the wellspring of popular Russophobia.” 36 The atmosphere that was created was one of ‘us against them’, a feeling that there was a constant threat coming from ‘the other’. Ceausescu successfully exploited the fear for, and nurtured the hatred against the Soviets. Historiography became an important instrument in stirring up nationalistic feelings: “One of the lessons taught by national history was that nothing good ever came from the east.” 37 This fear allowed Ceausescu to portray himself as the defender of national interest. The perfect setting to depict himself as protector of the nation and to take advantage of Russophobia came during his famous balcony speech in 1968 in which he denounced the invasion in Czechoslovakia. Ceausescu quickly engaged upon a campaign of nationalistic propaganda and manipulation of national symbols. He began touring the country intensively to hold speeches and to participate in meetings. His speeches were full of references to the glorious past, historical myths and heroic deeds of the Romanian ancestors. A striking example of the used nationalistic propaganda was the re-writing of history: until the early 1970s Romanian national pride was derived from cultural influence inherited by ‘the Latinity and Romanity’ of the mighty Romans. 38 So, emphasis was placed on Roman influence. However, Ceausescu later introduced a new ‘official history’. Emphasis then shifted to Dacian culture as being superior to that of the Romans: “It was now argued that the intermingling during the Roman era led the Romans to assimilate into the culture of the indigenous population, resulting in a higher cultural level for the Romans.” 39 35

The fear for the Soviet Union was questionable since Romania was of little strategic importance: it was bordered by three Warsaw Pact countries (Hungary, Bulgaria and the Soviet Union) and no NATO country. 36 Bacon (1987), p. 170. 37 Petrescu (2003-2004), pp. 254-255. 38 Kemp (1999), p. 152. 39 Gilberg (1990), p. 20.

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The indigenous Dacian people, who were the original inhabitants of the area, were thus believed to be superior to the invading Romans. Interpreting history this way had far-reaching consequences, since usually the Roman (together with ancient Greek) culture is branded as the cradle of European civilisation. The history developed on Ceausescu’s order seems to claim that the roots of European culture lay with the ancestors of the Romanians. Ceausescu’s nationalistic policies allowed him to create the right amount of distance between Romania and the Soviet Union to manoeuvre independently. Moreover, by taking up the role as maverick within the communist bloc Ceausescu attracted the attention of the West. While Romania reduced participation in the Warsaw Treaty Organisation and Comecon, ties with the West intensified. Trade with the West augmented, foremost with West Germany, but also economic agreements came into being with France, the United States and Great Britain. Simultaneously, trade with the rest of the communist bloc declined. Ceausescu successfully diversified economic relations and attracted much needed foreign investment. The United Stated even granted Romania the ‘most favoured nation’ status in 1975, which implied benefiting from certain trade advantages such as low tariffs. The American government allowed their companies to do large scale investment in Romania, and Romania even invested 58 million dollar in an oil company in the United States. 40 Since the beginning of his rule, Ceausescu pursued a policy of ‘multilateral development’ which implied that Romania had to establish a “modern, multifaceted, industrially based economy, no longer confined to the second-class status of producer of primary materials.” 41 In accomplishing these objectives campaigns saturated with nationalistic features sought popular mobilisation. For the first half of the 1970s Ceausescu’s policy was successful and considerably improved the country’s economic position. Industrialisation proceeded fast, labour productivity rose, foreign trade and investment augmented, the GNP grow with 6,2 percent and living standards rose, albeit they still remained the lowest of Eastern Europe. 42 At the same time, gross debt was, after Czechoslovakia, the lowest of the communist bloc, and the country provided for most of its own energy. 43 The rapid economic growth enabled the Ceausescu to increase his power. National communism in these years allowed Ceausescu to exploit the East-West tensions, simultaneously achieving independence and economic advantages. It perfectly suited and complemented the regime’s use of nationalism to create legitimacy for the RCP and more importantly, for its leader. At the same time, increased living standards resulted in more satisfaction with the population, thereby extending the regime’s base of legitimacy beyond that of national rhetoric. Moreover, economic development impeded possible opponents to endanger Ceausescu’s rule. So, national communism turned out to be a successful formula for the time being. Only for the time being, because Ceausescu’s national communism was a benign formula which had to turn sour eventually. The policies aimed at nurturing national awareness and patriotism in order to bolster popular support turned popular support turned increasingly chauvinistic, to such an extent that it turned against the regime. One reason why the nationalistic formula turned sour was the personality cult which arose around the Ceausescu, one which paled Stalin’s idolisation. Ceausescu came to believe that he was the descendant of all heroic figures of history; that he embodied the culmination of all glories of Romania’s past. Ceausescu was described as “the greatest thinker, philosopher, statesman, and scientist the world has ever seen.” 44 Poetry and songs praised his greatness, comparing him with “a living god, the sun that provides others with warmth and inspiration and 40

Farlow (1978), p. 186. Multifaceted in this context means an industrial and service sector based economy, i.e. a non-agricultural economy. Linden (1986), p. 353. 42 Linden (1986), pp. 352-355. 43 Linden (1986), p. 352. 44 Gilberg (1990), p. 54. 41

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the inspirer for all mankind.” 45 At well orchestrated appearances Ceausescu was song about and cheered. Eventually everything and everybody revolved around Ceausescu. “No Romanian official could deliver a report or write an article without referring to President Ceausescu’s political inspiration and guidance.” 46 Part of Ceausescu’s obsession with himself resulted in the high level of centralisation of power. Ceausescu dominated virtually all institution, everyone was subordinated to his authority. The list of his official titles was endless and by the 1980s most institutions only fulfilled a symbolic task. Political opponents had been eliminated, and political counterweights had been gagged. There was nobody left to criticise, advise or moderate his policies. “He delegated so little authority to specialists that incentives for innovating [. . . ] were nonexistent.” 47 Ceausescu lost touch with his own population and reality. His bewildered face when the audience started catcalling during what would be his last balcony speech on the 21 December 1989, strikingly illustrates that he was in complete denial of reality. The obsession with himself peaked in his ‘systematisation’ project in which he planned the demolition of historical buildings, churches and even complete neighbourhoods for the purpose of constructing an entire new city. Apparently, Ceausescu was eager to leave his stamp on the course of history by constructing something that would outlive him. Needless to say that forcing people out of their homes did not increase the regime’s popularity. 48 The plan met with fierce resistance, in particular among the Hungarians and Germans since especially their villages would be demolished. When Ceausescu assumed power he continued the ethnicity policies of suppression he inherited by his predecessor who introduced these policies after the Hungarian uprising in 1956. Already under Gheorghiu-Dej’s rule Hungarian schools had been closed down; the Hungarian Bolyai University in Cluj was forced to merger with the Romanian Babes University; Hungarian place and street names were changed into Romanian names; the border of regions redrawn as to shift the ethnic composition in favour of the Romanians, and historical facts concerning Hungarian influence were removed from history books or ‘restyled’. Nonetheless, under Ceausescu’s rule the relationship between the Romanians and Hungarians became even more strained as nationalism transformed into chauvinism. The praising of the Romanian nation was exercised at the expense of other, “claims on behalf of the Romanian nation clearly relegated all others to a position of secondary or tertiary rank.” 49 After decades of interethnic tension, the violent confrontation between Hungarians and Romanians in Timisoara was the instigator of the revolution that would topple Ceausescu. Though, interethnic tension, intensified by Romania’s national communism, and Ceausescu’s loss of sense of reality were not the sole reasons for Ceausescu’s downfall. Romania’s national communism derived legitimacy from the alleged threat the Soviet Union posed for the Romanian nation. Russophobia constituted one of the pillars of nationalism besides the glorification of the Romanian nation. The ‘doctrine of Russophobia’ lost its legitimacy when Gorbachev introduced glasnost and perestroika reforms in Eastern Europe. In a speech Gorbachev held in Prague on 10 April 1987 he spoke the following words: “We proceed above all form the premise that the entire system of political relations between the socialist countries can and should be built unswervingly on a foundation of equality and mutual responsibility. [. . . ] The independence of each Party, its responsibility to its people, the right to

45

Gilberg (1990), p. 54. Fischer (1981), p. 118. 47 Bacon (1987), p. 172. 48 Gilberg writes that the people were moved to houses in the suburbs which were often of lower quality than those they previously lived in. Gilberg (1990), p. 54. 49 Gilberg (1990), p. 238. 46

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resolve questions of the country’s development in a sovereign way - for us, these are indisputable principles.” 50 We can distinguish similarities between Gorbachev’s words and the fragment of Romania’s ‘declaration of independence’ of 1964 (see previous section). When Gorbachev stated that each country is entirely sovereign he completely undermined the raison d’être of the Ceausescu regime. Ceausescu, the protector of the Romanian nation had lost his alleged enemy and Russophobia as a political instrument. Therefore, when Gorbachev launched his reform programme, it turned the Romanian image of the Soviet Union upside down; Moscow was no longer perceived as a threat. “[The Romanians] were, in fact looking to Moscow to free them from the domestic tyranny of the Ceausescu clan.” 51 The socio-economic context in which all this took place was one of hardship and declining living standards for the Romanian people. One of the main causes for the economic hardship was Ceausescu’s determinedness to pay off the foreign debts accumulated during the late 1970s. In order to achieve this, Ceausescu exported as much as possible, including the products necessary for daily survival for the Romanians. Empty supermarkets and frequent power cuts became a common phenomenon. By the end of the 1980s, Ceausescu was a hated man for his severe oppression and the dramatic economic state which he had created. When communism started to crumble throughout the communist bloc, Romania was the only country which experienced a violent revolution in which Ceausescu and his wife were executed.

50 51

Cynkin (1988), p. 311. Petrescu (2003-2004), p. 255.

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2. Romanian national identity 2.1 Before communism As said before, the Dacians and later the Daco-Romans are considered the most important people for the evolution of the Romanian people. After the Romans had conquered the Dacian Kingdom, they introduced their uses in the territory. 52 Today, this is still reflected in the language since the Romanian language has Latin origins, which relates it to other Latin-originated languages such as Italian, French and Spanish. 53 Although the Romanian language also has, due to its vicinity to other Balkan countries, loanwords from Balkan languages, 54 this linguistic link with the West currently functions as a confirmation of a linkage between Romanian culture and European culture, as Romanians consider themselves being a Latin people. 55 But above all, Romanians perceive themselves as Europeans. The Romanian history partly connected the country with the history of the rest of Europe by shared events like the Revolutions of 1848 and 1968. 56 From the fifteenth century the Southern part of Romania found itself under Ottoman rule. When towards the end of the eighteenth century the Ottoman Empire started to reveal its first cracks, Romanian intellectuals felt more freely and attracted to the French cultures and values which led, like in the rest of Europe, to the revolts of 1848. 57 At the end of the nineteenth century Romanian thinkers, who had enjoyed an education in France or who were influenced by the French revolution, started to form an idea on Romanian identity and its position within Europe. These revolutionaries believed in ‘progress’ and ‘civilisation’, 58 while on the other hand conservatives still held on to traditional values. The conservatives did not see any advantages of changing Romanian society quickly: instead, they considered a slow shift. One of these conservatives was Titu Maiorescu; a critic and intellectual who has been very important for nineteenth-century literature. 59 His thought was extended later on by Mihai Eminescu into “a coherent socio-political theory of Romania’s dependency status.” 60 Eminescu, today still considered Romania’s national poet, 61 argued that Romania was reliant on other states, mostly modernised European nations, copying their institutions which did not fit in Romanian society simply because they were non-existent. In the interwar period Romanian cultural capital seemed to grow even to the extent of calling Bucharest the ‘Paris of the east’. 62 The discussion on identity “through the relationship between traditional and West European trends” 63 continued. Eugen Lovinescu was a liberal who also was involved in this debate. He was pro-European and believed that modern Romania had seen similar developments as other European countries. Like Lovinescu, George Calinescu underlined this linkage with Europe and rejected the idea of backwardness of Romania, 64 which was present those days in Western Europe. Calinescu was the writer of the first exhaustive ‘history of Romanian literature’. 65 Previously mentioned Eminescu and Maiorescu were important in this compendium for their known literary work. 52

Castellan (2000), p. 1. Bos (2007), p. 105. 54 Bos (2007), p. 105. 55 Interview B22 and B13. 56 Boatca (2006), p. 569 and interview A03. 57 Castellan (2000), p. 2 and Boatca (2006), p. 554. 58 Boatca (2006), p. 557. 59 Drace-Francis (2006), p. 180. 60 Boatca (2006), p. 560. 61 Bos (2007), p. 105 and Boatca (2006), p. 560 62 Byrnes (2007), p. 46. 63 National Institute for Research and Development in Informatics (1999). 64 Boatca (2006), p. 569. 65 Boatca (2006), pp. 568-569. 53

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Thus, throughout history Romanians tried to establish a Romanian national identity as a European identity, as they perceive themselves being part of the same European culture and history.

2.2 From communism to the European Union The debate on Romanian identity came to an abrupt end with the beginning of the Second World War. The post-war period did not offer the possibility to continue shaping ideas concerning national identity due to the arrival of communism. The Romanian identity has been deeply influenced by it. Under the communist regime, art and literature as a part of it, had to have an instrumental function in favour of the state, that is, it was used as propaganda. Artists were paid to express what the regime wanted. 66 Criticism was not allowed; texts were controlled and censored if necessary. After 1989, the discussion on national identity revived but the focus changed with a possible European Union membership in mind. Nowadays, the discussion is no longer about tradition and modernity. Instead, Romania wants to illustrate how European it was and is. As said before, Romanians in general feel they have always been Europeans. The accession to the European Union in 2007 is felt by almost all Romanians as a home-coming, either because they feel they never left Europe - they were forced to do so because of communism -, or they felt the accession as an acknowledgement of their Europeanness. They have always felt being a part of Europe, culturally and historically. 67 Nonetheless, the passive mentality of the Romanians has been stated as a main reason for the difficulties regarding the accession and the implementation of the acquis communautaire. People tend to wait for the state or some other actor, like the EU, to change the situation. 68 Furthermore, Romanians do not understand some laws yet, and cannot properly implement them. 69 Another issue closely linked to the passive attitude is the lack of a civil society; there is no middle class present in Romania. 70

2.3 Religion and folklore Romanian national identity is largely influenced by the Christian Orthodox Church. Not surprisingly, 86.8 per cent of the population is Orthodox while 89.5 per cent of the inhabitants are Romanian. Apart from the Orthodox religion there are some other religions; 4.7 per cent of the population is Roman Catholic, 3.2 per cent Reformate, 1.5 per cent Pentecostal and 0.9 per cent Greek Catholic. 71 The importance of religion today does not lie in the church institutions but mostly in the ideology. Next to religion, folklore and subsequently traditions play an important role in everyday life in Romania. 72 The strong position of the Orthodox Church in Romanian society dates back to the Middle Ages, particularly to the situation in the region of Transylvania. In that period Transylvania was an autonomous region within the Hungarian Kingdom 73 and its population was predominantly Hungarian. The ethnic Romanians could not participate in political life and their religion was not as accepted as Catholicism. The result of this ‘ethnic and religious exclusion’ 74 was that religion started to be a very important part of the formation of a national identity; the 66

Interview B22. Interview A03, B01, B05, B08, B13, B16, B19, B20, B22, B25, B26, B27, B36, C09 and C14. 68 Interview A03, B06, B07, B09, B10, B19, B22, B30, B33, C09 and C13. 69 Interview B01, B07, B09, B22, B13, B16, B18 and C10. 70 Interview B16, B22, B27, B30 and B33. 71 National Institute of Statistics (2008). 72 Interview A03, B22, B26, C05 and C06. 73 Flora, Szilagyi, and Roudomentof (2005), p. 36. 74 Flora, Szilagyi, and Roudomentof (2005), p. 36. 67

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Orthodox belief became for the ethnic Romanians a very important element in defining their own national and cultural identity. Throughout the centuries the Orthodox Church reinforced her position in the legitimising of Romanian nationhood. The Romanian Orthodox Church tried to put focus on the national values, “thereby legitimating the Romanian nation-state.” 75 In the following years, Orthodox Christianity became the dominant religion and the Orthodox Church became the national church. 76 This development strengthened the linkage between faith and national identity; also minorities started to see religion as the key element of their identity. Not surprisingly, the statues of the Church nowadays still state that “the Romanian Orthodox Church is national and in majority according to her apostolic age, tradition, number of faithful and her special contribution to the life of the Romanian people.” 77 During the communist regime the Orthodox Church kept her leading position among the cults present in Romania. 78 Even if the communist ideology condemned any form of religion, the Romanian government made use of the Orthodox Church in order to legitimise its own reign. 79 During Ceausescu’s regime, the Church as an institution was used to “stimulate nationalistic sentiments”, 80 in particular to obtain support from the population. 81 Through the Romanian Orthodox Church, the communist government highlighted “ancient Romanian rights” and “the assertion of Romanian national supremacy within the state”. 82 In this way, minorities were left out of the national identity and their religions were, subsequently, repressed. In the case of the Greek Catholic Church for example, properties were confiscated and donated to the Orthodox Church. 83 Nonetheless, the Orthodox Church was in some way oppressed as well. 84 People were not forbidden to go to church; the repression was directed against some church representatives who could have, according to the communists, a dangerous influence on their society or community. 85 Furthermore, the church was infiltrated by the secret service. 86 The fear of infiltration was probably stronger than the real level of infiltration, but the result was the same: people did not dare to confess anymore. In Romania there was no uprising against the communist regime started by the Orthodox Church. The only resistance came from a Hungarian protestant priest, Laslo Tokes, towards the end of Ceausescu’s rule. 87 Despite the Orthodox Church’s collaboration with the communist regime it did not lose its dominant position. According to the Church’s Statues, “the Romanian Orthodox Church is [still] the Church of the Romanian nation” 88 and it is “the Patriarchy’s opinion that being Romanian equals being Orthodox”. 89 This changed somewhat in 2006, when the Romanian government introduced the Law on Religious Freedoms and Religious Denominations. 90 The Orthodox Church does not officially represent the national religion anymore, but keeps her special position as an extraordinary powerful actor. 91 The other religions were rehabilitated after 75

Flora, Szilagyi, and Roudomentof (2005), p. 37. Stan and Turcescu (2000), p. 1468. 77 The Statues for the Organisation and Functioning of the Romanian Orthodox Church, General stipulations (2008). 78 Flora, Szilagyi and Roudomentof (2005), pp. 38-41, Stan and Turcescu (2000), pp. 1468-1471 and Miller (2005), pp. 3-4. 79 Flora, Szilagyi and Roudomentof (2005), p. 39, Miller (2005), p. 4 and interview A03 and B22. 80 Miller (2005), p. 4. 81 Miller (2005), p. 4 and interview A03. 82 Flora, Szilagyi and Roudomentof (2005), p. 39. 83 Flora, Szilagyi and Roudomentof (2005), p. 40, Stan and Turcescu (2000), pp. 1470-1471 and interview B22. 84 Interview A03, B22 and B26. 85 Interview B22 and B26. 86 Interview A03 and B22. 87 Miller (2005), pp. 6 and Pope (1997), p. 6. 88 Romanian Orthodox Church (2008). 89 Radu (2005), p. 99. 90 Andreescu (2008), p. 139. 91 Andreescu (2008), p. 156. 76

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1989, although the Greek Catholic Church is still involved in a conflict with the Orthodox Church which denies the restitution of the Greek Catholic proprieties. 92 It has been stated that, when looking at religion in general, with the end of communism people needed a new ideology to replace the void. 93 Religion offered an alternative which could fill up different aspects of life, giving people something to hold on to. This could be an explanation why religion and folklore (in short, traditions) still play such an important role in everyday life.

2.4 Perception of Romania abroad Although the Romanians have always considered themselves as Europeans, this opinion was not shared in the rest of Europe. In the eighteenth and nineteenth century, Romania was perceived as an uncivilised country. In this period the Balkan in general, and Romania as a part of it, was considered as a backward periphery of Europe. Similarly to the concept of Orientalism, the Balkan was seen as different, almost barbaric. Thus, in this context surfaced the idea of ‘Balkanism’ in which the Balkan represented the past of the now modern world. 94 This image of a backward, peripheral zone has persisted in the collective imaginary until today. It is still possible to find expressions that suggest such backwardness, for example one-liners as the following title of a news article, ‘Europe’s very own Puerto Rico’. 95 This idea was also underlined as a result of Western literature of the nineteenth century. In 1892 Jules Verne wrote a novel “halfway between reality and the fantastic” 96 in which Transylvania forms the scenery. However, the best-known novel in this context is Bram Stoker’s Dracula, a story of a cruel count who turns out to be a vampire, living in Transylvania. Although Stoker never travelled to Romania, he depicted Transylvania as a “sinister, remote and backward region”. 97 The myth that materialised from the novel suited perfectly in the ‘Balkanism’ discourse and underlined once more how different Romania was from Western Europe. The Romanians are not particularly happy with this situation. Firstly, both under the communist regime and the governments after 1989, Romania did not want to be associated with the idea of backwardness which was promoted by Stoker’s novel, since this idea was in conflict with the wish to position Romania either as an independent country (that is, independent from the Soviet Union) or as a modern European country (in the wake of the EU membership). 98 Secondly, the historical figure on which Stoker had based his novel, Vlad Tepes (Vlad the Impaler), is considered by many Romanians as a national hero as he defended Romania against the Ottomans in the fifteenth century. In spite of this, the general feeling among Romanians is that the Dracula myth is just a nice story which ‘sells’. 99 It is, according to the Ministry of Foreign Affairs, a “marketing brand based on a fictional character”, 100 although some Romanians feel offended that the national hero Vlad Tepes is being used as a brand. Furthermore, it has been said that Romanians are looked upon as ‘poor relatives’, but this is partly because the Romanians perceive themselves this way and, as a matter of fact, they use this image also as a political means. 101 Maybe this idea of being a poor relative is a result of the

92

Flora, Szilagyi and Roudomentof (2005), p. 52, Stan and Turcescu (2000), pp. 1482-1485 and interview B22. Interview A03, B22, B26 and C11. 94 Boatca (2006), p. 556. 95 Gallagher (2004), p. 34. 96 Deletant (2007), p. 225. 97 Light (2007), p. 749. 98 Light (2007), pp. 755-758. 99 Interview A03, B22 and B26. 100 Interview B22. 101 Interview B22. 93

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feeling that Romania still is not considered as a full member of the EU. 102 The EU is using double standards: 103 for example, many EU countries imposed a transition period for Romanian workers coming to their country.

2.5 National Minorities National minorities play an important role in Romania’s history, identity and Romania’s everyday life. The Hungarians represent the largest minority group in Romania with 6.6 per cent. Roma represent 2.46 per cent of the population, 104 although it is estimated that there is a larger number of Roma. Numbers vary, but it can be said that there are approximately a million or even two million Roma in Romania. 105 They often do not register as such, if they are even registered. 106 1.47 per cent of Romania’s population is of another ethnic origin: Ukrainians, Germans, RussianLipovans, Turks, Tatars, Serbs, Slovaks, Bulgarians, Croatians, Greeks, Jews, Czechs, Poles, Italians, Chinese, Armenians, and Csangos. 107 All minorities have left a mark on Romania; however, Hungarians, Roma, Germans and Jews are the most visible ones. Jews were already living on Romanian territory during the Roman Empire, but most Jews emigrated to Romania only in the nineteenth century and formed a coherent community within the Romanian borders. 108 As in the rest of Europe, they were persecuted during the Second World War. For a long period any Romanian involvement in the persecution of the Jews was denied, but in 2004 the government - under president Ion Iliescu recognised the Holocaust. 109 After that decision, the Jewish community started to open itself and became more active in promoting its own culture. The problems which the Jews are facing are not problems of interests, but problems of getting their property back. 110 The Germans, or Saks, are not very numerous anymore as they emigrated in great numbers: in the 1980s, the German government made an arrangement with Romania in order to give Romanian Germans the opportunity to move to Germany. 111 Many did so, and emigration continued after the fall of the communist regime. Despite its small population, the German community has managed to come at almost the same level as the Hungarians as regards their minority rights. This is because they can build on a strong historical heritage and on their language, which is the only language used in Romania that has a large amount of speakers throughout several countries in the world. 112 Nevertheless, when speaking about minorities in Romania, people usually refer to Hungarians and Roma. This is not because the other minorities are assimilated and the Hungarians and Roma are not; the other minorities live their own lives in their own communities as well. It has to do with the minorities’ needs; all minorities have specific needs, but the needs and demands of the Roma and the Hungarian communities are certainly the strongest, 113 as they are also the largest minorities (although a causal relation cannot be confirmed). Furthermore, there is much debate on their position within Romanian society. Therefore, the next sections will focus on these two ethnic groups.

102

Interview A03, B13 and B22. Interview B10, B13, B17 and B28. 104 Ethnocultural Diversity Resource Center (2002). 105 Cretan and Turnock (2008), pp. 276, Crowe (2008), pp. 537 and CEDIME-SE (2001), p. 2. 106 Interview A02, A03, B13 and B27. 107 Ethnocultural Diversity Resource Center (2002). 108 Bos (2007), p. 36, Treptow (1996), p. 255 and The Romanian Jewish Community. 109 Government of Romania, Ministry of Justice (2004) and United States Holocaust Memorial Museum (2005). 110 Flora, Szilagyi and Roudomentof (2005), p. 52, Stan and Turcescu (2000), pp. 1482-1485 and interview B22. 111 Bos (2007), p. 41. 112 Interview B13. 113 Interview B13. 103

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2.5.1 The legal and institutional framework as regards minorities Romania has quite an extensive legal framework for the minorities; it has been stated the most extensive one in the whole European Union. 114 First of all, the national minorities are all recognised in the Romanian constitution. The Electoral Law then gives them the right to be politically represented. All national minorities, with the exception of the Chinese and the Csangos, are represented in the Parliament by the Parliamentary Group of the National Minorities. This Group consists of all political parties that represent the minorities in Romania, with the exception of the Hungarians, who have their own, independent party; the Democratic Alliance of Hungarians in Romania (UDMR). In 2005, a Draft Law on the Status of National Minorities was adopted by the government and presented to the Parliament. However, this Draft Law never passed as some of the political representations voted against it. Romania did ratify the European Charter for Regional or Minority Languages and the Framework Convention for the Protection of National Minorities. Besides these legal documents, Romania also has a lot of ‘minority structures’, like the Department of Interethnic Relations; a governmental body dealing with all interethnic issues. The Ministry of Culture has its own Minority Rights Unit and the Ministry of Education and the Ministry of Public Health appoint school and health mediators for the Roma. Moreover, all ministries have their own structure for Roma issues, as stipulated in the National Strategy for Roma which was adopted in 2001. In that year the National Council for Combating Discrimination was set up as well. Finally, although this list has not been exhaustive, the President recently got his own Counsellor for Minority Issues. 115 The existence of all these institutions does, however, not guarantee their functioning: the National Strategy for Roma for example is very strong and ambitious, but there is no political will nor money to implement it correctly. 116

2.5.2 Hungarians With almost 7 per cent of the whole population, the Hungarian community represents the largest minority community within Romania. Most of the Hungarians in Romania live in Transylvania; in the western part of Romania. This region has become the representation of a RomanianHungarian conflict which started in the beginning of the twentieth century. Hungarians have been present on Romanian territory since the ninth century. 117 They settled in Panonia and King Stephan the Holy Christianised them in the year 1000, thereby founding the Kingdom of Hungary. The Hungarian Kingdom expanded its territory and the region of Transylvania - inhabited by the Daco-Romanians - became part of it. The Kingdom fell apart in 1526, when the central part was conquered by the Ottoman Empire and the western and northern part came under control of the Habsburg Empire. Transylvania remained independent until 1690, 118 when Leopold Habsburg from Austria conquered the region. As in 1693 the Hungarian and Austrian administrations split, Transylvania was isolated from Hungary. Only in 1867, when Austria and Hungary became equal partners again, Transylvania returned to be Hungarian territory. Hungarians consider Transylvania thus as an integral part of Hungarian territory, where many Hungarians live and have lived for centuries. According to the Romanians, however, the presence of the Daco-Romans in the region long before the 8th century constitutes the evidence that Transylvania is Romanian territory. After the First World War Romania was put in the right when in 1918, at Alba Iulia, it was decided that Romania would be constituted again by all Romanian provinces: Moldavia, 114

Interview B07, B22 and B13. Interview B13 and The Diplomat (2009a). 116 Interview A02, B13 and B27. 117 Salagean (2006b), p. 145. 118 Chiriac, M. et.al. (2006), p. 177 and Salagean (2006b), p. 145. 115

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Wallachia, Bucovina, Bessarabia and Transylvania. The Hungarians adopted a silent attitude as they hoped that the Peace Conference in Paris in 1919 would deny the unification of Romania and Transylvania. The Peace Conference, however, acknowledged the legitimacy of the united Romanian state, and inhabitants of Bucovina, Bessarabia and Transylvania earned Romanian citizenship. 119 The Treaty of Trianon of 1920 - the peace treaty between Hungary and the Allied Powers - affirmed the unification establishing that the eastern part of the Banat, Transylvania included, would be part of Romania. The decision to unify Transylvania and Romania was seen as a ‘reunification’ by the Romanians, as they state they are the descendents of the Daco-Romanians having lived there long before the Hungarians invaded the territory. However, for the Hungarians the Treaty of Trianon is a mere national trauma, as they lost more than two thirds of their territory and a population of more than 13 million people. Of those 13 million, 3.2 million were ethnic Hungarians and 1.7 million were lost to Romania by awarding Transylvania to this country. The rest of the territory was rewarded to Czechoslovakia, Yugoslavia and Austria. The trauma of Trianon has thus become constitutive to the Hungarian national sentiment since the 1920s. 120 During the last century, Hungarian nationalists inside and outside Romania called for an autonomous status for Transylvania, or even demanded the assimilation of the region to Hungary. Not surprisingly, the Romanians denied such a status and a conflict was born, with Transylvania as its representative. After the signing of the Treaty of Trianon the Hungarians tried to protect their own interests by establishing the Hungarian Union in 1921 and the Popular Hungarian Party in 1922, which merged with the National Hungarian Party, resulting, finally, in the Hungarian Party (for a more detailed description of the development of the Hungarian parties, see section 6.2.3). The party declared itself “the defendant of Hungarian interests for the entire minority”, 121 as the Treaty of Trianon indeed had changed the Hungarians in Romania into a minority. The rights of the minorities had been guaranteed by the Alba Iulia Resolutions of 1918 and the Paris Minorities Treaty of 1919, both part of the Treaty of Trianon, and the minorities were given a consistent juridical basis in the constitution of 1923. 122 Nonetheless, the Romanian government altered the community organisations and cultural institutions of the minorities. 123 Those measures were not adopted directly against the minorities, but they were to promote a kind of a Romanian identity aimed at the consolidation of the newly united territories. But the minorities, especially the Hungarians, looked upon it with suspicion and felt discriminated in some way. 124 When the communists seized power in 1944, the situation as regards the national minorities eventually improved somewhat as under socialist rule, the ethnic and cultural differences were of minor importance, the aim of socialism being the strengthening of the working class. 125 Important cultural institutes were established, culminating with the set-up of the Hungarian University ‘Bolyai’ in Cluj in 1946, and bilingualism was officially introduced. In 1956, however, Romania started to deviate from Moscow and began to introduce a more autochthonous and national mode of socialism. Schools which taught exclusively in minority languages decreased as the number of mixed schools increased. An important symbol of this new approach was the merger of the Bolyai University in 1959 with the Romanian University ‘Babes’. 126 When Ceausescu came to power in 1965, the situation of the minorities started to deteriorate significantly as Ceausescu stood for a severe nationalist socialism in Romania. It was in this period that tensions between Hungarians and Romanians culminated. 119

Chiriac, M. et.al. (2006), p. 178. Culic (2006), p. 176 and interview B12. 121 Chiriac, M. et.al. (2006), p. 178. 122 Salagean (2006a), p. 598. 123 Culic (2006), p. 176. 124 Salagean (2006a), p. 598 and interview B27. 125 Culic (2006), p. 178 and interview B27. 126 Culic (2006), p. 179. 120

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The repression of the Ceausescu regime affected the whole society, Romanians included. 127 However, the minorities found themselves in the most precarious position, as the measures token erased all their ways to cultivate their own culture, something which was not the case for the Romanians. Among others, the minorities were forbidden to speak their own languages and churches came under state control. Especially the last measure meant a serious threat for the continuing existence of the minorities: in the absence of an own state, the church functions as the guarantor of the minority’s identity. The repression has especially been felt by the Hungarians. There is some proof that the repression was, in the end, some kind of a community repression directed especially against Hungarians. In 2006, president Basescu set up a Commission which had to research the communist era. The final report of the Tismaneanu Commission condemns the communist period 128 and recognises that the repression was partly a community repression, an idea that is also supported by statistics and historians. 129 The Romanians do not understand these feelings because they perceive the communist oppression as equal to the whole population. They see the Hungarian’s demands for ‘collective’ rights as demands for positive discrimination, or even as breakaway tendencies. 130 In recent years the relations between Hungarians and Romanians seem to have improved and tensions diminished. There is still a conflict, but this is not an ethnic one anymore; we need to look at it as a political conflict for several reasons. Firstly, the perception of the conflict as an ethnic one is kept alive by some nationalists and hate speakers, 131 like the demonstrators in Moldova in April 2009 who called for a unification of Moldova and Romania. Secondly, the media continues to depict all problems as ethnic ones. 132 This leads to stereotypes which are to a certain extent believed by people, especially by them who do not have any contact at all with other ethnicities. Finally, politicians use ethnic issues as a tool for their electoral programs. 133 This was already the case under communism, and it still happens frequently, as for example the case with the Status Law (see below). Of course, there still are some tensions - especially in those regions where the Hungarians form the majority like in Tirgu Mures - but these tensions are not translated in violent conflict. And if there is a violent conflict, it is not caused by ethnical issues but by a lack of authority of the state. 134 Moreover, Hungarians still have their demands as they feel they need a special status in Transylvania. These demands are generally promoted by the UDMR; the Hungarian political party. The UDMR was present in the government between 1997-2001 and 2005-2008. The UDMR has been very active in supporting any governmental action regarding minorities’ rights and interethnic relations. The party played an important role in the establishment of the Joint Government Meetings between Hungary and Romania and in the adoption of the Draft Law on the Status of National Minorities. Nowadays, the UDMR is not in the government anymore, but it still strongly supports the Draft Law, which promotes a legal framework for a cultural autonomy for the minorities (see also section 12.4 on Minorities rights). Another interesting development of recent years was the adoption of the Act on Hungarians Living in Neighboring Countries LXII/2001 in 2001. This Act, which became known as the ‘Status Law’, is an initiative of the Hungarian government. Its aim is to institutionalise the relations between Hungarians in Hungary and Hungarians living in other 127

Culic (2006), p. 184 and interview A03 and B22. International Herald Tribune (2006), Romanian president, in a first for the nation, condemns its Communists Dictatorship, in: International Tribune, 19 December 2006. 129 Bos (2007), p. 32, interview C16, B12 and B13. 130 Culic (2006), p. 184. 131 Interview B13. 132 Interview B13. 133 Interview B13 and B22. 134 Interview B13 and B41. 128

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countries. The Status Law provides special rights to ethnic Hungarians living outside Hungary’s borders, such as travel benefits, students funding, and work permits. 135 The Romanian Government, however, considered the Status Law to be an infringement to the territorial sovereignty of Romania. The Government has no problem with special rights given to Romanian citizens who are also ethnic Hungarians, as long as this does not occur on Romania’s territory. 136 The European Commission for Democracy through Law adopted the same position. The Commission considered that states can adopt unilateral measures on the protection of their kinminorities, irrespective of whether they live in neighbouring or in other countries. Thus, the facilities granted to kin-Hungarians on Hungarian territory were considered no problem. However, the Commission also stated that the territorial sovereignty of states has to be respected, and therefore, expressed doubts upon the facilities granted to the Hungarians on Romanian territory. 137 There was much debate on the Status Law throughout Europe, but in the end, it was not a major issue, at least not in Romania and Hungary. The Status Law is considered to be a tool of propaganda, both by Hungarians and Romanians, 138 as the Status Law was used in order to win votes from Hungarians living outside Hungary. Moreover, such a law will lose its total significance once the Schengen agreement is implemented. Nevertheless, the Status Law is considered by Hungarians as a positive development. The relations between Hungarians and Romanians have certainly become more peaceful after the fall of communism, although tensions are still present, especially in certain areas in Transylvania. However, the idea that Transylvania is the embodiment of the ethnic conflict is not valid anymore. 139 Hungarians may not be happy with the situation, but they accepted it. Nevertheless, the region continues to be a special one for the Hungarians, in which they say they need to have the right to fully cultivate their own identity.

2.5.3 Roma The presence of the Roma minority in Romania dates back some centuries, probably around the Middle Ages. Different authors, however, do not agree on the exact date of arrival. In any case, in a document signed by Mircea the Great of 1387, it seems that the Roma were present already for a century. Although the exact date is not clear, it is assumed that they came from India to Romania around the 13th or 14th century. 140 Their arrival in Europe dates back to the Byzantine Empire. In that period the name ‘Gypsy’ came up, which derives from ‘Egyptian’. 141 The main names they acquired in Europe mostly derive from the former mentioned term. 142 Because of their stay in the Byzantine Empire, they acquired themselves the name ‘Rom’, which was the general name for the inhabitants of the empire. 143 In Romania, the Roma were quickly enslaved and in this way the name ’Gypsy’ became synonymous with that of ‘slave’. 144 The fact that the Romani people lived as slaves in Romania, is also confirmed by the Civil Code of that time in which it was stipulated that “Roma arriving from abroad were the

135

Act LXII of 2001 on Hungarians Living in Neighboring Countries. Culic (2006), p. 188 and interview B13 and C16. 137 Culic (2006), p. 189. 138 Interview B12 and B13. 139 Interview B13 and B22. 140 Achim (2004), pp. 7-26, CEDIME-SE (2001), p. 5, Cretan and Turnock (2008), p. 28 and Bos (2007), p. 34. 141 Achim (2004), pp. 9-11. 142 For example ‘Ţigani’ or ‘Zigeuner’. 143 Achim (2004), p. 12. 144 Achim (2004), p. 29. 136

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property of the state. In addition, every Roma born was automatically classified as a slave”. 145 Conditions changed slightly during the Turkish occupation. Guilds were introduced and the Roma were classified along their skills and according to the sector in which they were enslaved. 146 Those categorisations are still present in society today. Roma are divided in tribes according to those classifications. The position of the Roma in Transylvania, which than fell under Austro-Hungarian regime, was not better. In 1758-73, Maria Theresa tried to assimilate Gypsies in the Habsburg society by introducing the ‘Gypsy Decrees’, 147 which stipulated that the Roma were not allowed to speak their own language or to dress in their traditional clothes. 148 In the nineteenth century, under influence of the Enlightenment, ideas rose that slavery was not a justified measure but inhumane and barbaric. Halfway the century the Roma were freed, but their situation did not change considerably. They did not posses any land and lived in poverty. By the end of the First World War Romania had acquired a bigger territory (Transylvania from that point on would be a region of Romania) and in return it had to improve human rights. At the same time, the government was trying to create one homogenous Romania in which minority groups as the Roma did not fit. 149 In addition, the economic situation was worsening, creating the need to blame someone for the deteriorating social conditions. The Romani people were given the blame and they were denied the same rights since they lacked a culture or history “that was defined in written terms”. 150 In the interwar period, “Roma began to organise themselves collectively” 151 and started an emancipation movement. 152 They created a journal, Vice of Roma, and a Union in order to upgrade equal rights for the Romanian Roma. Although some actions were started, the upheaval of fascism put an end to it. The beginning of the Second World War made the situation of the Roma even worse. The same fate intended for the Jews by the Nazis was planned for the Roma. In Romania, Ion Antonescu supported Hitler and, in his nationalistic view, there was no space for minorities such as the Roma. 153 Half a million Roma died, including 10,000 deaths due to cold and starvation. 154 The end of the war did not improve the situation. During the communist regime the Roma were slightly better off since they had relatively more chance of getting a job or a stable house. However, the regime wanted to create a ‘homogenous Roma society’. 155 This meant that the Roma had to be assimilated. Roma could not practice their traditions or use their language; instead, they had to work in state factories or farms. The repression that took place during the regime was aimed at everyone and no distinctions in ethnicity were made in this sense. 156 Due to the measures of 1967 that aimed to induce a higher birth rate, the Roma families, which were large already, grew even more and led to the increase of abandoned children. 157 In addition, the Roma children in orphanages had a variety of health problems. Some projects started in the 1970s in order to integrate Roma in society through education. However, due to a lack of means those

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CEDIME-SE (2001), p. 5. CEDIME-SE (2001), p.6. 147 Cretan and Turnock (2008), p. 281. 148 Cretan and Turnock (2008), p. 281 and CEDIME-SE (2001), p.6. 149 CEDIME-SE (2001), p. 8. 150 CEDIME-SE (2001), p. 8. 151 CEDIME-SE (2001), p. 8. 152 Achim (2004), pp. 153-159. 153 CEDIME-SE (2001), p. 8. 154 Cretan and Turnock (2008), p. 282. 155 CEDIME-SE (2001), p. 8. 156 Culic (2006), p. 184 and interview A03, B22 and B27. 157 Cretan and Turnock (2008), p. 283. 146

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efforts came to a stop. 158 Towards the end of Ceausescu’s era, in the midst of an economic crisis, many Roma lost their jobs and “some turned to illicit activities, which recycles marginalisation, delinquency and poverty”. 159 The end of communism brought a sense of freedom to most Romanians. On the contrary, for the Roma the situation even worsened. In the 1990s there was an increase of violent actions against the Roma. There are many examples such as the escalating demonstrations of Bucharest in 1990. The demonstrations against communist administrators staying in function intensified and the destruction of Roma homes followed. 160 Nowadays, the Roma minority are present in the entire country as their presence is not limited to specific areas. As a result of their distribution, the Roma form a relatively heterogeneous group. 161 Their religious beliefs or even the language they use is strictly related to the area they live in. Muslim Roma for example mainly live on the Black Sea coast (in Babadag). 162 In other regions, like in Vaslui, the Orthodox religion is practiced. 163 Roma in Transylvania often speak Hungarian. 164 Another distinction between Roma lies in the way they live. “Contrary to popular belief, only some Roma groups are nomadic”. 165 In Bucharest, large numbers of Roma live in ghettos while in other parts of Romania they live in little self made houses. However, almost all Roma live in poverty in houses that lack electricity or running water. 166 Often whole families live in small rooms where bedroom and living areas are combined. 167 As said before, Roma often speak the language of the region they live in. However, a specific Roma language does exist and is similar to modern Indian. Still, only some Roma speak Romani. Their culture roots are based on old traditions. Part of this traditional way of living is the position of woman. Girls have to marry and to have children at a very young age. However, the way of life cannot be generalised since there are great differences between different Roma groups. The Roma are the biggest group in Romania that is least educated. Even if they did enjoy some education this is mostly limited to primary school. 168 High numbers of illiterate people are the consequence. Roma women are even more disadvantaged in this regard. Of the women 23 per cent “received no formal education compared to fifteen percent of the men”. 169 Furthermore, most Roma children who do go to school, attended segregated schools. 170 Nowadays, these kinds of schools are prohibited by law. 171 However, according to Romani CRISS - an NGO which defends the rights of the Roma - these schools have not yet totally disappeared. 172 The lack of school attendance can be linked to the fact that many Gypsies are not registered. Often they do not attend to requirements as register births, marriages and deaths. 173 Others instead claim that many Roma register themselves as Romanian or Hungarian. 174 This may have different reasons. There is, for instance, an identity problem. The term ‘Roma’ is often 158

Cretan and Turnock (2008), p. 283. CEDIME-SE (2001), p. 10. 160 Crowe (2008), p. 538. 161 Boia (2006), p. 331. 162 Cretan and Turnock (2008), p. 279. 163 Cretan and Turnock (2008), p. 276. 164 Cretan and Turnock (2008), p. 276. 165 Harding (2008), p. 28. 166 Crowe (2008), p. 541. 167 Crowe (2008), p. 541. 168 CEDIME-SE (2001), p. 44. 169 Crowe (2008), p. 540. 170 Crowe (2008), p. 540 and Cretan and Turnock (2008), pp. 291-292. 171 Cretan and Turnock (2008), p.292 and interview B13. 172 Interview B27. 173 Creţan and Turnock (2008), p. 278. 174 Achim (2004), pp. 212-214 and interview B13 and B27. 159

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linked with the idea of marginalisation or discrimination. 175 At the same time, however, it is difficult to talk about the Roma as a homogenous group since there are so many differences within the community. 176 The relations with Romanians are at least problematic. For instance the very name of the Roma instigates discussions and disputes. Although the name ‘Gypsy’ or ‘Ţigani’ has a negative connotation, it is widely used by Romanians to refer to the Roma. Some people feel that the word Roma is too similar to Romanian and they do not want any confusion on the subject. 177 Moreover, Romanians were not very pleased with negative news from abroad in which Roma were confused with Romanians. 178 The running-up for EU-accession meant for Romania that it needed to find solutions to the problem. 179 Next to different projects it was also decided to change the name from Roma to Rroma, to avoid any confusion. 180 In the end, the name obtained the same negative connotation as the name it replaced, since it was still being used to describe the Gypsies as a non-European, non-Romanian people. 181 At the same time there are some Roma who prefer to be called ‘Tigani’. 182 However, this could be due to the fact that people are used to be called in a certain way and do not know what the word historically means. 183 From 1989 onwards the Roma are recognised as a national minority 184 and are tend to be seen as a modern minority more and more. 185 However, the Roma community lacks a common ‘consciousness’ partly due to the fact that they do not form a coherent group. 186 The discussion on what it means to be Roma has only just begun within the Roma society and will probably develop further over the coming years. 187 Nonetheless, this process will encounter different obstacles, mainly because of the social issues that make integration into society difficult. 188 In 2005, twelve countries started a project in order to address the Roma issue; the Decade for Roma Inclusion. These counties - Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Macedonia, Montenegro, Romania, Serbia, Slovakia and Spain - have a great Roma minority and committed themselves, together with NGOs and Roma organisations, to tackle the problems. Each country has drafted an Action Plan for the period between 2005 and 2015 to improve the situation of the Roma. 189 Within the framework of the Decade of Roma Inclusion, Romania made some efforts in order to gain progress on life standards for the Roma. However, in a report on the development of an effective policy for Roma inclusion, the organisation Decade Watch stated that Romania is generally not very fast in showing their plans. In addition, the Romanian government lacked transparency and did not include civil society in the making of the Decade Action Plan (DAP) in 2004. 190 The governmental structure chosen to coordinate the implementation of the DAP is the National Agency for Roma. It was set up in 2004 but it witnessed different institutional changes that made the development of the institution difficult. 191 Nonetheless, “the new agency enjoys

175

Achim (2004), p. 214 and interview B27. Achim (2004), p. 214. 177 Boia (2006), p. 331, Woodcock (2007), pp. 493-495 and interview B27. 178 Woodcock (2007), pp. 493-515. 179 Woodcock (2007), pp. 493-495. 180 Woodcock (2007), pp. 493-495. 181 Woodcock (2007), pp. 493-495. 182 Interview B22 and B27. 183 Interview B27. 184 Achim (2004), p. 216. 185 Achim (2004), p. 216. 186 Achim (2004), pp. 216-217 and interview B13. 187 Achim (2004), p. 218 and interview B27. 188 Interview A03, B13 and B22. 189 Decade of Roma Inclusion 2005-2015 (2008). 190 Nicoara (2007), pp. 111-112. 191 Nicoara (2007), p. 113. 176

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relative autonomy” 192 but it “gives priority to implementing the National Strategy on Roma in comparison with implementing goals of the Decade of Roma Inclusion”. 193 According to the Decade Watch, Romania has made progress as well, mostly in the health and education sectors. The government is trying to make school access easier by “providing free school meals, subsidised school supplies and transportation” 194 . A project for adult education, called ‘Second Chance’, needs to decrease illiteracy mostly among Roma women. School mediators are introduced to “improve school enrolment and attendance”. 195 However, there is a low number of qualified mediators. The greatest problem still is the existence of segregated schools. “The Ministry of Education has adopted a notification that mandates desegregation in the Romanian school system, and, through the ministry, EU PHARE funding was dedicated to desegregation projects”. 196 In the health sector mediators are put into place as well. Still, the Ministry of Public Health is the only ministry that has a budget for Roma issues. On other issues such as employment there is still a need for effective policies. The work of the Decade Watch is, however, mostly focused on the measures and policies that have been taken. They compare practices and progress made by the participating countries. The Decade of Roma Inclusion is a relatively young project and it is therefore difficult to say what the effects of the new policies will be. 197 The EU-accession certainly pushed Romania to improve its policies towards the Roma, but as the Decade Watch implied and Romani CRISS stated, there is still a long way to go in order to improve their situation.

2.6 Cultural Policy The European Union has a cultural program which finances cultural projects and encourages cooperation between countries on a cultural level. In Romania, ‘the Culture Program (20072013)’ 198 is carried out by the ‘Cultural Point’ of Romania. “The Cultural Contact Point of Romania offers information regarding the ‘Culture’ Programme to those who are interested, helps the cultural operators interested in creating projects in finding partners for projects and offers technical assistance in elaborating projects”. 199 It is in fact a financing programme for Romanian cultural organisations that are interested in collaborating with other European partners. One of the requirements for participation is that at least three countries participate in such a project. 200 The goal of the program is reinforcing cultural bands in order to establish a common European culture that is based on a common heritage. 201 The general idea is that through this cultural cooperation “the emergence of a European citizenship” 202 will be encouraged. In 2003 the Romanian Cultural Institute (RCI) was founded in order to promote Romanian culture abroad. The RCI has an office in Bucharest and in sixteen other countries, of which fourteen in Europe. 203 The location of these offices reflects the priority in the promotion of Romanian culture. 204 The institute provides funds to projects which are aimed to promote Romanian culture. These funds are intended for both foreign and national projects. One of the 192

Nicoara (2007), p. 114. Nicoara (2007), p. 114. 194 Nicoara (2007), p. 42 and interview A03. 195 Nicoara (2007), p. 42. 196 Nicoara (2007), p. 42. 197 Nicoara (2007), pp. 15. 198 The Culture (2007-2013) Program of the European Union (2007). 199 The Culture (2007-2013) Program of the European Union (2007). 200 Interview B01. 201 Interview B01. 202 The Culture (2007-2013) Program of the European Union (2007). 203 Romanian Cultural Institute (2009) and interview B01. 204 Interview A03 and B01. 193

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funding programmes is CANTEMIR, which “aims to ensure easier access to Romanian culture, raise the profile of Romanian culture on international cultural markets, and foster links between Romanian and foreign artists.” 205 The above mentioned institutes are examples of initiatives which try to encourage other Europeans to become more interested in Romanian culture. It has been stated that mutual understanding can contribute to European citizenship which may show that Romanians are not that different from other Europeans. 206

2.7 Conclusion Since 2007 Romania is part of the European Union. For years the country was perceived as a peripheral borderland. Even in literature it was often described as a dark and mysterious country. Nowadays, some Romanians still feel being the odd one out. In fact, one of the interviews affirmed that Romania is seen as the ‘poor relative’ of Europe. However, Romania tries to change this perception, among others by the promotion of its culture abroad. By making its culture known other countries may start to see them differently, and no longer see Romania as an underdeveloped, non-western country; it may increase the understanding of the rest of the EU countries towards Romania. Moreover, the promotion of culture abroad is regarded as crucial to a mutual understanding in general which could contribute to the development of a European citizenship. However, these ‘cultural policies’ alone cannot change the perception of Romania as the ‘odd one out’, since this perception is not just determined culturally. Nonetheless, even from the cultural point of view some remarks can be made. Romanians in general feel they have always been part of Europe; they share their history and culture with the other European nations since the Roman Empire. Somehow Romania’s history was connected to the history of the rest of Europe. Transylvania was for a long period part of the Habsburg Empire while Southern Romania fell under the Ottoman Empire. Some historical events took place all over Europe as the revolts in 1848 and 1968. The country was disconnected from the rest of (Western) Europe for fifty years during communism; this period is perceived as the only interruption of the shared history. Therefore, Romanians are mostly pro-European and accession to the EU was for them an obvious step. Although some say communism is over and does not form any obstacle for the future anymore, it still affects daily life in Romania. Romanians in general struggle with a mentality problem: they tend to wait for someone else to settle their problems. They lack a pro-active attitude that would help them to improve the situation by themselves. During communism, the state controlled every single aspect of life in Romania; nowadays, Romanians still wait for another actor to tell them what to do. This passive mentality is the biggest challenge for the integration of Romania into the EU, since Romanians now rely far too much on the EU. Many of them expect the EU to solve all problems. Of course, the EU can and should help Romania with the integration process, but also an effort from Romanian authorities and citizens is needed. Passivity makes any development difficult to achieve. If the Romanians are not committed to adapt themselves to the new social conditions they will stay behind and not reap the benefits of European integration. On the other hand, some Romanians feel they are not treated fairly in comparison to other member countries. New members have had to apply more legislation and policies than older members regarding the accession, thus the EU is using double standards. Moreover, Romanians feel they are not regarded as a full member. This might be true, but the best way to overcome this, is perhaps to adopt a more pro-active attitude by Romania. In that way, Romania could strengthen its position in the EU and it would not be seen as a ‘poor relative’ anymore. 205 206

Romanian Cultural Institute (2009) and interview B01. Interview A03, B01, B22 and B26.

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Another issue that came more and more to the surface after communism was the position of the minorities. During the communist regime, the only nationality that was embraced was the Romanian. Other nationalities were oppressed, assimilated or neglected. After 1989 the paradigm shifted, making policies for minorities possible. The EU-accession has encouraged even more a progress in the establishment of minority policies. This was not an obligation, but mentioned as a strong recommendation. Romania has especially done a lot of work with regard to the Roma. While in the nineties policies for Roma were almost absent, since 2000 there have been various initiatives to improve their living standards. In particular, the accession to education and health care has been improved by the establishment of school and health mediators. Another initiative is the Decade of Roma Inclusion, which in essence is a good program as it recognises the Roma issue as a common EU problem instead of a Romanian problem. However, much remains to be done to really improve the situation of the Roma. A mentality change is needed, both among Romanians as among Roma. Firstly, the institutions concerned with Roma issues have to approach the situation in a different way. Roma are approached as one homogeneous group, while in reality, they are very heterogeneous. Each local Roma community has its own values and traditions, mostly depending on the region where they live. Consequently, policies would be more effective if they were directed to the specific needs of the local communities. In this sense, the Decade of Roma Inclusion is not very effective, since it is aimed at projects for the whole Roma minority. Secondly, Roma need to redefine themselves urgently to fit into the modern society. Most of them hold on to a traditional style of life which prevents them from social integration; educated Roma for example are frequently banished from their communities. Education in general is the most effective way to improve the living standards of Roma. Unfortunately, many Roma are too poor to send their children to school. Moreover, segregated schools still exist, although prohibited by law. Segregation preserves stigmatisation, the third aspect to be changed. Many Roma do not declare themselves to be Roma since being Roma still means being stigmatised somehow. A more positive perception on Roma could stimulate them to integrate more in Romanian society. However, here again Romanians suffer from their passivity: they perceive the problem as a European problem and thus wait for the EU to do something about it. But Romania cannot expect the EU to solve everything without addressing the problem at home. Instead, here lies an opportunity for Romania to take the lead in the Decade of Roma Inclusion, being an example for the other countries involved. In this way, Romania can affirm to be a fully fledged member of the EU. The case of the Hungarians is very different. The situation of the Hungarians already had started to improve immediately after the fall of communism. The prospect of EU membership had not much to do with it. The conflict between Romanians and Hungarians seems to have diminished over the years, in which the participation of the UDMR in the government played an important role. Nowadays, it is not an ethnical conflict anymore but mostly political; in fact, it is just presented as an ethnic problem. Furthermore, the region of Transylvania does not longer form a threat to Romanian unity. Most Hungarians have accepted the situation, although they still feel they need to have a special status in that region. However, it is possible that Transylvania will become again a major source of conflict if Romania does not continue to put the minorities’ issues on the forefront. Such a situation is not unthinkable as in recent years the enthusiasm for the implementation of minorities’ policies seems to have diminished. Moreover, Romania’s policies lack continuity since they change with every new government. Nevertheless, membership of the EU reinforces the position of the minorities as they perceive the EU as a new platform to defend their rights. In this way, the EU may guarantee a more stable situation inside Romania in the future. There is still a long way to go. Mentality cannot be changed overnight. New generations will have to proof they are willing to leave the past behind. The communist era has paralysed the

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country but it may be possible for Romania to overcome this obstacle in the future if its citizens are sufficiently motivated. They need to look to the future adopting a pro-active attitude fitting an EU-country. Regarding the minorities, Romania has to maintain and improve the good work and be aware that minorities’ policies will remain crucial for a stable society, since minorities are a vital part of their community.

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3. Constitution of Romania 3.1 Constitutional order of Romania When looking at the current Romanian constitution, a democratic judicial system can be recognised. According to article 1, Romania is a sovereign, independent, unitary and indivisible national state. The form of government of the Romanian State is a republic, governed by the rule of law, based on a Western model of balance of powers. Article 4 states that the Romanian people are united: “Romania is the common and indivisible homeland of all its citizens, without any discrimination on account of race, nationality, ethnic origin, language, religion, sex, opinion, political adherence, property or social origin.” 207 According to article 16, no one is above the law. 208 In this chapter, the establishment of the current Romanian constitution will be analysed.

3.2 The Constitution before 1991 In August 1965, Romania adopted a new constitution in order to establish a political system with one ‘great party’. The governmental party changed the juridical and social system. 209 This constitution contained 121 articles, divided into 9 sections or titles: the Socialist Republic of Romania, the Citizens’ fundamental rights, the bodies of the State’s power, State’s administration, the local bodies of the State, the judicial bodies, prosecuting bodies, the Romanian symbols and some final provisions. The constitution reflected and established the communist totalitarian principles, and had to guarantee Romania’s transformation into a totalitarian communist state. Romania developed exactly the way the founders of the constitution had planned. 210 It is not a coincidence that a few months before the adoption of this constitution, Nicolae Ceausescu was appointed Secretary-General of the Communist Party. Under his leadership Romania followed the line of his predecessor as a great advocate of national sovereignty. Ceausescu was responsible for the quick implementation of the constitution in which characteristics of strong national sovereignty appeared clearly. 211

3.3 The transition and the establishment of the new Constitution after 1991 After the collapse of communism in Eastern Europe and the execution of Ceausescu and his wife, Romania struggled with a new political system. The political disorder continued for quite a while as Romanians remain unsatisfied with their politicians. In December 1989, the situation ended in a revolution when high level communist apparatchiks of the dictatorial regime were removed. 212 But even though the power bodies stayed intact, a new constitution had to be established. At that time, a de facto government was in power: the National Salvation Front Council. In order to establish a new constitution, the Decree/law No. 92/1990, a ‘miniconstitution’ entered into effect from 1990 until 1992. 213 This Decree/Law was basically an electoral law, regarding the election of the parliament and the President of Romania. It also provided democratic principles: exercising the political power by the people; the principle of pluralism and separation of powers; the legislative functions of the Parliament; the prerogatives 207

Article 4 of the Constitution of Romania. Article 16 of the Constitution of Romania. 209 Jansen (1991), pp. 229-230. 210 Muraru (2009). 211 Jansen (1991), p. 229. 212 Muraru (2009). 213 Muraru (2009). 208

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of the Romanian President; the relation between Parliament, President of Romania and the Government; checks and balances between the state powers and the political accountability of the President of Romania and of the Government. After Romania had suffered from communist totalitarian principles for over forty years, these new democratic principles significantly changed the country as it was the first time the legislative power of a Romanian Parliament was mentioned. 214 Although democratic principles were present in the ‘mini-constitution’, from 1990 to 1992, Romania struggled with a slow process of democratisation. Since several limitations to the democracy remained, human rights organisations became active in Romania at this time. A new constitution was drafted in an unstable climate and was adopted eventually after a public referendum on 8 December 1991, when 22.4 per cent voted against, while 77 per cent said ‘yes’ to the new constitution . 215

3.3.1 The Constitution of 1991 The new constitution contained 152 articles, divided in 7 titles. The first title ‘general principles’ outlines Romania’s state structure with a republican form of government. The ‘rule of law’, ‘Romanian citizenship’, ‘the judicial value of international treaties’ and ‘the provisions concerning the national Romanian symbols’ were important issues discussed in this first title. The second title, ‘fundamental freedoms and duties’ contained 4 chapters; ‘general provisions, fundamental rights and freedoms, fundamental duties and ‘Advocate of the people’. 216 The third chapter, ‘public authorities’, contained chapters about ‘the parliament’, the ‘President of Romania’, the ‘government’, ‘public administration’ and finally the ‘judicial authority’. This chapter provided the structure for the Romanian government. The president is Head of State and is, according to the constitution of 1991, elected for four years by universal, equal, secret and freely expressed voting. The parliament is elected the same way and for the same duration as the president. The parliament consists of the Chamber of Deputies and the Senate. The relations between the government and the parliament are described in special chapter III. Title IV, ‘economy and public finance’ refers to the economy, the financial system, fees and taxes and the Court of Audit. 217 What might be one of the most important features of the Romanian constitution is that it also deals with property, reflecting Romania’s struggle with private property under the communist regime. Title V and VI include the Constitutional Court, which follows a European model, and the revisions of the constitution itself. Finally, title VII, ‘final and transitory provisions’ refer to the temporary conflict of law and future institutions. 218 The current constitution, which was established in 2003, added one chapter to these titles; Title VII became ‘revision of the constitution’, and therefore ‘final and transitory provisions’ became Title VIII. 219

3.4 Current Constitution The constitution al changes of 2003 were necessary as the Romanian democracy was still young and further reforms were required. Due to the lack of democracy inheritance, Romania had followed the French/Belgium model in order to establish the constitution of 1991. By the end of

214

Interview B32. Muraru (2009). 216 Muraru (2009). 217 Muraru (2009). 218 Title V and VI of the Constitution of Romania. 219 Ionescu (2008), p. II 19. 215

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the 1990s, it became clear that several articles of this constitution were not suitable for Romania. 220 Furthermore, a few special typical Romanian topics were missing. A new referendum was held to adopt the changes for the new the constitution. A large majority, 89.7 per cent of the Romanian people, was in favour. The most important changes were: • • • • • •

National minorities have the right to use their native language in dealing with the governmental administration and the courts. Private property is guaranteed by protection of the law (previously property was only ‘protected’, not ‘guaranteed’). The mandate of the President of Romania is extended to five years (previously it was four years). 221 Citizens are entitled to a fair trial and cases need to be resolved within a reasonable time (article 21). Changes regarding individual freedom. This was important for the Romanian people as, during communism, individual freedom was not respected, and until 2003, this right was often violated. Separation of powers was, for the first time, explicitly mentioned in article 1. This strengthened the independence of justice. 222

Furthermore, a few articles showed that Romania fully pursued accession to the European Union in the years before 2007. Article 16, paragraph 4 for instance states that “after Romania's accession to the European Union, the Union's citizens who comply with the requirements of the organic law have the right to elect and to be elected to the local public administration bodies.” Furthermore, Article 148 discusses the integration of Romania into the European Union. 223 Aside from these changes, Romania may still need some constitution al reforms. The power of the Ombudsman in Romania is still weak and could be strengthened. Furthermore, as Romania is currently working on decentralisation, the role of local authorities could be discussed within the constitution. Moreover, as Romania’s judicial power is criticised for not being independent enough, reforms could be made regarding the appointment of judges and the role of the Minister of Justice. 224

3.5 Separation of Powers within the Constitution The current constitution of Romania reflects explicitly the principle of separation of powers in article 1 sub paragraph 4, which means that the legislative, executive, and judicial power have their own areas of responsibility. According to article 61 of the constitution, the parliament is the supreme representative body of the Romanian people and the sole legislative authority of the country. 225 The Chamber of Deputies and the Senate together form the parliament. The government and the President of Romania represent the executive power. The government, consisting of the Prime Minister, Ministers, and other members as established by an organic law, ought to ensure the implementation of the domestic and foreign policy of the country, and exercise the general management of public administration. 226 The President represents the State and is the safeguard of the national independence, unity and territorial

220

Interview B32. The Constitution of Romania. 222 Interview B32. 223 Muraru (2009). 224 Interview B32. 225 Article 61 of the Constitution of Romania. 226 Article 102 paragraph 3 of the Constitution of Romania. 221

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integrity of the country. 227 Although the legislative and executive powers are separated powers, the Romanian parliament and government co-operate intensively. According to article 111 of the constitution, the government is obliged to present the information and documents requested by the parliament through their respective presidents. 228 According to the constitution, the judicial power acts independently and on its own. This means that judges are independent and immovable. As a consequence of separation of powers, any interference of the legislative or the executive section is prohibited. In chapter 5, the judicial power will be further analysed.

3.5.1 The role of the people in the dismissal of the President The role of the Romanian people regarding the President’s suspension from office should not be left out of account as it is remarkable for the Romanian form of government. According to article 95 of the constitution, a referendum shall be held within 30 days after the Chamber of Deputies and the Senate have decided in a joint sitting that the President should be suspended from office. As the Romanian people choose the President, they also have the last word when the President should be suspended according to the Chamber of Deputies and the Senate. This indicates the important role of the people when it comes to the dismissal of the President, 229 since the President can hold his position in case the people vote him back in office.

227

Article 80 of the Constitution of Romania. Article 111 of the Constitution of Romania. 229 Interview B32. 228

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4. Romanian Polity 4.1 Executive power

230

Romania’s political system is a unitary, semi-presidential, representative and democratic Republic. The executive functions are shared between the president (Head of State) and the prime-minister (Head of Government).

4.1.1 Head of State The president is Head of State. Until 2003, the president was chosen every four years, simultaneously with the Chamber of Deputies and the Senate, but since the new election laws of 2003, the president is chosen for a maximum of two terms of five years (they do not have to be consecutively). The president represents the Romanian State and safeguards the national independence, unity and territorial integrity of the country. He also acts as a mediator between the powers in the state as well as between the state and society. The president is elected by free, universal, equal, direct and secret suffrage. During his term in office, the president may not be a member of a political party and he enjoys immunity. 231 The current president is Traian Basescu.

4.1.2 Government The prime-minister is Head of Government. He is appointed by the president, but cannot be dismissed by the president. 232 The prime-minister appoints the Council of Ministers. Membership of the government is incompatible with any other public office, except the office of deputy or senator. 233 The composition of the Romanian government per May 2009 can be found in the figure below. Emil Boc Dan Nica Gheorghe Pogea Radu Mircea Berceanu Cristian Diaconescu Adriean Videanu Ecaterina Andronescu Vasile Blaga Marian Sarbu Mihai Stanisoara Catalin Marian Predoiu Ilie Sarbu Elena Gabriela Udrea Ion Bazac Theodor Paleologu Nicolae Nemirschi Monica Maria Iacob-Ridzi

Prime-Minister Vice Prime-Minister, Minister of Administration and Interior Minister of Finance Minister of Transport and Infrastructure Minister of Foreign Affairs Minister of Economy Minister of Education, Research and Innovation Minister of Regional Development and Housing Minister of Labour, Family and Social Protection Minister of National Defence Minister of Justice and Citizens’ Freedoms Minister of Agriculture, Forests and Regional Development Minister of Tourism Minister of Public Health Minister of Culture, Religious Denominations and National Cultural Heritage Minister of Environment Minister of Youth and Sports

230

All information in this paragraph has been retrieved from the Europe World Year Book 2007, unless otherwise stated. 231 Constitution of Romania, articles 80 – 84. 232 Constitution of Romania, article 107, paragraph 2. 233 Constitution of Romania, article 105, paragraph 1.

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Constantin Nita Minister of SMEs, Trade and Business Environment Gabriel Sandu Minister of Communication and Information Society Victor-Viorel Ponta Minister for Liaison with the Parliament 0.1Figure 4.1 Composition of Romanian government per May 2009 Source: Government of Romania official website (2008).

4.2 Legislative Power According to article 61, paragraph 1 of the constitution, the parliament is the supreme representative body of the Romanian people and it is the sole legislative authority of the country. In this section a brief overview of Romanian parliamentary history will be presented, as well as a general description of the organisation and functioning of the parliament.

4.2.1 Parliamentary History Romanian parliamentary history starts in 1831, when in Wallachia a constitution al document was adopted, named The Organic Regulations. A year later these regulations were implemented in Moldavia as well. They set the foundations for the parliamentary institution in the Romanian Principalities. The Paris Agreement of 1858 and in particular The Agreement's Developing Statutes, which introduced the bicameral representation, perfected and enlarged the principle of national representation. These statutes were adopted in 1864 on the initiative of Prince Alexandru Ioan Cuza by means of a plebiscite. Under the political regime established by the Paris Agreement, the legislative power faced a process of modernisation and the legislative power became the national representation, which operated in accordance with the organisation and operation mode of parliaments in Western Europe at that time. The historical process of formation of the Parliament of Romania strongly boosted the affirmation of national sovereignty, subsequently leading to the union of Wallachia and Moldavia in 1859. On 9 May 1877 the Declaration of Romania's Independence was read under the dome of the Romanian Parliament and in 1920 the documents of union of the Romanian historical provinces with the country were ratified. In February 1938, under strong political pressure, King Carol II, who always had undermined the role of the parliamentary institution, imposed a rule of authoritarian monarchy. Under the royal dictatorship the parliament became a decorative body, deprived of its main attributes. By the setting up of a military dictatorship regime in 1940, the activity of the parliament was suspended. After 23 August 1944, under the pressure of the communist forces, the parliament was re-organised as a single legislative body, the Assembly of Deputies. In accordance with the 1948 constitution, this Assembly changed into the Great National Assembly, a formal body totally subordinate to the communist power. The Revolution of December 1989 made it possible for Romania to return to the authentic democratic regime, based on free elections and political pluralism, the observation of human rights, the separation of powers and the ruler’s responsibility before the representative bodies. Due to the documents issued by the provisional revolutionary power, Romania has returned to the two-chamber parliamentary system. All these stipulations can be found in the country's new constitution, approved by referendum in 1991. 234

4.2.2 Organisation and Functions of the Parliament Romania has a bicameral Parliament, consisting of the Chamber of Deputies (Camera Deputatilor) and the Senate (Senat). Elections for both Chambers take place simultaneously every 234

Chamber of Deputies official website (2008a).

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four years. The representation norm for the election of the Chamber of Deputies is one deputy for 70,000 inhabitants. The representation norm for the election of the Senate is one senator for 160,000 inhabitants. 235 The organisation of each Chamber is regulated by its own standing orders. The organisation of the joint sittings of the Chamber of Deputies and the Senate is regulated by special standing orders for these sittings. The internal structures of the two Chambers of Parliament consist of the Presidents of the Chambers, the Standing Bureaux, the parliamentary committees, and the parliamentary groups. The parliamentary structures are formed in accordance with the political configuration of each Chamber. 236 The functions of the Parliament of Romania proceed from its quality of supreme representative body of the Romanian people and from that of single legislative authority of the country. The powers of the Romanian Parliament are threefold. Firstly, it has legislative power. Secondly, it exercises parliamentary scrutiny, which can be systematised as follows: • Prior approval by the parliament and prior consultation of the parliament for certain of the president; • Grant or withdrawal of confidence to the government; • Questions and interpellations; • Motions; • Parliamentary inquiries; • Assumption of responsibility by the government on its own initiative; • Institution of criminal investigation of members of government; • Suspension from office or impeachment of the president. The third and last power of the parliament is its budgetary control. The constitution offers the parliament the exclusive prerogative of approving the state budget on an annual basis. 237

4.3 Local Administration Romanian territory is divided into administrative-territorial units. (see figure 4.2)

235

Ionescu (2008), p. II 33. Chamber of Deputies official website (2008b). 237 Ionescu (2008), pp. II 39-47. 236

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0.2Figure 4.2 Administrative map of Romania Source: Treptow (1996), p. 568. These units are communes, towns and counties. They function according to the principles of decentralisation and subsidiarity. Ministries delegate some of their administrative and financial powers to specialised public structures. The most important players in the local administration are the mayors and the local councils. They are both elected through equal, direct, free and secret suffrage for a term of four years. The mayor holds the executive authority. The local council functions as a deliberative authority. Some rules exist to assure the effectiveness of the local council. For example, the local council can be dismissed de jure if it has not convened during two consecutive months, if it has not adopted a resolution during three consecutive meetings or if its number falls below half plus one of the established compositions. The local council can also be dismissed by means of a referendum, which can be held on the instigation of 25 per cent of the number of citizens that have the right to vote in that administrative-territorial unit. At county level a county council is established. This county council consists of counsellors elected by free, equal, direct, universal and secret suffrage. The government appoints a prefect for each county and for the municipality of Bucharest. He or she oversees that all local administrative bodies (mayor, local council, county council) carry out their duties in accordance with the legal provisions. 238

4.4 Electoral system Romanian elections take place by universal, equal, direct, secret, and freely expressed suffrage, on the basis of a list system and independent candidatures, according to the principle of proportional representation. The option for an identical election system for both the Chamber of

238

Ionescu (2008), pp. II 73-74.

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Deputies and the Senate confers them the same legitimacy, as both of them are the expression of the will of the same electorate. 239 According to article 36 of the Romanian constitution, every person of eighteen years and older has the right to vote and according to article 37 every person aged 23 or older has the right to be elected. Article 38 confers the right to elect and be elected for the European Parliament. 240 The current electoral law was adopted in 2004 and is divided in a Law on the Election of the President, a Law on the Elections of the Chamber of Deputies and the Senate, and a Law on Election of Local Public Administrations Authorities. The President is elected for a term of five years, the Deputies and the Senators are elected for a term of four years. In the Election of the Chamber of Deputies and the Senate a 5 per cent threshold applies to be elected for all political parties, political alliances and electoral alliances. 241 With regard to political and electoral alliances an additional threshold of three per cent applies to the second member of the alliance. 242 A total of 314 Deputies can be elected, plus an additional number of eighteen Deputies for minorities that have not reached the threshold of five per cent. The Senate consists of 137 Senators. Before the electoral law of 2004, the electoral threshold was only 0.2 per cent, which resulted in political pluralism, something very much desired after the one party state Romania had been under communism. However, this resulted in the possibility to create a party with only 251 members and they all received State funding. Therefore, in the 2004 electoral law the threshold was raised and now political parties can only be legally registered once they have 25,000 signatures. 243

4.4.1 Effects of the new electoral system During the parliamentary elections of 2008, the new electoral system was used for the first time. Its aim is to better represent voters at the regional level, as opposed to the previous system. The new electoral law divides Romania in 42 constituencies (41 counties plus the Municipality of Bucharest) 244 and can be compared with the system used in the United Kingdom. 245 With this new system the collective votes are counted. This means that when a party receives, for example, sixteen per cent of the national votes, sixteen per cent of their candidates who have finished best in their constituencies will enter the parliament. There is one exception; if one candidate manages to obtain more than fifty per cent of the votes in the uninominal constituency, he or she will become a member of the parliament directly. 246 In order to gain as much votes as possible, the new electoral system triggers individual candidates to perform better at local and national level. Furthermore, this system allows voters to discharge individuals on corruption scandals or disappointing results. This was not possible during the use of the previous system. 247 The downside of this system is that it focuses on personalities rather than on the ideology of the parties. Political parties aim to bring in famous representatives in order to gain more votes. 248

239

Chamber of Deputies official website (2008c). Constitution of Romania, articles 36 - 38. 241 Law 373/2004, article 90, paragraph 2a. 242 Law 373/2004, article 90, paragraph 2b. 243 Coman and Ivan (2006). 244 Law 373/2004, appendix no. 1. 245 Nitoi (2008), p. 15-16. 246 Nitoi (2008), p. 15-16. 247 Nitoi (2008), p. 15-16. 248 Nitoi (2008), p. 17. 240

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4.4.2 Candidates for the presidential elections 2009 In November 2009, new presidential elections will be held in Romania. The most popular candidate is the current president, Traian Basescu. A poll held in April of this year showed that, if the elections would be held at that moment, forty per cent of the votes would go to Basescu. 249 Another candidate for the presidential elections is the new party leader of the National Liberal Party (PNL), Crin Antonescu. Keeping in mind the disappointment of the last parliamentary elections, members of the party favoured a new leader. Former party leader Tariceanu lost the vote by 546 to Antonescu’s 873. Antonescu is member of the PNL since 1990, a former Minister of Youth and Sports during the right wing government of 1996-2000 and is so far free of any corruption accusations. 250 The poll in April 2009 showed that, at this moment, Antonescu would receive fifteen per cent of the votes. 251 Although it remains uncertain until November whether he will be able to gain enough support in order to compete with the current president or not, analysts do believe he may be able to improve the relationship of the PNL with the governing parties. 252 More popular than Antonescu at this moment is the party leader of the Romanian SocialDemocrat Party (PSD), Mircea Geoana. According to the same poll, he would obtain nineteen per cent of the votes. 253 Geoana fulfils the position of chairman of the PSD since 2005 and is also Chairman of the Foreign Relations Committee in the Romanian Senate. In the governmental period 2000-2004 he was appointed as Minister of Foreign Affairs. 254 The candidate who turned out to be the least popular is Prince Radu Duda, the son-in-law of King Michael the First of Romania. 255 If the presidential elections would have been held in April, he would only have received about four per cent of the votes. 256

249

Hotnews.ro (2008-2009). The Diplomat – Bucharest (2009b). 251 Hotnews.ro (2008-2009). 252 The Diplomat – Bucharest (2009b). 253 Hotnews.ro (2008-2009). 254 Aspen Institute (2009). 255 The Romanian royal titles do not have any diplomatic or legal status. 256 Hotnews.ro (2008-2009). 250

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5. Judicial system The Romanian judiciary is expounded by the constitution, which contains the principles, structure and manner of organisation. Law no. 304/2004, concerning the judicial organisation, republished these principles. This law repealed most of the provisions of the previous Law no. 92/1992, on the establishment of the judiciary. In this chapter, the way Romania is organised in the judicial area will be examined.

5.1 Courts According to article 126 of the constitution, justice shall be administered by the High Court of Cassation and Justice, and the other courts set up by the law. 257 Different levels of hierarchy exist within the courts: the Constitutional court (Curtea Constitutionala), the High Court of Cassation and Justice - former Supreme Court of Justice – (Inalta Curte de Casatie si Justitie), Courts of Appeal (Curti de apel), regional tribunals (Tribunale), specialised tribunals and first instance courts (Judecatorii). 258 The law also provides a number of military courts. Effective collaboration between the courts is based on the principles of independence and transparency of justice which aims to harmonise the practice of courts. 259 According to article 16 of Law no. 304/2004, the High Court of Cassation and Justice (HCCJ) is the only supreme instance in function. 260 The Court has the competence to judge the appeal in cassation and to guarantee the unitary construction and enforcement of the law by the other law courts. It is organised in four sections; the Civil and Intellectual property section, the Criminal section, the Commercial section and the Administrative and fiscal contentious section. As the court has the final say in a process, its responsibility is high: By assuring a unitary interpretation of the law by all other judicial courts, it indirectly guarantees the equality of all persons. 261 The Courts of Appeal, 15 at present, are divided into several sections: civil causes, criminal causes, commercial causes, causes for minors and/of family, administrative and fiscal contentious causes, causes regarding labour conflicts and social security’s, maritime and fluvial causes or for other fields, in relation to the nature and number of the causes. 262 Each county has its own tribunal: There are 42 tribunals established by law, although one is currently not functioning. The tribunals, divided into different sections as well, exist of four specialised tribunals. The Bucharest tribunal functions as the specialised instance and has the competence to judge causes regarding intellectual property. The first instance courts have been established in counties and in the districts of the Bucharest municipality. Within the Romanian courts, the independency of judges is in principle enshrined in the constitution of Romania. 263 In order to guarantee independency, judges – as well as magistrates, policemen and other categories of civil servants – cannot join political parties. 264 Judges, regardless of the court degree, could not perform their job if the court would be subject to interference from bodies or persons in the form of guidelines or suggestions. 265

257

Article 26 of the Romanian Constitution. Law no. 304/2004 on Judicial Organisation. 259 Interview B32. 260 Law no. 304/2004 on Judicial Organisation. 261 High Court of Cassation and Justice official website (2005). 262 Law no. 304/2004 on Judicial Organisation. 263 Article 124 paragraph 3 of the Romanian Constitution and Law No. 303/2004. 264 Article 40 paragraph 3 of the Romanian Constitution. 265 Interview B32. 258

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5.2 Constitutional Court According to Article 142 of the constitution, the Constitutional Court is the guarantor for the supremacy of the constitution. 266 It needs to make sure that legislative acts are in accordance with the constitutional provisions. The decisions of the Constitutional Court are generally binding for any natural or legal person under the law when given in the previous constitutional control promulgation of laws (a priori control), as well as on the unconstitutionality exception path (a posteriori control). 267 The Constitutional Court consists of nine judges, of whom three are appointed by the Chamber of Deputies, three by the Senate and three by the President of Romania. Although the President of the Constitutional Court is elected by its own judges for a term of office of three years, the other judges are appointed for a term of nine years. Since the constitutional judges are appointed by the Parliament and the President, political influence might be possible in this process. Therefore, it is possible that the decision-making of the Constitutional Court results in a political issue as well. 268

5.3 Public Ministry The Public Ministry is an authority which, according to article 131 of the constitution, deals with the representation of the society’s general interests, the protection of the legal order and the protection of citizens’ rights. 269 It exercises its duties through public prosecutors and the judicial police bodies. The prosecutor’s offices function near each court and have premises in the areas in which the courts function. There is also a Prosecutor’s Office attached to the HCCJ. The general prosecutor of the Prosecutor’s Office attached to the HCCJ, also coordinates the National AntiCorruption Prosecutor’s Office. The organisation and management of the Prosecutor’s Offices, provisions can be found in the law. The prosecutors are competent to “conduct criminal investigation, according to the law; represent the general interest of the society and protect the rule of law; lead and supervise the activity of criminal investigation conducted by the police”. 270 Prosecutors are independently related to the courts as well as to any other public authority. Although the prosecutors operate under the authority of the Minister of Justice, they cannot be asked to open or to stop criminal investigations. The Minister of Justice has, aside from checking the way in which prosecutors fulfil their managerial duties and how they work with others, no means to interfere in the activity of the prosecutors. 271

5.4 The Superior Council of Magistracy The primary aim of the Superior Council of Magistracy (SCM) is to “fulfil the constitutional and legal role of guarantor of the justice independence”. 272 The Council is therefore responsible, above any other participant for the judicial procedures, for the correct organisation and operation of justice. The SCM is the only body competent to speak regarding the career of judges and prosecutors; i.e. the appointment, promotion, disciplinary sanctioning and release from office.273 The SCM is composed of nineteen members, of whom nine judges, five public prosecutors, two representatives of civil society (elected by the Senate) and the President of the HCCJ, the 266

Article 142 of the Romanian Constitution. Interview B32. 268 Ionescu (2008), pp. II 82-84. 269 Article 131 of the Romanian Constitution. 270 Council of Europe official website (2007). 271 Ionescu (2008), p. II 78. 272 Superior Council of Magistracy official website (2008). 273 Council of Europe official website (2007). 267

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Minister of Justice and the General Prosecutor of the Prosecutor’s Office attached to the HCCJ. Apart from the latter three, the Council’s other members are democratically designated by the general assembly’s of the judges and public prosecutors as well as by the Senate. The term of office of the SCM members is six years. 274 Assuring the independence of justice implies acting in accordance with two main coordinates. Firstly, specific mechanisms and appropriate procedures need to be guaranteed, which will assure the compliance with the principle of separation of powers within the State. The judiciary must be protected from any outside influences, for example of political or economic nature. Secondly, the SCM must at all time make sure that every magistrate is independent, as the act of justice needs to be subordinated exclusively to the application of the law. 275 In 2008, the SCM worked intensively to eliminate remaining problems in the judicial field. Unifying the case-law, increasing the transparency of the act of justice, strengthening the institutional capacity of the SCM, raising the accountability of the Council’s members and in conclusion making the act of justice more effective, were matters with great importance on the SCM’s agenda. 276 The Co-operation and Verification Mechanism reports of the EU, which examines Romania’s progress in the area of reform of the judiciary and of the fight against corruption every six months, discusses the results of the SCM in 2008. These reports will be analysed later on.

5.5 Police The Romanian police, falling under the jurisdiction of the Ministry of Interior, “represents the specialised state institution which exerts responsibilities regarding the protection of the fundamental rights and liberties of the individual, the protection of private and public property, prevention and identification of crime cases and observance of public order and safety, pursuant to the law”. 277 In Romania, four General Inspectorates are present; the General Inspectorate of the Romanian Police, the General Inspectorate of the Border Police (which is important as Romania has one of the largest external borders of the EU), the General Inspectorate of the Gendarmerie and the General Inspectorate for emergencies. The General Inspectorate of the Romanian Police coordinates the Bucharest Police Directorate, 41 county police inspectorates, 15 brigades for countering organised crime, 8 regional transport police units, the National Witness Protection, the National Agency against human trafficking, the International Police Cooperation Centre (IPCC) and 4 educational units. Romania is actively involved in international crime control, as the IPCC reunites several cooperation challenges, such as Interpol and Europol. 278 The Romanian police has experienced a series of defining stages in its transformation from 1989 to 2002. From an institution working under a totalitarian regime aimed at guarding the socialist values, the Romanian police changed into a modern public institution focused on citizens and the needs of the local communities. One of the most important changes has been the demilitarisation of the police in 2002, which caused profound mutations regarding the perception and action of its officers as well as the relation between citizens and the police. 279 Although changes within the Romanian police system have not been easy, the institution today seems to be a functioning machine. Where the Romanian police has been criticised in the past for its inconsistency in penalising people committing a crime (high-officials or ‘soccer players’ seemed to get away with driving too fast), this does not seems to be common practice any longer. 280 274

Ionescu (2008), pp. II 78-79. Superior Council of Magistracy official website (2008). 276 Superior Council of Magistracy official website (2008). 277 Article 1 of Law 218/2002. 278 Interview B11. 279 Interview B11. 280 Interview B07. 275

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In order to meet EU standards, a program of reorganisation and modernisation of the Romanian police was set up for the years 2004 to 2007. The Inspectorate of the Romanian Police was reorganised under three main pillars of crime fighting: public safety, criminal investigations and countering organised crime. 281 These three pillars were supported by structures that ensure technical and scientific investigations, criminality trend research, intelligence analyses and logistics and finances. Although lots has changed at the national police level, at local level reform is going slowly. A communication gap exists between central and local level, as the local police needs to sign “at least fifteen forms in order to get things done at a higher level”. 282 However, the local police has expressed their confidence that this will change once Romania becomes a member of Schengen. 283 Currently, the main issues involving the police in Romania are related to the impact of the economic recession on the judicial criminality trends. There seems to be an obvious relation between the standard of living and the increase in the number of offences. As stated by the Romanian police itself “an increase in criminality can be expected if the economic situation will aggravate and a decent living standard cannot be guaranteed”. 284 Even though statistics have shown that the judicial criminality trend has slightly decreased in 2008, this might evolve into an ascending trend due to the current recession. In this respect, and in order to reduce and eliminate criminality, the Romanian police has established three main aims: citizens' safety, preventing and countering organised and cross border crime, as well as ensuring a legal business environment. 285

5.6 Conclusion According to the constitution, Romania is a sovereign, independent, national state which is governed by the rule of law and respects the balance of powers. After the collapse of communism, a new democratic constitution had to be established in 1991. Since Romania lacked democratic experience, the constitution was based on the model of Western European countries. As the constitution of 1991 appeared to be not suitable enough for Romania, changes were made in 2003. The 1990s were characterised by a slow process of democratisation as Romania missed out on a solid legal order for decades. Although positive changes have been made, weaknesses remain. The separation of power looks good on paper, but question marks can be placed whether the judicial power is truly independent and whether the intense cooperation between the government and parliament can be legitimised. Moreover, the role of the Ombudsman should be strengthened by legislation as public authorities seem to not take him seriously. Collaboration between the different Romanian courts is based on transparency and independence. Several restrictions are put on judges and magistrates in order to ensure the independence of the judiciary. However, this independence of judges within the Constitutional Court is questionable as they are still appointed by the president and the parliament, thereby allowing this process to be potentially politically influenced. The Romanian police has undergone many reforms ever since the transition. The last years, the police seems to act truly and more as an independent institution. Although a communication gap between the central and local level has been observed, the realisation of the Schengen Treaty in 2012 should solve this problem. Future developments as regards the economic situation are important as they influence the main aims of the Romanian police, both at the central and local level.

281

Romanian Police official website (2007). Interview C10. 283 Interview C10. 284 Interview B11. 285 Interview B11. 282

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6. Political parties in Romania 6.1 From a one-party system to a multiple party democracy During the era of communism a one-party system existed in Romania. Although already founded in 1921, the Communist Party came to power only in 1944, as a consequence of the Soviet occupation. The party stayed in control until December 1989, when party leader Ceausescu and his wife were executed. 286 After 1989 Romania became a multiple party democracy. Because of the low electoral threshold and the huge enthusiasm, a couple of hundred parties emerged, including the historical parties National Peasant Party and National Liberal Party. Before they were prohibited by the Communist Party in 1947, these parties dominated the Romanian politics of the interwar. However, both parties failed to prevail during the 1990 elections. Although the National Liberal Party became the third biggest party in the Parliament, it had only received 6.4 per cent of the votes. The Democratic Alliance of Hungarians in Romania (UDMR) won 7.2 per cent, while the National Salvation Front (FSN) gained 66 per cent of the votes. Fifteen more parties managed to win seats in the Parliament. 287

6.1.1 The National Salvation Front (FSN) On 22 December 1989 Ion Iliescu, a prominent member of the Communist Party before his degradation in 1971, announced the elimination of Ceausescu from power and the formation of the FSN. Four days later, the FSN became the provisional government with Iliescu as president and Petre Roman as prime minister. Although the original members of the FSN were intellectuals, army officers and students, the most important members were former communist officials. Five days after the announcements of Iliescu, the FSN dissolved the Communist Party and promised future elections. The FSN, first claiming it was not a party and would not nominate candidates for the upcoming elections, formally registered as a party in February 1990 to compete in the elections of May the same year. As the results of the elections revealed, the FSN benefited from its role in the events of December 1989. Not only became the FSN the biggest party of the Parliament, also their leader, Iliescu, easily won the president elections with 85 per cent of the votes. 288 The electoral success could, however, not prevent the fragmentation of the party. Members became divided over the issue of economic reform and factions appeared centred around Iliescu and Roman. This resulted in the split of the party. Iliescu and his supporters, the less reform-minded, left the party and established the Democratic National Salvation Front (FDSN), while Roman and his followers were in favour of market reform and went on with the FSN. The FDSN was renamed PDSR (Party of Social Democracy in Romania) and subsequently Social-Democrat Party (PSD). The last adjustment was a consequence of the merger with the Social Democratic Party in Romania (PSDR). Equally, the Roman-wing endured some name revision; from FSN to PD-FSN and from PD-FSN to PD (Democratic Party). Now, the party is called PD-L. 289 In the next two sections, this report will analyse the current most significant political parties in Romania, in which it will look closer to the identity of the parties.

286

U.S. Library of Congress (2009). National Institute for Research and Development in Informatics (2009). 288 Roper (2000), pp. 65-66. 289 Roper (2000), pp. 70-78. 287

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6.2 Current represented parties in the parliament 6.2.1 Democratic-Liberal Party (PD-L) Originally, the PD-L was a reformist wing of the FSN, a centre-left party, and developed into the PD, founded in 1992 by Petre Roman. However, the PD experienced a slow but constant process of moving from centre-left to centre-right over the years. 290 The transition of the PD may be seen as quite a smart move. Romania transformed in the post-communist era from a state centralised system to a more open market system and the party has successfully reacted on this. 291 Since its establishment in 1992, the political identity of the PD was formed by placing itself in opposition with PSD, the former conservative wing of the FSN. After having been the opposition during PSD’s governing, the PD made an important step towards the centre-right spectrum of the Romanian political life in 2003. The PD, with party leader Traian Basescu, founded an alliance with National Liberal Party (PNL), named the D.A. Alliance, which stands for the Truth and Justice Alliance. This alliance with a centre-right party was an attempt to create a political pole strong enough to become a serious alternative to the PSD. 292 During the campaign for the 2004 elections the alliance promoted a centre-right governing programme. Focus was made upon supporting the European integration of the country, reshaping and reducing the role of the state, especially in the economical field, improving the quality of the educational system, strengthening the authority and credibility of the state institutions, decentralisation of the public administration, guaranteeing the private property, social cohesion and introducing an incentive fiscal system by reducing the financial taxes. Furthermore, the party promoted justice, freedom, responsibility and solidarity and defends the principles of a strong democracy. The cooperation with the PNL resulted into a success for the PD. The alliance’s leader, Basescu, was elected president of Romania and the party became part of the governing coalition until it was expelled from the government by the PNL. 293 The new political identity of the PD also had consequences for the party regarding the European Union. As a result of its movement towards the centre-rights spectrum of the Romanian political life, the PD was not accepted as full member of the European Socialist Party (ESP). Instead, the party became closer to the European People’s Party (EPP) and was accepted as an Associate Member in November 2006, before it became full member of the EPP in 2007. 294 In January 2008 the PD changed its name in PD-L because of the merger with the Liberal Democratic Party (PLD), a party which consisted of former PNL members and was led by Theodor Stolojan. Following the elections of 2008, PD-L became the largest Romanian party and is now governing again, this time not with the ideologically similar PNL but with the centre-left Social Democratic Party (PSD). The PD-L did try to form a coalition with the PNL first, but the latter demanded the post of Prime Minister. This was out of the question for the PD-L, as the PNL had already abused this position before by throwing the PD out of the government. 295 After the withdrawal of Stolojan, who was initially appointed prime minister by Basescu, the new party leader Emil Boc is now assigned as head of the government. 296 As the 2008 elections have shown, the PD-L especially attracts young and urban voters and especially from the counties Bucharest, Transylvania, the Banat and Damvita. 297 Because the party has a lot of young voters, the PD-L has every interest in a reform regarding the right to vote 290

Voinea (2006), p. 2. Interview B34. 292 Voinea (2006), p. 2. 293 Voinea (2006), p. 2. 294 Voinea (2006), p. 2. 295 Interview B21. 296 HotNews.ro (2008-2009). 297 The Diplomat - Bucharest (2008). 291

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for students in their town of study. Although it is allowed to vote for the mayor in their study town, students may only vote for the national parliament in their home district. This may be changed during the current government. 298

6.2.2 PSD-PC For the elections of 2000, the PDSR (later renamed PSD), the PUR (in 2005 renamed PC) and the PSDR (which merged in 2001 with the PDSR into the PSD) created an alliance, the so called Social Democratic Pole. The alliance received the biggest amount of votes and a government was formed with the support of the UDMR and other parties. For the 2004 elections, the by then reformed PSD and the PUR formed an alliance again but, although the alliance obtained again the largest amount of votes, the PUR joined the coalition government with the D.A. Alliance and the UDMR, not with the PSD. 299 During the elections of 2008 the PSD and PC worked together in an alliance again. 300 Unlike the PD-L voters, the voters of the Social Democratic Pole are mainly rural. The alliance scored well among the elder and people with lower incomes and is especially popular in Moldavia and Olenia, but also in the county Constanta, where PSD mayor Mazare is currently under investigation for fraud. 301

6.2.2.1 The Social Democratic Party (PSD) The PSD, descendent of the FSN, defines itself as social-democratic. However, until 2000, when it formed the Social Democratic Pole with the PSDR and the PC, the party failed to monopolise this identity, which had negative consequences on its ‘democratic legitimacy’. 302 The party suffered from its communist roots, consisting of ex-communist politicians and was blamed on its lack of transparency and internal democracy. Furthermore, the party was criticised for its authoritarian characteristics and behaviour, media manipulation and its influence on electoral rules and institutions. 303 Nonetheless, the PSD has been one of the major parties of Romania after 1989. After the FSN split up, the party has been part of the government until 1996, when the historical parties entered the Romanian Democratic Convention (CDR) coalition and won the elections. As a result of the failure of the CDR, the party of Ion Iliescu won the elections of 2000 and although the PC left the PSD in 2004, the Social Democratic Pole received still the most votes. During the 2008 elections the party again obtained a great number of votes and is now governing with the PD-L as second biggest party of Romania. 304 The PSD is considered as part of the European centre-left mainstream and is therefore accepted as member of the Party of European Socialist (PES). 305

6.2.2.2 Conservative Party (PC) Originally named the Humanist Party, the PC is led by media magnate Dan Voiculescu and has a nationalist, conservative-Christian ideology, but is strangely enough connected (although not represented in the European Parliament because the party received only 2.9 per cent of the votes)

298

Interview B21. Coman and Ivan (2006). 300 HotNews.ro (2008-2009). 301 The Diplomat - Bucharest (2008). 302 Strmiska (2001). 303 Gross and Tismaneanu (2005), pp. 159-160. 304 Chamber of Deputies, Parliament of Romania (2009). 305 Maxfield (2008). 299

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with the Alliance of Liberals and Democrats for Europe (ALDE). 306 Regarding the national representation in the parliament, the party only succeeds because of its alliance with the PSD.

6.2.3 Democratic Union of Hungarians in Romania (UDMR) The UDMR is a different kind of actor in the political spectrum than the above described parties. Like the others, this party has an ambiguous nature, with on the one hand a radical nationalist stream and on the other hand a moderate liberal wing. 307 However, the UDMR differs from the other parties in that it has an ethnic-regional character and represents the ethnic Hungarians in Romania. Therefore, the party receives about the same percentage of votes in every election, more or less corresponding to the percentage of Hungarians living in Romania, about seven per cent 308 , with most of their voters coming from the three Transylvanian counties where the Hungarian speaking population lives: Harghita, Covasna and Mures. 309 The UDMR is rather a union instead of a party. The foundation of the union happened spontaneously. Under communism the Hungarian population was repressed and discriminated. The creation of the union had several reasons: for the protection of the Hungarians’ rights, to have their own schools and to participate in politics. 310 The UDMR consists of two different wings, a social democrat wing and a liberal wing. The first wing is not strong: although the social democrats have wishes, their ideology is weak within the union. This wing was considered rather a radical nationalistic wing when the extreme nationalist Laszlo Tokes was still a member of the union, who became more and more radical. However, Tokes left the union in 2003 and founded his own party. The liberal wing has a much stronger ideology. Because these wings are not equally strong, clashes within the union can be avoided, as the voice of the liberals within the union is stronger. 311 The UDMR has been present in the parliament ever since the first elections in the postcommunist era. The union has also been part of the Romanian government, which is considered very important for the mentality of the Hungarians, to prove that they, after a long time of repression, could also be appointed Minister. 312 During the elections of 1996, the UDMR became part of the governing coalition and managed to maintain this position until the 2008 elections. 313 Although the party obtained their normal amount of votes (6.9 per cent), the union was ruled out by a coalition between the PSD and the PD-L. 314 The foundation of Tokes’ own party, ‘Hungarian Civic’ does not influence the position of the UDMR. In local elections Tokes’ party only received 10 to 15 per cent of the Hungarian votes and at the national level the party did not succeed. 315 The UDMR became a member of the EPP in 1993, as the union protects the same values as the EPP. 316 Although the union has different wings, its perception is more close to the ideology of the EPP than to any other European party. 317

306

Maxfield (2008). Strmiska (2001). 308 Coman and Ivan (2006). 309 Chamber of Deputies, Parliament of Romania (2009). 310 Interview B12. 311 Interview B12. 312 Interview B12. 313 Coman and Ivan (2006). 314 HotNews.ro (2008-2009). 315 Interview B12. 316 Romanian Ministry of Foreign Affairs official website (2004). 317 Interview B12. 307

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6.2.4 National Liberal party (PNL) The PNL is a historical party which had dominated Romanian politics before the era of communism. The party returned into the Romanian political life in 1990, although not as successful as before. During the 1990 elections the PNL became the third largest party, but with only 6.4 per cent of the votes. 318 In 1996, the historical parties, including the PNL, formed an alliance, the Romanian Democratic Convention (CDR), and were able to win the elections this manner. However, the economic results of this government were disastrous and disappointed their voters. 319 Unlike the former alliance partner PNG-CD (see 3.2.3.2), the PNL recovered quickly and managed to become part of the government again in 2004, after forming the D.A. Alliance with the PD. Leader of the PNL, Calin Popescu Tariceanu, was appointed prime minister. 320 In December 2006 several members of the PNL, including former Prime Minister Stolojan, formed the Liberal Democratic Party (PDL) to protest against the leadership of Tariceanu. 321 Stolojan was fighting an ideology conflict over the direction of the party. He and other members felt that the PNL was moving away from its vision and its liberal principals. Therefore, PDL adopted more liberal principals. 322 In April 2007, Prime Minister Tariceanu expelled the members of the PD from the government, and the PNL retained power as a minority government with the UDMR. 323 This kick out was due to problems with the president; although the PNL members could work well with their PD partners, the latter could just change opinion overnight on issues, after an agreement was reached already. 324 Recently, in March 2009, the party held leadership elections. Tariceanu has not obtained enough support to maintain the leadership of the party. He will be replaced by Crin Antonescu, the current vice president of the party. Now that Antonescu won the elections of party leadership, he will be designated as the liberal candidate in the presidential elections of 2009. 325 The PNL is member of the Liberal International and joined the Alliance of Liberals and Democrats for Europe (ALDE). 326

6.2.5 National minorities` organisations The Romanian constitution provides positive discrimination regarding the parliamentary representation of ethnic minorities, as the parliament has eighteen unelected seats for minority leaders. 327 Figure 6.1 shows the distribution of these unelected seats.

Association League of Albanians in Romania (ALAR) Association of Macedonians in Romania (AMR)

Association of Italians in Romania (RO.AS.IT)

Turkish Democratic Union of Romania (UDTR)

Armenians Union of Romania (UAR)

Community of Lipovan Russians in Romania (CRLR)

Union of Bulgarians in Banat – Romania (UBBR)

Democratic Union of Turkish –Muslim Tartars in Romania (UDTTMR) Hellenic Union of Romania (UER)

318

National Institute for Research and Development in Informatics (2009). Coman and Ivan (2006). 320 Maxfield (2008). 321 Romania News Watch (2009b). 322 Interview B34. 323 Romania News Watch (2009b). 324 Interview C14. 325 Romania News Watch (2009a). 326 Maxfield (2008). 327 Alionescu (2004), pp. 60-61. 319

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Jew’s Communities Federation in Romania (FCER) Democratic Forum of Germans in Romania (FDGR) Partida Romilor ‘Pro-Europe’ (PRPE)

Union of Croatians Romania (UCR)

in Union of Poles in Romania ‘Dom Polski’ (UPR)

Cultural Union of Rutens in Union of Serbs in Romania Romania (UCRR) (USR)

Democratic Union of Union of Ukrainians Slovaks and Czechs in Romania (UUR) Romania (UDSCR) 0.1Figure 6.1 National minorities organisation in the Parliament Source: Romania Chamber of Deputies official website.

in

6.3 Other parties 6.3.1 Greater Romania Party (PRM) The Greater Romania Party, a nationalist-populist anti-system party, was set up in November 1990 by two ultranationalist writers, Eugen Barbu, who died in 1993, and Corneliu Vadim Tudor. Tudor, a former court poet of Ceausescu is the leader of the party. 328 At first, the party was extreme xenophobic, anti-Semitic and anti-European. 329 In 2003 the party made a political turnaround by rejecting ant-Semitism. The revolve of the party was necessary in order to become a pro-Western party which supports democratic values and institutions, as Romania had entered the European political mainstream. Nevertheless, the party managed to preserve its nationalistpopulist character, which is considered the main reason for its support among their voters. 330 During the parliamentary elections of 2000, the PRM has reached its peak regarding its support, as the party won 19.48 per cent of the votes 331 . This support was mostly due to the disappointment of the Romanian people with their former government, the CDR coalition, and the discontent, of especially younger people, because of the economy. 332 The elections of 2004 were less successful for the PRM, as the party only received 12.92 per cent of the votes 333 , while during the last elections, in 2008, the PRM did not even manage to gain parliamentary representation for the first time since its creation, with only 3.4 per cent of the votes. 334 Equally, the PRM failed to obtain enough votes to gain seats in the European Parliament during the elections in 2007. 335 The party just recruited PNG leader Becali. Together these parties have about five to six per cent of the votes. This means that, if they do not cooperate with each other, neither of the parties will succeed to pass the threshold to enter the parliament. So instead of marginalising their nationalistic ideology, the PRM is bringing in someone of another party. 336

6.3.2 The New Generation Party - Christian Democratic (PNG-CD) The PNG-CD, led by soccer magnate Gica Becali, is a Christian nationalist party positioned at the right side of the political spectrum, because of its liberal affiliation in its support of capitalist markets. The PNG-CD is not of great significance, as it received only 2.4 per cent of the votes in 328

Radio Free Europe (2004). Coman and Ivan (2006). 330 Gross and Tismaneanu (2005), pp. 147-148. 331 Coman and Ivan (2006). 332 Gross and Tismaneanu (2005), p. 148. 333 Coman and Ivan (2006). 334 The Diplomat - Bucharest (2008). 335 Maxfield (2008). 336 Interview B34. 329

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the elections of 2008 and therefore was excluded from parliamentary representation. 337 The party managed to obtain more votes than the PRM during the European Parliament elections, but failed, with a threshold of five per cent, to gain any seats as it received 4.9 per cent of the votes. 338

337 338

The Diplomat - Bucharest (2008). Maxfield (2008).

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7. Romania in the European Parliament When Romania joined the EU in January 2007, the national parliament appointed 35 observers to represent the country in the European Parliament, with the perspective of direct elections within a year. The elections, originally planned for May 2007, were postponed due to domestic political problems. On 25 November of the same year, Romania voted for the first time to send 35 MEPs to the European Parliament.

7.1 Before the elections Before the elections took place, the Romanian Academic Society (SAR) investigated the positions of the Romanian parties toward several European issues by means of a questionnaire. The first finding of the SAR was that the political parties, with exception of the UDMR, had not discussed these issues before and had not yet taken a common position. An explanation for this might have been that the parties, in spite of the fact that political groups in the European Parliament consist of the positions of member parties, did not feel the need to have such a position, as they would just enter a European political group. 339 Politician Vasile Dincu, one of the 35 appointed observers confirmed this explanation. Dincu, who was interviewed just two weeks before the first elections, stated that there is not much interest in the European Parliament. Politicians as well as the voters are in favour of the EU because of the subsidies, but no one believes Romania can also play an active and constructive role. But that is not the only reason according to Radu Florea, working for Transforma, a foundation in Bucharest which promotes reform within Romanian public administrations. Becoming a member of the European Parliament is not attractive for Romanian politicians as the salary is a tip compared with the salary of a member of the national parliament. 340 Looking further at the outcome of the questionnaire of the SAR, all Romanian parties are in favour of European integration. The UDRM is the only party which supports the introduction of a federal system for the European Union. All other parties would like to maintain the current status although with increased powers for the European Parliament. The UDRM disagrees with this idea as it believes that a change in the balance of power will cause problems. 341 Romanian parties take a classical liberal position regarding the common market with the European Commission as regulator. Concerning the social model the Social Democratic Party (PSD), the Democratic Party (PD) and the Christian-Democrats in the Popular Group are in favour, whereas the National Liberal Party (PNL) believes that each country has to be able to use its model of choice. The current model of the structural funds of the EU unites the parties, as Romania benefits from this. 342 The common migration policy is well supported by all the parties, although the PSD, PNL and PLD (Liberal Democratic Party) appeal for a special status for Moldova, as the EU neighbourhood policy does not offer a clear perspective for the accession of the Republic. The UDMR, however, believes the current neighbourhood policy is suitable. The Common Foreign and Security Policy is an important aim for the PNL, PSD and UDMR, while the PLD is supporter of a national policy whereby the party is in line with the opinion of the European conservatory parties. The PD is ambiguous on this matter, as the party is on the one hand in favour of some common policies and on the other hand emphasises the importance for each

339

SAR (2007). Wereldomroep (2007). 341 SAR (2007). 342 SAR (2007). 340

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country to have its own diplomatic corps. Regarding the United States, all parties agree that the European Union should be an equal and critical partner of the superpower. 343 The SAR concludes that PLD, the most liberal party in Romania, is the most Eurosceptical, while UDMR the most enthusiastic and the PD the most pragmatic. But overall all Romanian parties are euro-enthusiastic and do not differ much from each other concerning Europe. 344 However, the SAR only describes the five biggest of the thirteen contesting parties, leaving out the PNG, PRM, PC, PIN, PNTCD, PRPE, PAS and VERDE. Also the independent candidate, Laszlo Tokes, is ignored during the research.

7.2 The elections of 2007 On the 25 November 2007, the first elections for the European Parliament took place. As mentioned above, Romania allotted 35 seats. To qualify for one seat, a party had to obtain more than five per cent of the votes. Thirteen parties and one independent candidate, Laszlo Tokes, contested the elections. 345 Figure 7.1 shows the results of the elections. As analysts expected, the turnout of the elections was not high; only 24.96 per cent of the Romanian electors did actually vote. 346 Considering that Romanians - politicians as well as voters - do not believe in an active, constructive role for Romania in Europe, this outcome is not surprising. Party Democrat Party (PD) Social Democrats (PSD) National Liberals (PNL) Liberal Democrats (PLD) Hungarian Democratic Union (UDMR) Laszlo Tokes (Independent) New Generation Party (PNG) Greater Romania Party (PRM) Conservative Party (PC) National Initiative Party (PIN) National Peasants (PNTCD) Roma Party (PRPE) Socialist Alliance (PAS) Green Party (VERDE)

Votes % 1.476.105 28.8 1.184.558 23.1 688.859 13.5 398.901 7.8 282.929 5.5 176.533 3.4 248.863 4.9 212.596 4.2 150.385 2.9 124.829 2.4 71.001 1.4 58.903 1.1 28.484 0.6 19.820 0.4 5.122.226 100 0.1Figure 7.1 Results elections European Parliament Romania November 2007 Source: Maxfield (2008), p. 6.

Seats 13 10 6 3 2 1 0 0 0 0 0 0 0 0 35

7.3 Expectations elections 2009 Already one and a half year after the first European elections for Romania, new elections will be held, this time together with the other Member States of the European Union. In order to improve the turnout in Romania the citizens need to be aware that the EU adds value to the policy of Member States with regard to individual, social, national and international security of European 343

SAR (2007). SAR (2007). 345 Maxfield (2008). 346 Maxfield (2008). 344

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citizens, according to Adrian Severin, Romanian member of the Socialist Group in the European Parliament 347 Romanian State Secretary of European Affairs from the Ministry of Foreign Affairs, Bogdan Mazuru, agrees that the population needs to become more aware of the EU and what the EU means for them. The Romanian population does not know enough due to a lack of communication and Mazuru states that this must improve. Although Mazuru does not see this lack of communication as a specific Romanian problem as the turnout of the elections of the European Parliament is about the same throughout Europe, he is claiming that the government of Romania will try its best to convince the citizens, especially in the time of the financial crisis, that the EU is important for them and therefore so are the elections. 348 The political parties seem to take the European elections seriously. Parties send professional people and, although there might be a lack of experience, the parties are quite active in Brussels. 349 The PNL attracts voters by informing the citizens and promoting its candidates, of whom the party thinks are the best possible candidates for the European Parliament. 350 Also the PD-L sends capable candidates. One of them is Monica Macovei, of whom the European Council of Justice Ministers is very pleased as she fights against corruption. Furthermore, the PD-L promotes youth as the party sends young candidates like Sebastian Bodu. In the meanwhile, the student organisation of the party will make an effort to attract young voters, although it is very hard to reach student voters as promoting a political party is not allowed at universities. 351 The UDMR will work together with Tokes’ Hungarian Civic party. The parties have come up with a common list, under the umbrella of the UDMR. First candidate on the list will be Tokes, the second and third candidates on the list will be members of the UDMR. The parties cooperate with each other in order to enhance their chances. Without the UDMR, the Hungarian Civic will probably not receive enough votes for representation, while Tokes will increase the chances of UDMR. Their main message to attract voters is that without this cooperation the Hungarians are not represented. 352 The main challenge for the parties will be to speech how important the EU is. This may be very difficult as the population is not interested; although people are still pro-Europe, they have to be convinced that they have to vote. The European Union is not very close to them. 353 The enthusiasm of the politicians to be elected for the European Parliament will, according to a Dutch newspaper, considerably grow, as the salary of the MEPs will no longer be dependent of the salary of the national parliament. After the elections of June, the salary will be equal for all MEPs and will be 7000 Euro per month, while Romanian MEPs now earn about 1200 Euro per month. 354 However, this observation is not shared in Romania. The rise of the salary is not considered to be a motivation, as politician make money in many other ways. 355

347

Europa Morgen (2008). Interview A01. 349 Interview B06. 350 Interview C14. 351 Interview B21. 352 Interview B12. 353 Interview B12. 354 De Telegraaf (2009). 355 Interview B06. 348

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8. Political identity, ideology and stability In the following section the problems regarding the political identity, ideology and stability will be discussed.

8.1 Political identity and a lack of ideology The political transition period of Romania in the first half of the 1990s is characterised by defocused parties and their unclear identities. A rough distinction could be made between social democratic parties, liberal parties, Christian-democratic parties, social-nationalist parties, ethnic parties and environmentalist parties, but the nature of these groups, alliances and the parties themselves were heterogeneous. Fast changes were made in the political spectrum as a result of internal conflicts and separation between and within parties. Another characteristic of post-communist Romanian parties is the lack of ideology. Instead there seems to be a rather populist approach or consensus politics. There are no major differences between the parties as they are just following public opinion. For instance, as almost the entire population was in favour of the accession, so were all the political parties. 356 Thus, although socialists would more likely defend the poor and impose on the rich while liberals are more market-oriented, the ideology is not the core of the party. The recruiting of individuals is more important instead. 357 The party with the most consistent ideology is, at least on paper, the PSD, which is underpinned by social welfare. 358 The UDMR seems to have a steady ideology as well, as the protection of the rights of the Hungarian population is still important. However, when a poll was held under two thousand Hungarians in Romania, it turned out that the most important were jobs, pensions and infrastructures. Cultural aspects and the autonomy issue only took the fourth and fifth place on the list. This means that the UDMR might have to change its direction in the future. It is therefore also important for the union to show the Romanians that it is not just capable to deal with Hungarians issues. 359 Although the PD-L and PNL have a right-wing ideology, they do not focus on this. In 2004, for example, the parties worked together campaigning against the sitting corrupt government instead of focusing on their ideology. 360 The 2004 campaign of the PNL and the - then called PD - attracted a great amount of voters. 361 This might suggest that the population does not bother about the lack of ideology. But at the other hand it is very difficult for the people to identify themselves with an ideology as parties are only about personalities. 362 The population does not have the feeling that it is able to change or influence politics, because there is no real choice to make. This lack of choice creates a disillusion 363 among people and is, furthermore, an important reason why there exists a lack of interest in politics, which contribute to the passivity of people. 364 If parties would support a clear ideology people might become more interested again. The current financial crisis could be a new opportunity for the political parties to focus on their left or right characteristics and create an identity in order to deal with the crisis. 365

356

Interview B34. Interview B05. 358 Interview B34. 359 Interview B12. 360 Interview B34. 361 Voinea (2006), p. 2. 362 Interview B12. 363 The disillusion is not only caused by the lack of real choice, but also caused by the corruption scandals in politics. 364 Interview B06. 365 Interview B23. 357

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A positive aspect of the European Union regarding this subject is that parties need to stick to their ideology. The PC, for instance, is refused by the European Socialists because of its liberal character, while the PSD is affiliated with this European party. This means that these Romanian parties are not able to campaign together as they do during national campaigns. This way the European parties are strengthening the ideology of the Romanian parties. 366

8.2 Political stability Throughout the transition period, Romania has known little political stability. The political scene has been filled with party and alliance break-ups, corruption scandals, instable or invalid governments and failure of ending the old politics. The government formed in 2004, the D.A. Alliance, did not end the period of political instability, like some expected. The coalition between the PNL, PD, UDMR and PC was a shortlived collaboration. Already in their first year of governing the parties had trouble agreeing with each other. 367 The PNL ended its cooperation with the PD by expelling the latter from the government. The majority of Romanians supported the EU-accession, not only hoping that it would stimulate the economic efficiency, but also the political stability. EU-accession meant hope for Romania to accelerate the end of the transfer of old to new power and better adapted political elites. 368 Regarding the European Union, it is furthermore important to reach a certain level of political stability for the credibility of Romania in the Union. 369 The new government brings hope for political stability. The political blockage of the past two years has left Romania vulnerable in the financial crisis. In a time of an economy slowing down, fast political decisions are absolutely necessary. Therefore, the economic crisis enforces the need of political stability. The coalition parties will have to step away from their history of conflicts in order to fight successfully against the economic crisis. 370 Yet, rumour is that the government will split up after the presidential elections. Especially when Basescu would fail to obtain his second term, possibilities would be there for the PSD to govern further with a minority, supported by other parties. However, it is not until after the presidential elections in November to find out whether these speculations will prove to be wrong or right. In the meanwhile, Becali, leader of the New Generation Party, retains the scandals by giving order to shoot the men who have stolen his car. 371

366

Interview B34. Gross and Tismaneanu (2005), p. 151. 368 The New Federalist.EU (2007). 369 Interview C15. 370 HotNews.ro (2009). 371 Interview B34. 367

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9. The state of Romanian democracy This section will analyse the shape in which Romanian democracy is nowadays. Several aspects of democracy will be discussed: democratic governance on the national and local level; elections and the initiative for a Coalition for a Clean Parliament; media freedom and ownership structures and anti-corruption effort.

9.1 National democratic governance In general it can be said that democratic awareness is high among the population and that democratic procedures and institutions are respected. Nevertheless, extremist nationalistic organisations and parties are not truly committed to democracy, although they do play the game by the (democratic) rules. More alarming is the worsening situation of democratic governance since the country’s accession in 2007. In Freedom House’s yearly rating of nations in transit, Romania’s score for democratic governance worsened in 2008. 372 This is predominantly the result of ongoing corruption scandals and the conflict between President Basescu and former Prime Minister Tariceanu which dominated Romanian politics in 2007. The conflict was sparked by Basescu wishes to call early elections in order to secure a larger majority. Tariceanu reacted to this by organising a parliamentary majority backed by the opposition and the ousting of all PD ministers, the party to which Basescu belonged before becoming president. In doing so, Tariceanu continued as a minority government. On 19 April the parliament suspended the president and organised a referendum on his removal. The Constitutional Court’s nonbinding verdict dismissed the parliament’s allegations of Basescu’s abuse of power and in a subsequent referendum on 19 May 74 per cent of the voter rejected the impeachment of the president. Democratic governance was further harmed by the abundant use of emergency ordinances by the Tariceanu government. Emergency ordinances become effective immediately after their promulgation and prior to parliamentary approval, consequently causing long delays in the official approval of laws by the parliament. To some extent, the frequent use of emergency ordinances is excused by the process of EU-accession. 373

9.2 Local democratic governance New legislation is made for the decentralisation of governance to the local level. However, question marks can be placed at the actual political will to decentralise, since little progress is made besides drawing legislation. 374 There is good legislation on the distribution of the national budget to the local budget. The regulations concerning the allocation of money to the local level cover expenses related to several areas, such as education, social assistance and salaries for the staff of public institutions. Money from the central to the local budget is furthermore distributed according to the number of inhabitants and the square kilometres of the communes. However, theory and practice do not neatly coincide. In reality, the allocation of funds to the local level is less effective as legislation portrays. 375 Furthermore, county council’s presidents and mayors have decisive powers over the budgets distributed to them by the national government and those EU funds that are distributed by 372

Romania’s score for democratic governance was 3.50 in 2007 and in 2008 this lowered to 3.75. In the ranking applied by Freedom House 1 equals ‘most free’ and 7 ‘least free’. 3.75 indicates that there still is much room for improvement for Romania. Freedom House (2008). 373 Bertelsmann Transformation Index (2008), p. 8. 374 Interview B33. 375 Interview B33.

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regional development boards. There appears to be a correlation between the political colour of the local authority and the amount of money received from the national budget. 376 The leading party in Bucharest tends to favour local authorities in which the same party governs, over those communes where the opposition is the largest party. Also among ministers a tendency exists to allocate funds according to political criteria by which county heads and mayors associated with the government party receive substantially more funds than those counties dominated by other parties. Freedom House furthermore reports that for companies that do not have a network with the political majority it is difficult to obtain financial support for projects. 377 Moreover, county presidents are frequently offered bribes in return for favours or the presidents themselves distribute funds in such a way to assure their re-election.

9.3 Elections The presidential election of 2004 and the parliamentary elections of 2004 and 2008 were considered both free and fair. Freedom House reported however that the potential for irregularities such as incomplete distribution of voter cards remains high. The Romanian Media Monitoring Agency criticised the biased media coverage of the elections and the OSCE reported negative campaigning and the distribution of false campaign materials in 2004. Media usually portray tendencies towards biased news coverage, but during election times the level of impartialness of the news reporting worsens. Libel is not uncommon during elections campaigns, while subsequent rectifications are. Yet the question is whether rectifications have a desired impact, since the aim of libel is to start a scandal in itself. In the local elections of June 2008 some candidates bribed a couple of hundred voters to swing the vote for mayor. 378 For the parliamentary elections of 2008 parties were accused of handing out electoral bribes in the form of a financial remuneration or food. There were also reports made of ‘electoral tourism’ whereby one individual could vote in as many counties as one could reach in a day. Afterwards a law was passed which stated that one can only vote in the constituency where one is registered. The turnout for the 2008 parliamentary elections was 39 per cent, a large drop in comparison to 2004 when 59 per cent of the Romanians voted. This figure especially contrasts sharply with 1990, when 86 per cent voted. Surprisingly, the rural turnout was significantly higher than the urban turnout. The young and urban predominantly voted for PD-L, while the elder, rural and lower income voter mostly supported the PSD-PC in the 2008 parliamentary elections.

9.3.1Coalition for a Clean Parliament For the 2004 local, parliamentary and presidential elections civil society for the first time united in a quest for political integrity: the Coalition for a Clean Parliament (CCP). 379 The objective was to ‘blacklist’ those politicians which were not considered fit before the elections started. The criteria applied were: 1) having repeatedly shifted from one political party to another in search of personal profit; 2) having been accused of corruption on the basis of published and verifiable evidence; 3) having been exposed as an agent of Securitate (Ceausescu’s former secret service); 4) being the owner of a private firm with important tax arrears to the state budget; 5) being unable 376

Interview B33. Freedom House (2008). 378 Nitoi (2008), p. 15. 379 The organisations involved (in arbitrary order): Romanian Academic Society (SAR); The Group for Social Dialogue (GDS); The Association of Political Science Students (APSS); Association for the Defence of Human Rights in Romania – Helsinki Committee (APADOR-CH); Asociatia Pro Democratia (ADP); Freedom House Romania; Centre for Independent Journalism (CJI); Civic Alliance; Media Monitoring Agency and Open Society Foundation (OSF). 377

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to account for the discrepancy between one’s officially stated assets and one’s income; 6) turning a profit from conflicts of interest involving one’s public position. 380 The CCP discussed these criteria with the main political parties and almost all agreed with the criteria set. Only the PRM refused to collaborate. The CCP subsequently investigated the candidates’ lists of the several parties on the basis of the criteria and drew up a blacklist. The list was then sent to the parties with the request to withdraw the candidates which were not considered fit. A considerable part of the blacklisted politicians belonged to the PSD and the party subsequently denounced the whole initiative. In the media the CCP was attacked and its members accused of being civic terrorists. Since the Romanian media landscape was to a large extent controlled by the PSD until 2004, the CCP tried to increase awareness among the population by distributing nearly two million flyers with the final blacklist. Opponents however tried to undermine the effect by distributing false flyers replacing the names of PSD members by those of opposition members. Not surprisingly, there were also politicians which decided to sue the CCP. An anti-corruption expert of the Romanian Academic Society tells: “They sued us in court, asking for one billion lei of damages. If we would have lost, we would be sold for the next part of our life, because you cannot pay that kind of money. We won all eighteen cases in court on [the basis of] freedom of expression.” 381 It is difficult to assess the successfulness of the project. Parties did withdrew some of the people blacklisted by the CPP, although by far the most MPs remained on the list even though they were not considered fit. In the end, 98 candidates on the blacklist lost their seats, because they were either withdrawn by their parties or did not manage to obtain a seat. On the other hand, 104 of the MPs on the blacklist did manage to obtain a seat in the parliament. Regardless of these results, what the CCP did realise was public exposure in the fight against corruption.

9.4 Media: freedom of speech and self censorship After an absence of decades, media outlets mushroomed after the fall of the Ceausescu regime. In the political climate after 1989 everybody seemed eager to publish his own newspaper. “It was amazing, suddenly you could say whatever you wanted, you could print anything you wanted, [and] you could say anything on TV.” 382 In the early 1990s Romania counted thousands more media outlets than nowadays. When the media market began to settle most outlets disappeared because they could not survive in the overcrowded market. Nevertheless, this period laid the foundation for the prime ingredient for the media: freedom of speech. In Romania the freedom of expression is fairly well guaranteed nowadays. Journalists are free to publish, and violence against the media has decreased over the last couple of years. The situation in Romania is peaceful and calm in comparison to neighbouring Bulgaria, where journalists continue to run the risk of being arrested or shot. Nevertheless, although there is no problem in terms of freedom of speech, this does not imply that everything journalists write is published by the editor. Journalists know this and self censorship appears to be common in Romania. 383 Journalists are restrained in their press coverage by the preferences of the owner of the media outlet. “Journalists learn the so-called taboos, they know that some people are untouchable and therefore [do] not write about them. Some journalists, who try to do their job properly and do not compromise, have the risk of losing their job.” 384

380

Romanian Coalition for a Clean Parliament (2005), p. 7. Interview B05. 382 Interview B16. 383 In several interviews self censorship of journalists was brought up, mostly because journalists know what the owner of the medium wants. Interviews: B34, B16 and B06. 384 Interview B06. 381

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Market entry for media business is not a problem. 385 The issuing of licences for radio and television broadcasting is carried out by the National Audiovisual Council (CNA). This institution functions as a media watch dog by monitoring the broadcasting media. The ownership structures of the Romanian media market are paradoxical. On the one hand there is a concentration of media trusts which posses the main TV channels, newspapers and radio stations. On the other hand the printing media, due to a lack of regulations, is flooded with small and barely profitable players. Two considerations need to be taken into account. First of all, the printed media is not profitable due to the lack of advertisement. Advertising agencies give preferences to the large media trusts which control both printing and broadcasting media. Printing media depends heavily on sales on the street and subscriptions. Romanians however lack a culture of purchasing newspapers; people are not used to pay for their news. Moreover, only nine per cent reads a newspaper on a daily basis. 386 A second phenomenon which needs to be taken into account is the publication of newspapers with a very low circulation. Mostly in the country side newspapers have a circulation of around two hundred or three hundred copies. The front page stories of these newspapers serve to bring a certain, often political, messages across. “The media is not there to sell, but to influence public opinion.” 387 “Media is not run like a business. Media is a political or economic instrument. More often than not, media organisations are created and used as a tool, a tool to support somebody’s interest; probably the owner’s.” 388 This argument is supported by the close links between the media and politics. The Romanian media can be characterised as ‘politicised’. The ownership structures of the players on the market reveal the connections between the media business and politics. Until recently, these structures were fairly unknown, but efforts to reveal the ownership have increased transparency over the last couple of years. As mentioned above, the media market is concentrated (leaving aside the local print media with low circulation used mainly as a political tool). A look at the biggest media trusts, labelled ‘media moguls’ by President Basescu, reveals the interests of politics in media and vice versa.

9.5 Media: private ownership structures There are five big media moguls in Romania. Their media trusts are characterised by the possession of TV, radio, newspapers and magazines. The owners are discussed here in arbitrary order together with their political and business connections. The first media tycoon is Dinu Patriciu, ex-majority owner in the oil and gas Rompetrol Group and according to Forbes magazine the richest man in Romania. Patriciu owns the Adevarul Holding, which publishes the daily Adevarul (‘The Truth’) and four other magazines. 389 Patriciu was a member of the parliament for the PNL between 1990 and 1996 and from 2000 until 2003. Patriciu is prosecuted for several accusations, among others fraud. He claims to be innocent. Sorin Ovidiu Vantu is owner of the Realitatea-Catavencu Media Group, which controls fourteen print outlets, three television stations (including the leading news channel Realitatea TV), a radio network, and the second biggest news agency. 390 Vantu is a controversial business man that made his fortune through an investment fund that deprived 300,000 Romanians of their savings, though he evaded prosecution. Vantu uses intermediaries for his outlets, so on paper he does not own the above mentioned media. The third tycoon is Adrian Sarbu, owner of the Mediapro. He controls five TV channels, among others PRO TV, the market leader. Sarbu also owns two radio stations, six Bucharest 385

Media Sustainability Index (2008), p. 87. Interview B34. 387 Interview B34. 388 Interview B16. 389 Media Sustainability Index (2008), p. 93. 390 Media Sustainability Index (2008), p. 93. 386

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based publications, some local newspapers and the main news agency. 391 Sarbu was a member of the FSN after 1989 and was involved in the creation of the first audiovisual law which made private ownership of television possible. 392 He is accused of favourable media coverage on excommunists in power between 2001 and 2004 in return for tax payment postponement. 393 Sarbu is supposedly linked with the PSD. Dan Voiculescu founded the Intact Media Group which runs five TV stations (including the second most popular Antena 1), several dailies and radio stations. 394 Voiculescu recently handed over the company to his daughter. Voiculescu is also the founder and leader of the PC. Voiculescu uses his media power for political purposes. For example, the PC formed an alliance with the PSD backed by Voiculescu’s media influence. Moreover, it is a public secret that the PSD’s willingness to form a coalition with the PC is motivated by the latter’s control of the media. 395 So, the political alliance of the PC and PSD seems to be one cemented by the PC’s supply of broadcasting time and the PSD’s offer of parliament seats. Moreover, Voiculescu is also one of President Basescu’s most vocal opponents: he led the impeachment of the president in 2007. The Intact Media Group overtly portrays an anti-Basescu attitude in its media coverage. The fifth media group is the Ringier Group from Switzerland. It is the only big foreign player on the Romanian market. Ringier publishes the two biggest dailies: Libertatea and Evenimentul Zilei. In other countries this group is only involved in printing, but in Romania it also bought shares in a TV channel. The difference between the Ringier Group and the four Romanian tycoons is that the foreign company seems to be less involved in politics. The Ringier Group is in Romania primarily to make money.

9.6 Media: public ownership The five media trusts mentioned above control 45 per cent of the television market in terms of audience and 90 per cent of the circulation of newspapers. Romanian state television (TVR) on the other hand controls 22 per cent of the TV audience with its four public channels. 396 The public media also owns four radio stations and public news agency Rompres. The president, parliament and government together appoint the boards of the public radio and television stations according to an outdated law from 1995. Under the law the board members do not require any professional criteria or competence in the field. In 2005 efforts were made to reform the law on the initiative of Raluca Turcan, head of the Media and Culture Committee of the Parliament. However, her draft law was not even discussed in Parliament. Allegedly this had to do with Turcan’s membership of Stolojan’s breakaway fraction PLD. 397 The latter left the then governing PNL because of its anti-Basescu posture. This example shows that the public media, just as the private owned media, is affected by the political environment. The political entanglement is also revealed by the appointment of the president of the TVR in 2007. They appointed Alexandru Sassu, a former MP from the PSD who was in charge of communication strategies. The Media Sustainability Index 2008 states: “The transfer of a party spin-doctor directly to the top of public television showed the lack of any scruples on the part of Romanian politicians. Sassu was the first-ever head of TVR coming openly and directly from the staff of a political party.” 398 Just as the boards of public radio and television, the board of the National Council of Broadcasting (CNA) is also appointed by the 391

Media Sustainability Index (2008), p. 93. Comanescu (2009). 393 Comanescu (2009). 394 Media Sustainability Index (2008), p. 93. 395 Interview B05. 396 Media Sustainability Index (2008), p. 93. 397 Media Sustainability Index (2008), p. 89. 398 Media Sustainability Index (2008), p. 89. 392

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president, parliament and government. Supposedly, in 2007 the then governing PNL made a political bargain with the PSD and divided the presidency of the CNA and TVR between them. 399

9.7 Media: conclusion From the situation described above the image arises that media and politics are entangled. Both the public and private owned media are closely connected to the political environment. Media trusts are owned, or heavily influenced by political figures, and media is used for emitting politically coloured messages. Due to a lack of anti-concentration laws, the Romanian media market became concentrated in the hand of a few media trusts. Though, it has to be added that the situation has improved since 2004. Under the government of Prime Minister Nastase the media landscape was even more centralised and to a large extent under PSD control. Nastase used to buy media publicity with advertising money. After the 2004 parliamentary elections a new law was passed concerning state advertisement. As a result, the amount of money spent on state advertisements decreased to four million Euro in 2005, compared to fourteen million Euro in 2004 under Nastase. 400 Furthermore, the ownership structures have become much more transparent during the last couple of years. The question remains however whether the consumer is aware of the ownership. Some therefore advocate that ‘media literacy’ should be enhanced so that the TV viewer or radio listener is familiar with the media ownership structures and therefore aware of the message emitted. 401

9.8 Politics and anti-corruption efforts The themes of corruption and politics are closely interwoven. In general it can be said that corruption is deeply rooted and common among all political parties. Corruption investigations are obstructed on a regular basis by politicians. After Romania’s accession to the EU, Justice Minister Monica Macovei stepped up anti-corruption efforts but these were met with great hostility by a majority of the parliament. Although she enjoyed support from the EU and international media, she was voted out of office by the Senate due to ‘reform failures’. MPs have been accused regularly of making prosecution for corruption more difficult, among others by introducing new practices such as notifying suspects in advance of house searches. 402 Moreover, politicians have continually interfered with the activities of the National Anti-corruption Directorate (DNA) by changing its legal status and by the dismantlement of its anti-corruption instruments. 403 Furthermore, Romanian courts are cautious in cases concerning high level officials, and many cases do not come to a closure. 404 Moreover, Romania has shown itself reluctant in fulfilling EU requirements for greater transparency and accountability, and the situation has worsened since the country’s accession.

399

In parliament the PNL was able to continue as a minority government until 2008 with the unofficial support of the PSD. 400 Media Sustainability Index (2008), p. 95. 401 Interview B16. 402 Freedom House (2008). 403 Freedom House (2008). 404 Interview B06.

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10. Foreign Policy Since 22 December 2008, The Ministry of Foreign Affairs is headed by Cristian Diaconescu. The Ministry has one minister and five state secretaries, for European Affairs, for Global Affairs, for Strategic Affairs, for Relationships with Romanians Abroad, and for Inter-institutional Relations. The official mission of the ministry is “carrying out the foreign policy of Romania in compliance with the legal framework in effect and with the Programme of Government. This includes participating in the process of European and Euro-Atlantic integration of Romania”. 405

10.1 Membership of international organisations Below is a short overview of some of the international organisations Romania is member of. The relations with a number of these organisations are described further on. Romania is member of the United Nations (since 14 December 1955), the Organisation for Security and Cooperation in Europe (since 25 June 1973), the Council of Europe (since 7 October 1993), the Organisation for Economic Co-operation and Development (official application for membership on 28 April 2004), the Organisation Internationale de la Francophonie (since October 1993), the North Atlantic Treaty Organisation (since 29 March 1994, see below), and the European Union (since 1 January 2007).

10.1.1 Romania and the NATO The North Atlantic Treaty Organisation (NATO) is an important international organisation, promoting peace and stability throughout the world. As a ‘Western’ institution, its ever closer presence to Russia is watched warily by the latter. Romania, former member of the Warsaw Pact, the Soviet counterpart of NATO, was the first country to sign the NATO Partnership for Peace Agreement on 26 January 1994. This programme is generally seen as a first step towards NATO membership. Romania became a full member of NATO on 29 March 2004. 406 Only four years later, Bucharest hosted the until then largest NATO summit from 2 till 4 April 2008. According to a report on Romania’s foreign policy, the NATO is seen as “the central pillar in Romania’s defence and security policy”. 407

10.1.2. Current NATO missions Romania contributes to the NATO forces in Afghanistan (ISAF) and Kosovo (KFOR). The International Security Assistance Force (ISAF) in Afghanistan is aimed at assisting Afghanistan in maintaining security in the country. NATO has command over the ISAF since August 2003. 408 On 14 January 2009, Romania had 148 troops stationed in Kosovo to help the Kosovo Force mission (KFOR) to achieve its main goal, which is to help maintain a safe and secure environment and freedom of movement for all citizens, irrespective of their ethnic origin. KFOR has been in force since June 1999. 409 On 17 February 2008, Kosovo declared itself independent. Romania did however not recognise this independence and has supported Serbia’s draft United Nations resolution to ask the International Court of Justice (ICJ) whether this declaration was in conformity with international law. 410

405

Ministry of Foreign Affairs of Romania official website (2005a). NATO Partnership for Peace official website (2008). 407 Ministry of Foreign Affairs of Romania official website (2008), p. 15. 408 NATO in Afghanistan official website (2009). 409 NATO KFOR official website (2009). 410 Ministry of Foreign Affairs of Romania official website (2008), p. 34. 406

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10.2 Regional Cooperation Romania is a member of a number of regional institutions. According to the official website of the Ministry of Foreign Affairs, regional cooperation “represents a significant dimension of the Romanian diplomacy”. 411 Romania’s foreign policy with regard to the Black Sea region consists of transforming the area into a space of cooperation, security and stability. Romania contributed significantly to a European Commission proposal on the Black Sea Synergy, which states that the EU aims to increase cooperation among the countries surrounding the Black Sea. 412 Furthermore, Romania contributed 21 personnel to the EU Monitoring Mission (EUMM) in Georgia. The main objective of this mission is “to contribute to stability throughout Georgia and the surrounding region in accordance with the six-point Agreement of the 12 August and the subsequent implementing measures”. 413 Another priority topic of Romania’s foreign regional policy is the Danube Cooperation, which is aimed at an increased visibility of the Danube area. This visibility consists among others of promoting the Danube as a major European transport route. 414 Romania pays a lot of attention to its neighbouring country Moldova and has constantly backed a European perspective for this country. The Republic of Moldova also benefits from the Romanian Official Development Assistance. 415 Relations between Moldova and Romania are tense, though. This is due to accusations, made by Russia, of Romanian plans to annex the Republic of Moldova. These accusations are not only directed to Romania; Russia accuses also the Moldavian opposition parties of attempts to annex Moldova to Romania. 416 Relations with another neighbouring country, the Ukraine, have improved since the dispute over the maritime delimitation in the Black Sea has been settled by the ICJ. This ruling followed on the submission of a claim by the Romanian government at the ICJ in September 2004. At stake was the exclusive economic zone around an island in the Black Sea, Serpents’ Island. This island was Romanian until 1948, when it was ceded to the Soviet Republic. Nowadays it belongs to the Ukraine. Although Romania was granted only four-fifths of its claim, both countries have stated the ruling was fair and that they would abide by it. 417

10.3 Relations with Russia Although officially Romania wants to “re-launch and stimulate the bilateral relation in the spirit of confidence and mutual advantage” 418 , there are certainly tensions between Bucharest and Moscow. Romania associates Russia mainly with the take-over of Bessarabia (present day Moldova) and the forced communist regime after World War II. After its independence in 1990, Romania’s foreign politics was mainly based on geostrategic reasons and not on economic relations. This put Romania in a tough position, since it has made trade relations and energy purchase (Russia being a mayor player on gas export) a lot more difficult. Romania has to import many goods from Russia and especially gas. One of Russia’s main interests is creating the South Stream pipeline, which would bring many Eastern European countries under its sphere of influence, while Romania supports the Nabucco pipeline. The Nabucco pipeline is the EU’s attempt of becoming less dependent on Russian gas. (see

411

Ministry of Foreign Affairs of Romania official website (2005b). European Commission official website (2009a). 413 EU Monetary Mission in Georgia official website (2008). 414 Ministry of Foreign Affairs of Romania official website (2008), p. 31. 415 Ministry of Foreign Affairs of Romania official website (2008), p. 36. 416 HotNews.ro (2009). 417 BBC (2009). 418 Ministry of Foreign Affairs of Romania official website (2008), p. 42. 412

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section 20.3) Since Romania does not support Russia, the latter almost doubled its price for Romania in comparison to the price of most Western countries. 419 Although attempts are being made to reconcile the two countries, one important issue remains unsolved to date, namely the question of the ‘Romanian Treasure’. This concerns two shipments of gold, money, jewellery (including jewellery belonging to Queen Maria of Romania) paintings, testaments and other valuable items to Russia during World War I. As Romania was occupied by the Germans, the safety of all these items could not be assured and they were sent to Russia for safekeeping in the Kremlin. Russia and Romania signed several treaties on the status of these items and Russia assured it would return everything to the Romanian people. 420 From the 42 train carriages sent to Russia, Romania has only retrieved the contents of two railway carriages. Negotiations have been ongoing ever since the end of World War I to retrieve the treasure and on 5 March 2009 the Romanian Minister of Foreign Affairs again brought up the subject of the lost treasure to be examined by the joint Romanian-Russian Commission which researches the problems arisen from the history of bilateral relations. 421

10.4 Conclusion After 1989 Romania only hesitantly initiated democratic reforms, especially in comparison to the countries in Central Europe. It was not until 1993 that the Romanian government started to take the conditions for a future EU-accession seriously. A weakness of Romania remained its slowness and the quality of the reforms made. As a consequence, Romania was excluded from the accession group, which acceded to the EU in 2004. Anticipating Romania’s membership, the EU even introduced the so-called ‘super clause’, enabling the EU to postpone accession for one year. After the signing of the Accession Treaty the EU repeatedly threatened to apply the super clause. To prevent this from happening, Romania passed numerous laws in a hurry. A clear weakness is the poor quality of the legislation passed. The EU on the other hand failed to address this. It seemed more preoccupied with output numbers and check marking, than actually addressing the quality of the reforms made. Nevertheless, the EU has been the motor behind Romania’s modernisation by laying out a framework for development. National politics in Romania have been characterised by defocused parties and their unclear identities. However, it must not slip one’s mind that Romania’s multi-party system is still relatively young. The political spectrum has experienced structural developments ever since the end of the communist era and still continues to consolidate. A significant example of such a transformation is the PD-L, the party which has gradually moved to the centre right while finding its own true identity. The lack of ideology appears to be a reason for greater concern. Political parties do not seem to be aware of the necessity of a true ideology, while in the mean time the Romanian population is more and more losing its faith in politics. People are convinced that it does not matter whom you vote for, as all parties take over the public opinion. As long as political parties perpetuate to reach their voters by this populist behaviour, people will continue to feel deceived and frustrated. In order to end this vicious circle, Romanian parties must commit to a clearly defined ideology. In this respect, the affinity with the European political parties is very useful. The European Parliament consists of parties with clear and plain ideologies, which do not recognise parties of another ideology as their member. A striking example is the alliance of the PC and PSD within national politics, this could not be transferred to the European Parliament. The European Socialists have refused membership of the PC because it is a liberal party, while the PSD was accepted. 419

HotNews.ro (2008). Council of Europe (2002). 421 Mediafax.ro (2009). 420

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Romania has known little political stability throughout the transition period. The political scene has been filled with party and coalition break-ups, corruption scandals, instable or invalid governments and the failure of breaking completely with old political habits. Although this does not seem to concern politicians themselves, it is the main reason for the population to mistrust their political representatives. Although national and local governance are frequently affected by political scandals, democratic procedures are respected and consolidated fairly well. Elections are not completely free of irregularities, but are considered fair. A positive change has been the introduction of a new electoral system in which individual candidates can be held better responsible for their actions. The Romanian population has the possibility to chastise politicians for corruption scandals or broken promises. Furthermore, it is believed to prevent election fraud, as votes are now too expensive to buy off. Recently legislation for more decentralisation has been drafted, but little progress is made with the actual implementation and political will can be questioned. More alarming is the correlation between the political colour of the local authority and the amount of money received from the national budget. The budget appears to be allocated in line with the political party dominating the central government in Bucharest. Villages where the opposition has a majority can count on less financial means. Freedom of speech is guaranteed and violence against journalists decreased significantly. However, self censorship is common practice, journalists know the so-called taboos. A strong point is the easy market entree for media businesses. A weakness of the printed media is the flooding of the market by numerous papers which are hardly profitable, among others due to the lack of advertisements. A threat facing Romanian media is its use as a political or economical tool to serve someone’s interest. This is revealed by the close links between politics and the media. Romanian media can be characterised as ‘politicised’. Four out of the five big commercial media trusts that control the media are either directly or indirectly linked with political parties. The public media is also affected heavily by the political environment and subject to political bargains. Unfortunately, this entanglement between politics and the media results in biased media coverage and libel, especially during election times. Although the media landscape is rather centralised, the situation did improve considerably since 2004. Under the former Nastase government the media was even more centralised and to a large extent under PSD control.

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11. Social Structures A democracy is based on social structures in its society. These structures are the link between the divided powers and the different levels of society. It is the link between the government and the citizens of a state. Therefore, in this section the social structures of Romania will be explored. The headlines of this chapter are: the non-profit sector, the state and its citizens, daily corruption and education.

11.1 The non-profit sector in Romania As the non-profit sector is of great importance to guarantee citizens’ rights and support minority groups, the existence of this sector in Romania will be explored in the first part of this chapter. First, the legal background of the sector in Europe and Romania will be explained. Secondly, the civil society of Romania will be described and finally, the funding of the non-profit sector will be outlined.

11.1.1 Law on the non-profit sector The European Council is aware of the influence of voluntary organisations in Europe since 1952 when it gave them the opportunity to obtain a consultative status. Resolution 93 (98) of the Council of Europe was the legal basis for the co-operation between the Council and the consultative organisations, which was later replaced by Resolution 2003 (8): the consultative status changed into a participatory status. In order to acquire this status the voluntary organisations are obligated to share the Council of Europe’s aims and contribute to its work; to be international and representative - both geographically and in its sphere of activity - with permanent headquarters, a structured organisation and a secretary general. 422 The Council seeks cooperation with these organisations as it wants to know the views and aspirations of European citizens; it seeks to provide direct representation for them and it wants to publicise its own activities through these associations, of which 374 now hold participatory status. 423 Non-governmental organisations (NGOs) are of great importance to build a democratic state based on the implementation of human rights and the rule of law in Central and Eastern Europe. Therefore, the relation between the Council and the voluntary organisations has accelerated over the last years. NGOs are able to give advice to citizens in the fields of the European Court of Human Rights, the European Social Charter, the European Committee for the Prevention of Torture, the European Convention on the Legal Status of Migrant Workers, the European Cultural Convention and the European Charter for Regional or Minority Languages. Moreover, they promote the signature and ratification of the European Convention on the recognition of the legal personality of international non-governmental organisations (ETS No. 124). This Convention is implemented to regulate the operation of non-governmental organisations all over Europe, especially in countries where an effective legal framework is lacking. 424 Most of the Eastern European states, like Romania, have created a tax-system in which taxpayers are able to share a certain percentage of their income tax to qualified beneficiaries, through which they have a direct voice in the distribution of state funds. 425 Romania as a civil law country has three forms of civil society organisations. There are nongovernmental organisations or non-profit organisations (NPOs): associations, foundations and federations. The last one refers to two or more associations or foundations cooperating. 422

Council of Europe official website (2009). Council of Europe official website (2009). 424 Council of Europe official website (2009). 425 Ambrose (2005). 423

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Concerning the legal basis of these organisations, Fiscal Code, Law 53/2003 describes the definition of a NPO. The regulations for the three types of organisations are defined in Governmental Ordinance 26/2000. 426 The association, which is legislated in Governmental Ordinance 26/2000 paragraph 4, can be defined as “subject of law constituted of three or more persons who, on the basis of an agreement, share, without being entitled to restitution, their material contribution, their knowledge and their lucrative activity, in order to accomplish activities of general interest, of community interest or, if such be the case, of their personal, non-patrimonial [not-for-profit] interest.” According to paragraph 6 of the same ordinance an association needs a statute and a constitutive act in order to have a legal status. The foundation is defined in paragraph 6 as well: “subject of law created by one or more persons who, on the basis of an act of will inter vivos or for cause of death, establish a patrimony designed permanently and irrevocably for achieving an objective of general interest or, if such be the case, of community interest.” Federations are subject to the law that regulates associations, which can be found in paragraphs 35 and 36. The different associations and foundations of which a federation consists keep their own legal status. All three forms of organisations are obligated to register with the clerk of the court where the organisation has its headquarters.

11.1.2 The civil society Civil society can be defined as the “space between the family, state and market, where people come together to pursue their interests.” 427 Romania has a poor civil society tradition. It was not until the end of the communist period that civic associations embarked upon the development of a free and independent civil society. Civil society developed relatively late in Romania; until the mid-nineteenth century civic associations or initiatives were rare. Explanations for the hesitant development of civil society can be found among others in Romania’s geographical location during the 19th century. Surrounded by three competing empires (the Ottoman, Tsarist Russia and Austro-Hungarian) and under the constant threat of foreign interference, political instability prevented civil society from evolving. 428 Moreover, the rural character of Romania and the Orthodox Church’s failure to emphasise the value of charity, created barriers to civil society’s development. 429 However, during the interwar period, Romania experienced its first democratic exercise and the constitution of 1923 granted the people the freedom of association. The first civic associations arose, only to be brought to a halt by the authoritative regime during the Second World War and the subsequent communist rule until 1989. Under communism everybody and everything became subordinated to the party, thereby destroying the interwar development of civil society. In comparison to the rest of the communist bloc, the situation in Romania was harsh. Even civic initiatives with a militant resistance character or dissidents groups failed to emerge due to the severe repression by the Ceausescu regime. The civil ‘facade’ movements that were present, such as youth movements, were closely linked to the party and were by no means elements of a free and independent society. The re-emergence of civil society after 1989 has been a slow and difficult process. Overall civil activism remains low. In 2003 an estimated 9 per cent of the population was member of at least one civil society organisation which did not generate income, such as trade unions, religious or environmental groups and sports associations. 430 Furthermore, enthusiasm for volunteer work remains low among Romanians. Only 7 per cent of the Romanian citizens does voluntary work on a regular basis, while 25 per cent stated that they do voluntary work 426

Council of Europe Romanian official website (2004b). Civil Society Development Foundation (2005), p. 12. 428 Civil Society Development Foundation (2005), p. 16. 429 Civil Society Development Foundation (2005), p. 16. 430 Civil Society Development Foundation (2005), p. 23. 427

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sometimes or rarely. 431 Volunteerism is believed to be weak because it is associated with the memory of ‘forced voluntary work’ under communism. The number of NGOs has risen over the last couple of years, but few of them are really active. They are predominantly based in the big cities. 432 The position of civil society is still fragile and its influence limited. This is mostly the result of the government’s reluctance to recognise civil society and to cooperate with it. 433 Usually, civil society is still perceived more as a threat instead of a possible partner for bringing about change. This attitude becomes among others apparent in the reluctance of the government to attend meetings organised by civil society. Nevertheless, the capacity of civil society has improved over the last couple of years according to the NGO Sustainability Index which is published yearly by the USAID. 434 It appears that civil society’s voice is getting louder and politics are, albeit hesitantly, inclined to listen more. A striking example of civil society’s increased influence is the project for the Coalition for a Clean Parliament which originated for the first time in 2004 (see section 9.3.1).

11.1.3 Funding The main problem facing Romanian civil society is the lack of funding, which is a potential harm to its independence. Although many EU funds create opportunities for civil society organisations, these funds are often first distributed to the government. This implies that non-governmental organisations only have access to these funds through partnerships with government agencies. Therefore, other sources of funding are an easier way to receive financial support. Especially before EU-accession, the non-profit sector depended on funds from the US. Nowadays, the source of funding originates mostly from the EU. 435

11.1.3.1 Pre-accession assistance The EU provides candidate countries with pre-accession funds to help these countries financially with the expenditure of the adoption of the existing EU-laws and on development in general. The EU applied three pre-accession instruments of which Romania benefited. The first pre-accession programme from which Romania received financial assistance was PHARE; a programme created in 1999. PHARE funds focus on the pre-accession priorities pointed out in the applicant country’s Road Maps and Accession Partnerships. PHARE’s main objectives are: strengthening public administration and institutions so as that they can function effectively within the EU framework; the promotion of the convergence between the national and EU legislation; and the support of economic and social cohesion which implies the promotion of a well functioning market economy which can cope with the competitive pressure of market forces within the EU. 436 Romania also benefited from the Instrument for Structural Policies for Pre-Accession (ISPA). This programme, which was established in 1999, grants financial support in the areas of transport infrastructure and environmental projects. Like PHARE, ISPA aims to promote economic and social cohesion. 437 The third programme which helped Romania reform is the Special Accession Programme for Agriculture and Rural Development (SAPARD). Through this programme Romania was aided financially to deal with the structural adjustment of agricultural sectors and rural areas. Moreover, the programme assisted in the implementation of the acquis communautaire concerning the 431

Civil Society Development Foundation (2005), p. 24. Interview B32. 433 Interview B06 and B32. 434 United States Agency for International Development (2007). 435 This section addresses the funds provided by the EU. Non-profit organisations often rely on these funds. However, the funds are accessible to everyone. 436 European Commission (2009d). 437 European Commission (2009e). 432

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Common Agricultural Policy (CAP). 438 The three above mentioned pre-accession assistance programmes, together with Turkey’s pre-accession instrument and the Community Assistance for Reconstruction, Development and Stabilisation (CARDS) were replaced in 2007 by the Instrument for Pre-Accession Assistance (IPA). Under IPA, the former programmes are brought into a single framework, which assists candidate and potential candidates to prepare accession. Romania and pre-accession assistance Before Romania officially entered the EU on the first of January 2007, Romania was financially aided by the pre-accession funds discussed in the previous section. Mentioned bellow are the sums of money Romania received each year under the PHARE, ISPA and SAPARD funds and the total amount of assistance received that year from the EU (in millions of Euro): 439 • • • •

2003: PHARE, ISPA and SAPARD 272; 162; 261 (total 695) 2004: PHARE, ISPA and SAPARD 433; 159; 317 (total 907) In 2005 Romania, together with Bulgaria received from PHARE, ISPA and SAPARD: 751; 250,3; 500,7 (total 1502.0) 2006: PHARE, ISPA and SAPARD: 544,3; 192,4; 377,9 (total 1114,6)

Sadly, not all this money was allocated to Romania in an honest manner. There were several reports of fraud made by the European Anti-Fraud Office (OLAF). In 2006 OLAF worked on 481 active cases distributed among member state countries, acceding and candidate countries. Out of this number, 24 cases concerned Romania, compared to eleven in Bulgaria. 440 Fourteen of these fraud investigations in Romania were related to pre-accession financial assistance from PHARE, ISPA and SAPARD. 441 This number is high considering the fact that in 2006 there were twenty cases related to pre-accession funds. However, knowing that 61 per cent of pre-accession assistance was granted to Romania in 2006 puts the number of fraud cases in perspective. 442 Furthermore, OLAF reports that Romania’s number is also relatively high due to the good cooperation of Romania in providing information on the suspects of fraud. This contrasts with Bulgaria. Structural and Cohesion Funds The EU’s Structural and Cohesion Funds are aimed at reducing the prosperity differences between the different member states and regions. The Structural Funds are mostly operated at a regional level, while the Cohesion Funds are administered at the national level. The financial assistance of the Structural Funds aims to speed up the progress of regions which try to catch up with the average EU development level. Covered by the Structural Funds are the European Regional Development Fund (ERDF) and the European Social Fund (ESF). The ERDF is directed at the development of infrastructure (especially aimed at telecommunications, environment, energy and transport) and the support for small and medium sized businesses. Furthermore, the ERDF functions as a financial instrument to support both local and regional development and to help foster cooperation between regions and towns. 443 The ESF aims at improving employment and job opportunities within the EU and dedicates financial assistance to increase adjustment between workers and enterprises through for example lifelong learning schemes. The ESF also seeks to enhance the access to employment for the unemployed, women and migrants. Moreover,

438

European Commission (2009f). Report from the Commission to the European Parliament and the Council (2003-2006). 440 European Anti-Fraud Office (2006), p. 24. 441 European Anti-Fraud Office (2006), p. 28. 442 European Anti-Fraud Office (2006), p. 28. 443 European Commission official website (2008b). 439

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the fund aims at reinforcing social integration of disadvantaged people by combating discrimination and strengthening human capital by reforming educational systems. 444 The EU’s Cohesion Fund is available for those member states who’s GNP per inhabitant is lower than 90 per cent of the EU average. The Cohesion Fund is directed at reducing the economic and social shortfall of those states eligible for the fund. The fund finances projects regarding transport infrastructure and environment, such as energy efficiency, renewable energy and the strengthening of public transport. The countries eligible for the Cohesion Fund for the period 2007-2013 are Spain, Portugal, Greece and the member state who joined the EU in 2004 and 2007. 445

11.1.3.2 Romania and the Structural and Cohesion Funds For the period 2007-2013 the EU has a budget of 347,4 billion Euro at its disposal for the Structural and Cohesion Funds. 446 Each member state has drafted its own National Strategic Reference Framework (NSRF) which sets out the country’s investment priorities for regional and sector programmes. Romania’s strategy is developed in a partnership between the Commission, national, regional and local authorities and lays out how the country is planning to invest the 19,7 billion Euro allocated to Romania for the period 2007-2013. 447 Romania has identified five priority areas to increase economic growth and social cohesion. First of all, it wants to invest in the development of basic infrastructure (roads, rail, water) to bring this in line with European standards. Second, Romania aims to increase the long-term competitiveness of its economy. There is a need for the country to move beyond its dependency on cheap labour. The third objective set out in Romania’s NSRF is the development and more efficient use of human capital. Through life-long learning programmes and active labour market policies Romania seeks to increase its labour force participation rate and decrease mismatches on the labour market. Fourth, Romania seeks to improve its administrative capacity and increase its efficiency. The fifth and final priority set out in Romania’s strategy is the promotion of a balanced territorial development. In other words, it seeks a balanced and equal growth of the entire country, preventing increased divergence between regions. Applying for EU funds Romania received large sums of money from the pre-accession funds and will receive billions for the upcoming years from the Structural and Cohesion Funds. Although the EU has dedicated a generous budget to Romania, the money does not always arrive at the place where it is most needed due to a lack of administrative capacities. The procedures to start the application process and to implement projects with EU funding are lengthy and complicated. 448 This especially contrasts sharply with funding from the US – who was Romania’s main benefactor in the early 1990s - which is easier accessible. 449 The Soros Foundation Romania conducted a research on local authorities’ access to EU funds in four out of Romania’s eight regions. It appeared that the number of applications made by rural communities and small cities is low. A quarter did not submit any project at all to obtain EU funding, while 26 per cent of the communities investigated only applied for one project during the period 2004-2008. 450 The subsequent success rate of an application was 50 per cent and most of the funds were dedicated to basic infrastructure, such as roads, water pipes and sewages. 451 Cities 444

European Commission official website (2008c). European Commission official website (2008d). 446 European Commission official website (2008e). 447 European Commission official website (2007a). 448 Interview B18. 449 Interview B07. 450 Interview B33. 451 Interview B33 and Soros Foundation Romania (2009). 445

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and medium-sized towns appear to be more active in acquiring EU funds than the small villages. However, especially the small villages with poor infrastructure are the most in need of funding. The problems which towns encounter in applying for funds are multiple. A first obstacle is the lack of information. There is a lack of knowledge on how to accede funds. Villages do not dispose of specifically trained personnel to write EU projects. Moreover, sometimes there is also a lack of equipment, which prevents a village from applying. For example, some funds are only accessible via an electronic application, but some of the communes do not have access to internet and/or do not know how to use it. 452 Another problem facing villages are budget restraints. The EU funds are only available in combination with a co-financing of the applicant itself. However, some villages have little to no local income, because there are no enterprises present for tax collection. The study also revealed that villages, which arranged a partnership with other villages, NGOs or the county council, achieved a higher success rate. Nevertheless, few villages made partnerships. It can be concluded that being “inappropriately informed, having poorly trained staff, running on small budgets and being unable to partner with other institutions or associations” are the common problems facing predominantly small and rural villages in acquiring EU funds. 453 Not only towns and villages face problems, also NGOs have difficulties in obtaining funds. Like the Soros Foundation, the CENTRAS organisation plays an important role in the existence of NGOs. The organisation fights for the development of NGOs with the goal to strengthen the role of civil society. Therefore, CENTRAS provides smaller NGOs on the countryside with information about funding. Besides this, CENTRAS is a source of information for the European Commission and foreign investors. CENTRAS could be seen as the intermediary between NGOs and their sponsors. These kinds of organisations are of great importance to the future existence of NGOs in Romania.

11.2 Romania and its citizens It is not surprising that a state which only recently changed from a dictatorship into a democracy has difficulties to inform its citizens about their rights and about how the system in general works. Citizens are often not aware of the chances and possibilities for them introduced by high level reform. The current relation between the Romanian state and its citizens will be outlined in this part of the chapter.

11.2.1 The state and its citizens Romania is a unitary state, but the constitution also establishes that the country is an indivisible unitary state. 454 In fact the territory is divided; the constitution provides that the country’s territory is divided and administratively organised in counties, towns and communes. Article 1 states the independence of Romania from any other country at an external level and the supremacy of the internal power at internal level. 455 Almost every country has provisions and principles concerning the relationship between citizen and state. Romania is no exception. Article 4 paragraph 1 of the constitution provides that: “the state foundation is laid on the unity of the Romanian people and the solidarity of its citizens.” 456 The unity of the Romanian people is characterised by a historical, linguistic, ethnic, religious and cultural unity. According to article 4 paragraph 2 of the constitution Romania is an indivisible and common homeland for all its citizens without any form of discrimination. This article not only consecrates the political idea of equality of all Romanian citizens, but also gives criteria for their 452

Interview B33. Soros Foundation Romania (2009). 454 Constitution of Romania. 455 Ionescu (2008), p. II-24. 456 Constitution of Romania. 453

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non-discrimination. Besides this, the constitution guarantees under article 16 the equality of rights and people more precisely (see chapter 12 Human rights). Both articles are intended by the constitution to complement each other. Anti-discrimination is one of the most important elements in the relationship between the state and citizen. Article 6 of the constitution is a framework, which contains provisions on minorities and their right to identity within the Romanian state. The only condition that is laid down in the constitution concerning the guarantee and expression of culture, linguistic and religious identity of minorities, is that this protection is in line with equality and non-discrimination with other Romanians. 457 Some provisions made under the general principles of article 6 of the Romanian constitution should be mentioned here: • Article 29 paragraph 5: “Religious cults shall be autonomous from the State and shall enjoy support from it, including the facilitation of religious assistance in the army, in hospitals, prisons, homes and orphanages.” • Article 32 paragraph 3: “The right of persons belonging to national minorities to learn their mother tongue, and their right to be educated in this language are guaranteed; the ways to exercise these rights shall be regulated by law.” • Article 62 paragraph 2: “Organisations of citizens belonging to national minorities, which fail to obtain the number of votes for representation in Parliament, have the right to one Deputy seat each, under the terms of the electoral law. Citizens of a national minority are entitled to be represented by one organisation only.” • Article 128 paragraph 2: “Romanian citizens belonging to national minorities have the right to express themselves in their mother tongue before the courts of law, under the terms of the organic law.” 458 The Romanian constitution also describes the relation with Romanians who live abroad; article 7 states that the state supports and strengthens the link with these citizens. The constitution does not make a difference between Romanians who live in neighbouring countries, or those who live further away. It should be mentioned that the sovereignty of other states may not be affected by the encouragement of the cultural, linguistic and religious identity of Romanians abroad. 459 The constitution states that Romanian citizenship is provided by organic law; the law on Romanian citizenship, Law No. 21/1991, provides how citizenship is acquired or lost. In Romania, citizenship is obtained by the ius sanguinis principle. Citizenship is a condition in order to practice passive or active suffrage and public and civil service functions. 460

11.2.2 Citizens and their rights The juridical system of Romania has gone through a lot of changes since the fall of communism. In the early 1990s the communist system had to be reformed, while in the late 1990s the juridical system needed to be reshaped again, in order to assimilate and transpose to the acquis communautaire. 461 It is impossible for citizens to adjust easily to these kind of reforms. Although, generally speaking, Romanian citizens are aware of the membership of the EU and the advantages it could bring them, awareness concerning their national and international rights is low.

457

Ionescu (2008), pp. II- 24-25. Constitution of Romania. 459 Ionescu (2008), p. II-26. 460 Ionescu (2008), p. II-27. 461 Interview B38. 458

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The Romanian law obligates public consultation of every law, which results in the publication of every initiative on the website of the Ministry of Justice. 462 Although the technical improvements of the last decade are essential for the transparency of the juridical system, not all Romanian citizens have the possibility to use these sources. Poverty impedes the access to information, especially on the country side. There is a law on the provision of financial support for legal cases, however, the people in question are often not aware of the fact that they are able to get support or even a free lawyer. As internet is the main source of law, programmes and initiatives of the Ministry of Justice to stimulate the awareness of people’s rights, cannot reach every Romanian citizen. Another initiative that does not have the effect that was anticipated regarding citizens’ legal involvement, is the 2006 law on mediation. Romanians who are aware of their legal rights, make abundant use of them, resulting in frequent visits to court. In order to create an effective legal system, unnecessary cases need to be avoided. Mediation can be a good alternative. It can be a solution both for the lack of judicial manpower and for citizens, as mediation lowers the legal costs. Financial aid from the Structure Funds is needed to establish this alternative in law. 463 Unfortunately, people cannot be forced to mediate. 464 As regards European law, it is too early for citizens to comprehend it; people first need to have a basic level of understanding law, in order to accept new law. Due to the communist system people lack basic legal knowledge. A second reason explores that first the Romanian institutions need to learn and practise European Law. In other words, European law is not of citizens’ interest yet. 465 Next to the government as a source of citizens’ rights, NGOs play an important role in the citizens’ awareness concerning their rights. NGOs try to make people aware of their rights, and that they exist to help them and to fight against injustice. 466 Through NGOs citizens can discuss new legal initiatives with the Ministry of Justice. For example, four new codes (the Criminal Code, the Criminal Procedure Code, the Civic Code and the Civic Procedure Code) were recently adopted by the Romanian government without respect of the law on transparency in decision-making. Therefore, several NGOs started the campaign ‘Stop the Codes’ to block the four codes. The campaign, which is supported by many civil society organisations, wishes the codes to be withdrawn and send back to the Ministry of Justice in order for society to be properly consulted, as required by law. 467 A problem however, is the unfamiliarity of people with the existence of NGOs. Future campaigns to increase citizens’ awareness of their presence are one of the most important tasks of the NGOs at the moment. After the reform of the legal system, it is time to put the new system in practise. 468 In the end, the goal of the accession is to assure all citizens of their international rights. Transparency, mediation and trust are aspects that should develop the citizens’ awareness of rights in Romania. The road to reach that goal will be difficult for Romania.

11.2.3. The national Ombudsman Like most other countries Romania has an Ombudsman; his role is to defend and guarantee the rights and freedoms of the people. The Romanian constitution provides this new institution as the People’s Advocate within the judicial system. Chapter IV of the constitution addresses the characteristics of the function of the People’s Advocate. 469 Article 58 states that deputies are 462

Interview B38. Interview B41. 464 Interview B38. 465 Interview B38. 466 Interview B07. 467 Interview B18 and B16. 468 Interview B09. 469 Ionescu (2008), p. II-30. 463

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specialised per fields of activity. The person has to report to the Parliament annually or by request, according to article 60. 470 The organisation and functioning of the Ombudsman can be found in organic law; law No. 35 of 13 March 1997 471 on the organisation and functioning of the institution of the Advocate of the People, which lays down the general provisions of the function. Those are among others: • The Advocate of the People’s function is an autonomous public authority, independent of any public authority, under the terms of the law. • Public authorities have the obligation to communicate, any information, documents or other acts that they possess, related to the complaints lodged with the Advocate of the People, granting him support for the exercise of his duties. • The Advocate of the People shall submit reports, in joint session of both Chambers of the Parliament, annually or at their request. 472 The mandate of the Ombudsman is for a period of five years and may be renewed only once. The function of Advocate of the People has a lot of deputies, which he has to exercise ex officio. 473 The Ombudsman presents his or her institution before the Parliament and other public authorities, but also in relations with natural persons or legal identities. Complaints are important, as the Ombudsman needs to receive and distribute complaints lodged by persons aggrieved by public administration authorities through violations of their civic rights and freedoms. Decisions on these complaints have to follow up the legal solution of the complaints that are received and requested from the public administration authorities or civil servants. 474 There are many more prerogatives and duties, that the People’s Advocate has, which look good on paper. However, the problem is the execution of these powers, as the Romanian Ombudsman is not an identifiable person. It is hard to reach him/her and he/she does not seem to be taken seriously enough as authorities do not respect the institution sufficiently. His/her position needs to be strengthened by legislation as this is necessary for a strong society. 475

11.3 Daily corruption It has been argued that corruption, both low- and high-level, is deeply rooted in society. 476 It is something you encounter every day and people talk openly about it. A clear example is that parents buy their children high school diplomas, which is dangerous and hopeless since they enter a job with little to no expertise. 477 During elections corruption is not a taboo but used as political weapon to harm opponents. 478 The EU 2008 report on the Cooperation and Verification mechanism states that: “Romania continues to make progress in the fight against corruption at local level but needs to produce more results. Public awareness campaigns, training sessions and other preventive measures have been carried out. The number of corruption investigations within the police has increased. However, in areas such as health and education were there are clear indications of corruption, few measures have been taken. A poll conducted by Transparency International in the 470

Constitution of Romania. Republished according to the provisions of art. II from the Law no. 233/2004 for the amendment and completion of the Law no. 35/1997 regarding the organisation and functioning of the Institution of the Advocate of the People, published in the Official Monitor of Romania, Part I, no. 553 from 22 June 2004, giving a new numbering of the texts. 472 Law No. 35 of March 1997. 473 Law No. 35 of March 1997. 474 Ionescu (2008), pp. II-30-31. 475 Interview B32. 476 Interview B06 and C07. 477 Interview C07. 478 Interview B18. 471

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first half of 2008 suggests an increase in ‘every day corruption’ compared to the previous year. The Romanian government adopted a national strategy on counteracting local corruption in the beginning of June, with the aim of developing a more transparent and efficient local administration.” 479 During communism corruption was used as a way to survive. After the fall of communism corruption continued to be a problem and Romania needed a quick solution to encounter the problem, which resulted in the establishment of the independent body National Anti-Corruption Directorate (DNA). Civil society is proud of the head of the DNA, Daniel Morar. 480 He is considered as a national hero by some. On European level he is very much appreciated as well for his activities in the fight against corruption in Romania, which for example means investigating high officials or members of the Parliament. 481 Some people even claim that the DNA could not exist without him. Albeit DNA receives little support from the current government, as stated by DNA itself, 482 the organisation has been successful in creating discussion about corruption in society. DNA will be discussed further in section 13.2. In order to fight and control daily corruption, Romania needs more mechanisms and institutions like DNA. This issue is of high importance concerning further integration into the EU, for example concerning the accession of Schengen and the availability of Structure Funds. A transparent and honest system is required to achieve further development of Romania.

11.4 Education 11.4.1 Romanian educational system The Romanian education system is regulated by a central organisation and there are several laws which regulate the education system and its professors. However, there is no compulsory attendance at school in the sense that there are no inspectors who check school attendance, which makes it hard to increase the rates of children going to school. Especially within certain minority groups one can observe a significant amount of children that is not participating in school activity. 483 In order to get a clear overview of the Romanian school system one may consult the overview given below: 1. Pre-school education: kindergartens; age 3 to 5; non compulsory. 2. Primary education: primary school; age 6 to 9; 1st to 4th grade; compulsory. 3. Lower secondary education: lower secondary school (gymnasium); age 10 to 13; 5th to 8th grade; compulsory. 4. Lower secondary education: high school-lower cycle or School of Arts and Trades; age 14 to 15; 9th to 10th grade, compulsory. 5. Upper secondary education: high school-upper cycle (age 16 to 15; 11th to 12th grade; post-compulsory) or completion year (age 16; 11th grade; post compulsory) and then high school-upper cycle (age 17 to 18; 12th to 13th grade; post compulsory). 6. Post-secondary education: post high school education; age >19; post compulsory. 7. University and post university education: university education (bachelor-master), doctorate (PhD), post-university education; age >19; post compulsory.

479

European Commission official website (2008a). Interview B18 and B38. 481 Interview B38. 482 Interview B35. 483 European Association for Education Law and Policy (2009). 480

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Since 1995, the education system law contains a section regarding university autonomy, which directs towards management, administrative and financial tasks. Besides autonomy, academic freedom is guaranteed by law within all educational institutions and students are free to choose their study freely. 484 It is stated that access to higher education depends on a secondary school diploma; however, it has been argued that in practice, one can exchange permission to university for money. One could state that corruption within the educational system evolves already at a very low level as parents who can afford it are said to be able to buy a secondary school diploma and likewise permission to university. 485 School leavers by level of education: • • • •

Seven per cent of the population obtained a university degree (40 per cent law or economics; 6 per cent mathematics; 11 per cent technical degree). Twenty-one per cent of the population obtained a secondary school degree. Eleven per cent of the population obtained a primary school degree. A total of 1.3 per cent of the population has no degree at all. 486

When referring to the financial support for students, which by law the government is obligated to provide, scholarships and financial aid is given to a specific group. This group consists out of families with low education backgrounds and families with a low income per capita. 487 Students belonging to the Roma minority are also given the possibility to receive this support. Besides this national regulated system, the World Bank has supported the Romanian government with expanding a feasibility study on a general loan scheme, coming into force next year. 488 Aimed at widening access to higher education, the Romanian government has designed a framework in which specific groups are free of charge.

11.4.2 Quality of education During the communist regime, the education system in Romania was well developed. Starting from the 1990s, the quality of education has decreased as a consequence of low expenditures of the Romanian government on education (only five per cent of GDP). 489 The most striking problem as regards the education system seems to be the lack of congruence between the university programs and the labour demand. The Romanian society is desperate for higher educated people with business skills and technology specialisations. However, due to the disability of the government to change the content of the curriculum after the fall of communism, a significant rotation in content is not visible. One can conclude that the design of the curriculum has changed over time; yet, the content remained largely similar to prior circumstances. 490 Concerning the quality of education there are significant regional differences in Romania. The quality of education in rural areas is much lower than in urban areas. This is due to the fact that rural areas experience problems with shortages of teachers and also with unqualified teachers. 491 On country level, Romania has a shortage of 9,000 to 10,000 qualified teachers in primary and lower secondary education. In many cases, teachers shift schools every two years, since they do not have enough hours to teach. They transfer to urban areas since living and teaching conditions are better in these areas. In order to stimulate the presence of qualified teachers in rural areas, the Romanian government has introduced a bonus system based on 484

European Association for Education Law and Policy (2009). Interview C07. 486 EVD official website (2009). 487 European Association for Education Law and Policy (2009). 488 European Association for Education Law and Policy (2009). 489 EVD official website (2009). 490 Interview C04. 491 EVD official website (2009). 485

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distance from cities. Thus, wages have risen in rural areas in order to attract teachers and prevent the typical rural-urban migration. 492 In 1999, the Romanian Minister of Education signed, together with 28 other European ministers of education, the Bologna Declaration. With the signing of this Declaration, the ministers conceded formally to several reforms in higher education within Europe. In order to improve the mobility of students and teachers, all obstacles to their freedom of movement had to be removed and therefore, structural harmonisation of diverging national structures had to be realised. As a consequence, Romanian universities have incorporated the two-cycle system in which a distinction is made between bachelor and master students. This is in line with the European system, as well as the ECTS-system which all Romanian universities are obligated to implement. As regards the student mobility, Romania has claimed that already prior to its accession into the EU all mobility obstacles were removed and that only work permits create problems.

11.4.3 Human resources in education The share of qualified teachers continuously increased during 2000-2006, at all levels of education. By residence, the share of qualified staff is lower in rural areas as compared to urban areas. In university education, the issue of unqualified personnel does not exist. It is forecasted that the school population will decrease by 20 per cent in 2013 (as compared to 2005). This demographic trend is expected to trigger a decrease of personnel in education by about 10 per cent. Despite this forecasted surplus of teachers, there are increasing shortages of qualified teachers. This is especially the case in areas where demand for higher educated persons by employers is rising, for example in the ICT sector and for foreign languages. Moreover, deficits of qualified teachers are also specific to the fields related to new occupations demanded by the labour market for which initial training programs for teachers are not available yet. The ageing trend of the population is also visible in case of teaching staff and will contribute to the overall decrease of the teaching personnel. Another discouraging factor within the Romanian education system is the award that university employees like teachers and professors receive. The wages they obtain are in such a degree dissatisfactory that they often feel the need to acquire other vacancies after office hours. An enormous amount of personal effort is asked from the professors and teachers since the universities themselves do not have money to acquire photocopy papers and complementary reading material. 493 Many university teachers eventually switch jobs because of the bad congruence between their human capital and their pays. There is no existence of an efficient pay-system; a system that maintains the efficiency of the employees by distributing progressive rewards. Due to the inefficient wage system, employees are often de-motivated and disillusioned with their jobs, an attitude which can affect students in a discouraging way. Additionally, the low attractiveness of a teaching career, the relatively persisting inflexibility in the professional routes and rewarding of the teachers, limit the possibilities to recruit new teachers. These developments and demographic trends underline the importance of the qualification and quality of the human resources employed in education. 494

11.4.4 Quality of human capital The competitiveness of the human capital is directly influenced by the level of education. For the population in the 25-64 years age group, data show that the share of population with at least upper secondary education is close to the EU average, but below the average level of the ten new member states and the 85 per cent benchmark for 2010. In Romania, 492

Interview C01. Interview B12. 494 Ministry of Labour, Family and Equal Opportunities official website (2007). 493

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the share of population (aged 25-64 years old) with at least upper secondary education increased during 1999-2005 from 67.9 per cent to 73.3 per cent. In the same group, the share of population with university education, even though on an ascending trend (from 8.7 per cent in 1999 to 11.1 percent in 2005), remains below the level of most developed countries (USA 27.7 per cent; France 16.4 per cent; UK 15.4 per cent).495 Figure 11.1 shows educational attainment of the active population (aged 15 to 29) by different education level in 2005. Educational attainment University education graduates

% 6.6

Post-secondary and foreman education graduates

2.3

Upper secondary education graduates

29.9

Graduates of professional schools and apprenticeship schools

16.3

Primary education graduates

5.9

No schooling

1.8

0.1Figure 11.1 Educational Attainment: Active population 15-29 years (2005) Source: Ministry of Labour, Family and Equal Opportunities official website (2007). Romanian employees are relatively well educated in comparison to their low wages. However, as their knowledge is often closely connected to a specific function, their labour mobility remains relatively low. 496 Among the higher educated population one can observe a tendency towards leaving the country; a so called ‘outflow of human capital’. A significant amount of the Romanian university students leaves the country during their studies to maintain their education abroad, which has resulted in a large outflow of emigrants. 497 Higher educated people seem to encounter minimal satisfaction within the Romanian labour market and, although highly educated, wages are poor compared with other European countries. The European Union has confirmed the phenomenon of brain drain in Romania, a concerning situation in which a vast group of human capital leaves the country and thereby leaving Romania in an unfavorable economic position.498

11.5 A few remarks on the future of civil society in Romania In Romania NGOs can be interpreted as an 'unofficial' opposition party, watching politics from the sideline. During communism NGOs did not exist, they had to be rediscovered after 1989. Although new law on their existence is accepted by the Parliament in 2002, they still have to fight for their legality. 499 Their criticism is not welcomed by the government that has its hands full with EU reforms. Some NGOs even think that they are only (ab)used in times of election, for ‘a short love affair’, in order to attract the support of voters. 500 The Romanian government does not provide NGOs with political or financial support. The sector is still depending on foreign funding; EU funds as well as funds from the less

495

Ministry of Labour, Family and Equal Opportunities official website (2007). EVD official website (2009). 497 Interview C12. 498 Interview B39. 499 Interview B07. 500 Interview B08. 496

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bureaucratic United States. 501 The lack of dialogue between the government and civil society is harmful, whereas their cooperation could be of positive influence on the future of Romania. Their cooperation could mean the exchange of expertise, which would extend the public debate and strengthen the civil society. Hopefully, new initiatives by the Romanian government arise and will be successful in order to establish a functioning participatory democracy. 502 There are a lot of difficulties for the Romanian citizens to gain full knowledge of their rights, since internet access is often needed to obtain information. Due to this lack of consciousness, Romanians are not always aware of the possibilities to go to court, and if they are, they encounter various problems due to the lack of juridical manpower. This results among others in the extension of cases. In the future the civil society needs to be strengthened. It is the task of NGOs and the Romanian government to create a framework where both could work in. It is up to the people to learn to trust their government and to support Romanian civil society in order to establish a participatory democracy.

501 502

Interview B06 and B07. Interview B23.

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12. Human Rights At the time Romania applied to become a member of the European Union, the country still struggled with the fundamental rights of minorities, women’s rights and children’s rights. Today, Romania has ratified all legal instruments concerning human rights with the exception of Protocol 12 to the Convention for the Protection of Human Rights and Fundamental Freedoms dealing with the general prohibition of discrimination. 503 Over the years there have been a lot of reports about the Romanian progress. Although there are positive developments there still exists a lot of concern regarding the matter of human rights in Romania. This chapter will clarify the political and social rights of the Romanian citizens and emphasise the concerns of women’s rights, children’s rights and rights of minorities.

12.1 Political and Social Rights The lack of social and political rights of the Romanian citizens was one of the reasons for the uprising of the Romanians in 1989. The change of political regime later that year entailed a new beginning on the role of the state in guaranteeing citizens’ rights. Shortly after, Romania joined several international treaties on human rights. 504 The constitution of Romania includes the interpretation of the major relevant issues of the Universal Declaration of Human Rights and international articles take precedence above national law in case of conflicting rules. 505 In certain situations the rights and freedoms of the people are restricted and according to article 53 of the constitution these restrictions can only be made by law and if necessary. However, the constitution states the reasons: “for the defence of national security of public order, the health of the citizens' rights and freedoms, conducting a criminal investigation, preventing the consequences of a natural calamity, disaster, or an extremely severe catastrophe.” Restriction can only be made, according to article 53 paragraph 2, if it is necessary in the Romanian democratic society. 506 The constitution lays down a wide range of human rights: Article 1, paragraph 3 of the Romanian constitution states that Romania is a democratic and social state in which not only citizen’s rights and freedoms have to be guaranteed, but also human dignity. And according to article 4, paragraph 2 all Romanians are equal, irrespective of race, ethnic origin, language, religion or sex. Title II of the constitution is all about the fundamental rights, freedoms and duties of the Romanian citizens. They are divided in four chapters. Chapter I is about Common provisions, the articles in this chapter concern universality (article 14), the equality of rights (article 16), aliens and stateless persons (article 17), international human rights treaties (article 20) and free access to justice (article 21). Article 20 contains reference to the Universal Declaration of Human Rights and “other treaties Romania is a party to”. Chapter II of the same title is called Fundamental rights and freedoms, which are both political and social rights: the right to life, to physical and mental integrity (article 22), individual freedom (article 23), the right to defence (article 24), freedom of movement (article 25), personal and family privacy (article 26), inviolability of domicile (article 27), secrecy of correspondence (article 28), freedom of conscience (article 29), freedom of expression (article 30), right to information (article 31), right to education (article 32), right to protection of health (article 33), right to vote (article 34), right to be elected (article 35), freedom of assembly (article 36), right of association (article 37), labour and social protection of labour (38), prohibition of forced labour 503

European Union Official Website (2006a). Ionescu (2008), p. II 28. 505 Constitution of Romania. 506 Constitution of Romania. 504

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(article 39), right to strike (article 40), protection of private property (article 41), inheritance right (article 42), living standard (article 43), family (article 44), protection of children and the young (article 45), protection of disabled persons (article 46), right of petition (article 47), right of a person aggrieved by a public authority (article 48). The last article (49) gives some restriction on the exercise of certain rights of freedom. The article describes that restriction may be given by law, the defence of national security, public order, health or morals (paragraph 1). The conditions have to be proportional to the situation in which the rights are restricted, according paragraph 2. The fundamental duties of the Romanian citizens are described in Chapter III. Romanians have to be faithful towards the country (article 50). “Military service is compulsory for all Romanian male citizens aged twenty” by article 52 paragraph 2. The rest of the chapter concerns financial contributions (article 53) and the exercise of rights and freedoms (article 54). The last Chapter of Title II is chapter IV the Advocate of the People. It gives the appointment and role of the advocate (article 55), the exercise of powers (article 56) and report to the parliament (article 57). 507 These varieties of human rights include a set of duties that are specifically related to the country. Examples of these duties are: faithfulness towards the country, loyal fulfilment of entrusted public offices and exercising in good faith the constitution al rights and freedoms. 508 From a formal perspective, the social and political rights that Romania established are in correct order, nevertheless, there still exist many problems with the implementation of these rights. Therefore, the rights of children, minorities and women in the country will be discussed in the next sections.

12.2 Children’s rights Romania has, like most other countries, adopted the Convention on the Rights of the Child. 509 Therefore, the children in Romania technically have rights, but these come from social law. The convention aims to support children and give them better knowledge of their rights. 510 At the time Ceausescu ruled the country women’s rights were consistently violated, since at that time women were obligated to give birth to at least four children. 511 Birth control and abortion were banned. 512 Since many families were not able to take care of so many children, the government raised them and it became ‘normal’ to leave your child behind in an orphan house. Although Romania implemented the Convention on the Rights of the Child in 1976, the conditions in the orphan houses were lamentable. 513 In 1989, after the collapse of Ceausescu there were about 100.000 abandoned children living in appalling conditions. 514 In 2000 Romania was pressured from the EU and international organisations to apply a moratorium on inter-country adoption, because of their extremely high adoption numbers. Even though even after 2001 many children were placed into foreign families, within the EU or the United States. Despite EU pressure, high officials of Romania and Italy made an agreement about placing 105 children in Italian families. The European Commission explained the country that the fundamental rights of children are given the same priority as human rights itself and for this reason negotiations regarding possible membership could not start. The result of this warning was illustrated into the Romanian child protection which became the priority to the Romanian government. 515 507

Section I and II of the Constitution of Romania. Ionescu (2008), pp. II 28-29. 509 UNHCHR official website (2004). 510 Convention on the Rights of the Child. 511 Nicolae (2005). 512 Rankin (2006), pp. 261-62. 513 Nicolae (2005). 514 Rankin (2006), p. 261. 515 Rankin (2006), pp. 263-70. 508

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In 2005, the Romanian government agreed on Law 272 ‘On the Protection and Promotion of the Rights of the Child’, which had to protect and promote a better knowledge of the rights of children. 516 Like the convention, this law is not a penal, but social law and the law aims to give family support, rather than placing them in a large orphan house. 517 These houses need to be replaced by other alternatives. Furthermore, the law wanted to bring child protection on the same level as the Convention. The law seems to be a success as 0.75 percent of the children stay in homes; this is the same level as in other Western European countries. 518 Nevertheless one can observe downsides too. UNICEF concluded that the children, who had to leave the system after the age of 18, had no education and were not educated for any vacancy. Besides this, children who returned to their natural families after staying in a state institution did not receive government assistance. The help to these families was poor and less than half of them received counselling. 519 The member states of the European Union did not share the same troubles with abuse of adoption as in Romania. Their laws concerning inter-country adoption have strong child protection procedures, but inter-country adoption is permitted. Romania decided not to follow this trend in adoption law and prohibited inter-country adoption in the new law. 520 In addition to the adaption of Law 272, the government also agreed on Law 273 ‘On the Legal Status of Adoption’. The law significantly changed the inter-country adoption process of Romania. It prohibited adoption of Romanian children outside the country, the only exception is the natural grandparents, but they can only be adopted if there are no Romanian alternatives. This means that, according to this law, adoption of a Romanian child by an unknown family has the preference above adoption by biological family abroad. This causes a lot of trouble, instead of living in a good home abroad, thousands of orphans and abandoned children now spend their lives in institutions or foster care. Another problem is caused by the fact that a birth mother must sign a declaration to end the parent-child relationship. In cases where the mother abandoned the child and has left without a trace, adoption is impossible. This causes yet another problem: children younger than 2 years cannot be placed in state institutions, according to Law 272. That means that abandoned children under the age of 2 are spending their first years in a hospital. 521 The European Union financed a program (PHARE-program) to introduce and explain the importance of children’s rights. The site http://www.copii.ro not only aims to inform children about their rights, or to give parents support, but also aims to tell professionals what to do. Teachers, doctors, police officers and social workers get a lot of information on how to act because domestic violence seems to be acceptable for 47 percent of the parents. 522 While the act seems to work, the government has forgotten about the disabled children. They are left on their own in a government institute their whole life. Even if they are able to leave the prospects are weak; only 28 percent gets some education. 523 UNICEF published figures that show that 40 percent of the children who are not raised in a family, have low writing and reading skills. One fifth of these children never went to school and a lot suffer from skin diseases, tuberculosis or hepatitis. Children that live on the street seem to have the most troubles as Romania does not have a juvenile justice system. One can conclude that the lack of knowledge of children’s rights is remarkable. 524

516

Law no. 272 of Romania. Drepturile copiilor sunt lege official website (2007). 518 Nicolae (2005). 519 Caplin (2007). 520 Rankin (2006), pp. 262-265. 521 Caplin (2007). 522 Drepturile copiilor sunt lege, official website (2007). 523 Caplin (2007). 524 Rankin (2006), pp. 265-286. 517

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This lack of knowledge is a problem for the children as they may not receive the right support when something gets out of hand. Therefore some international non-governmental organisations (NGOs) found their way to Romania and they offered help. All over the country small institutions are established, where they take responsibility for the neglected Romanian children. It happens that children are found in a dog kennel, lying at a chain. Or that a teenage mother does not know what she has to do, her family has not got any money, how should she take care of her child? There are not only problems with Romanian children since Roma children are having problems as well. Although according article 28 of the Convention every child has the right to go to school 525 , this is not always the case for Roma children. They can be kicked out of school because of their clothes, which are ‘too messy’, ‘unclean’ or just ‘Roma-like’. 526 According to Article 32 of the Romanian constitution general education is compulsory. The educational law states that education is a national priority and that you can access school freely, without any form of discrimination whatsoever. 527 The reality seems to be different. Registration can be a problem as well. As said before, some Roma groups are used to travel all over the country and those groups tend to forget to register their children, which is not accepted by schools. The registration of a child above the age of one takes a lot of time and money. Therefore, Roma children often miss out on education as their parents can be poor or simple do not know how to register. 528

12.3 Women’s Rights The European Social Charter contains a law which describes the principle of equality between men and women. 529 The main issue that Romanian women, like minorities, however, are faced with today, is that they are not treated equally and are discriminated. 530 Since the end of the Soviet regime, there have been various national and international organisations that support the emancipation of women and fight against inequality, but today woman are still not treated the same as men. As figure 12.1 shows, almost half of the Romanian population consists of women. Population of women: 10,962,000/21,344,100 (growth rate projected to decrease 4 % through 2010); Life expectancy of women (at birth): 76 years; School life expectancy for women: 14 years for both men and women (2006); Adult illiteracy for women: 3 % (2007); Unemployment of women: 6 % (2005); Adult economic activity rate: 50 % 0.1Figure 12.1 Women in Romania: statistics Source: Stop Violence Against Women official website (2008). The Romanian constitution gives a clear description of the rights of women. Article 4, paragraph 2 of the constitution states that “Romania is the common and indivisible homeland of all its citizens”, without discrimination on account of several protected grounds, including sex. Article 16 of the constitution describes the principle of equality of all citizens before the law and 525

Convention on the Rights of the Child. Interview A02. 527 Law no. 84 and Law no. 160 of Romania. 528 Interview A02. 529 Council of Europe Romanian official website (2004a). 530 Article 12 of the European Community Treaty. 526

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authorities. Article 41, paragraph 4 describes the principle of equal pay of men and women for the same work. Finally, Article 48 states the principle of equality between spouses in marriage. 531 During the beginning of the 2000s, Romania implemented a few laws regarding the equal treatment of women and men. In 2000, the Romanian government approved a ‘National Action Plan for Equal Opportunities between women and men’ 532 , which addressed the principle of equality in five areas: legislation, social rights, economy, decision-making and public awareness. In 2002, this Action plan became a law that sought to eradicate direct and indirect sex discrimination in all areas of public life. In 2002, ‘Law no. 48 on the Prevention and Sanction of all Forms of Discrimination’ was implemented. Article 1 guarantees equality between citizens in working conditions, recruitment, promotion and access to training, social security, public services, education and public peace. Article 2, paragraph 1 defines gender discrimination as differentiation, exclusion or limitation; completely or partiality based on gender. Gender discrimination is proscribed in employment (Articles 5, 6, 7 and 8), choice of residence (Article 17), access to public services (Article 10), education (Article 15) and public places (Article 18). 533 In 2003, the National Action Plan for Employment was adopted, in order to assist Romania in its EU-accession process. The Plan focused on four main aspects which included improving the employability of workers, creating new jobs and entrepreneurial opportunities, encouraging flexibility and improving equal opportunities for women and men. The Ministry for Labour, Social Solidarity and Family was the body responsible for the implementation of the plan. Overall, the Ministry seeks to increase the number of women in the workforce and therefore assesses gender pay disparities, provides education on equal opportunity laws, improves communication between employer associations, trade unions and the Advisory Commission, supports the sharing of household responsibilities and assists women as regards reintegration into the workforce after maternity leave. 534 In 2006, the Labour Code was amended (via Emergency Ordinance No. 55/2006) in order to provide equal treatment of men and women. Furthermore, direct and indirect discrimination as regards labour became prohibited. Women in Romania are openly and secretly opposed to domestic violence, sexual assault and trafficking. Different reports, published in the last few years, show the percentages of abuse in any kind of way. 535 In 2007, more than 9300 persons brought charges against domestic violence. 536 Romania tries to protect women by special programs, new codes and new laws. In order to prevent and to punish domestic violence, the Romanian Domestic Violence Law (Law 217) was adopted in May 2003. The law defines domestic violence as “any physical or verbal action deliberately perpetrated by a family member against another member of the same family, resulting in physical, psychological, sexual suffering or material loss” (Article 2, paragraph 1). The law describes domestic violence as violation of women’s fundamental rights and freedom and it addresses the role of social workers, prevention measures, mediation, shelters, protection measures and sanctions. In addition, the Council of Europe’s Campaign to Combat Violence Against Women was incorporated in the Romanian National Campaign 2006-2008 which involved action of local and regional authorities, the Romanian Parliament and other governmental structures. A new National Strategy to prevent and fight domestic violence was adopted in 2005 and currently there is another draft proposal to extend the strategy on combating violence against women. 537 531

The Romanian Constitution. Government Decision No. 1273/2000. 533 The Romanian Constitution. 534 Stop Violence Against Women official website (2008). 535 For example: Reproductive Health Survey Report (2004) by the Romanian Ministry of Health and United States Country Report on Human Rights Practices (2007). 536 Stop Violence Against Women official website (2008). 537 Stop Violence Against Women official website (2008). 532

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Article 217 of the new Romanian Criminal Code defines rape in order to prosecute the offenders of sexual assault. In 2006, this resulted in 459 convictions as regards rape. In addition, only in the first half of 2006 already 549 cases of rape were reported. Marital rape is, however, not included in the rape law provision and therefore not incorporated in these statistics. Men who are convicted for rape are imprisoned for three to ten years. Unfortunately, the prosecution of rape is difficult since a medical certificate and a witness are required. 538 The Romanian government has also taken several initiatives to combat trafficking in woman, albeit under international pressure. In addition to the new law against trafficking, the government also established a National Task Force and an Inter-Ministerial Committee against Trafficking. A National Plan on Trafficking in Women and Children has also been adopted. A Centre for Victims of Trafficking was established as part of the Plan. 539 Nevertheless, progress is too slow and limited. In 2007, a report of Amnesty International showed that women were still victims of domestic violence. 540 Amnesty published the case of a lesbian woman, who had been imprisoned for two years (1996 – 1998) because of the simple reason that she was in love with a woman. She, however, had been sent to a men prison and had been treated like a man. This demonstrates that the Romanian state has not entirely distanced itself from the former communist principles, since discrimination is still a major issue and equal and social rights are not guaranteed. In short, the transition of Romania from a totalitarian to a liberal state caused the following problems for women: low purchasing power means, a high rate of unemployment and poverty, deepening of social inequality and increased involvement of women in pornography, traffic and prostitution. 541 It is stated that Romanian women are hard workers who do not cut corners; unfortunately it is questionable whether the principle of equality in salary is actually respected in everyday life. With respect to the provisions as regards maternity leave women are more blessed. Women receive two years paid and one year of non-paid leave. In times of an economic crisis these provisions are, however, likely to change and it is thinkable that women will receive a shorter leave period. Additionally, women who are pregnant or have young children also have the largest chance to lose their job. This also demonstrates the issue of inequality between women and men. In society and politics, Romanian women do not tend to fulfil leading positions or positions which are relevant as regards the decision-making process. Some Romanians assume that women are not decision makers. Women would not possess the skills that are required for decision making, as oppose to men. 542 In the Parliament, for example, only ten per cent of the seats are taken by women. This problem could be solved by equalising the percentages of women and men in responsible and leading functions. The under-representation of women in higher functions, however, also poses a threat to civil society organisations (like the Women Association of Romania (AFR)) that are active in the domain of women’s rights, since they are not respected at the political level. Political parties talk openly about cooperation with the voluntary organisations during election campaigns, but after the elections have taken place the dialogue between politics and civil society is closed again. 543 These organisations, therefore, experience difficulties in continuing to exist and in maintaining their position in the Romanian society. Their existence is often the result of individuals who share the motivation and power to improve the situation for women. The president of the AFR, Liliana Pagu, is an example of such a motivated individual. She has been fighting for the position of 538

Stop Violence Against Women official website (2008). Stop Violence Against Women official website (2008). 540 Amnesty International official website (2007). 541 Open Summit official website (2007). 542 Interview B08. 543 Interview B08. 539

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women in Romania for more than twenty years. She does so by starting different initiatives, for example a campaign against breast cancer, a program against women trafficking and the organisation of an international human rights conference in Romania. To achieve these goals, she cooperates with other Romanian as well as foreign NGOs. As a Romanian and European promoter of women’s rights she conducts an open dialogue with foreign governments. Although she successfully obtained funds from abroad, both European and non-European, the much needed dialogue with the Romanian government is absent. 544 Women rights seem to be a contentious issue in a men society as Romania has. In Romania, democracy does not guarantee an equal treatment of men and women. Both the government and national and international civil society organisations should extend their actions with respect to the role of women in Romanian society and help to improve the position and situation of women.

12.4 Minority Rights The list of political conditions for the accession of Central and Eastern European Countries, which is part of the Copenhagen Criteria, describes the respect for and protection of minorities. The EU always puts pressure on future members to guarantee the protection of minorities and non-discrimination. The anti-discrimination issue is an EU-standard: it is part of the acquis and it is supposed to treat minority problems, especially with regard to the Roma minority in some countries. 545 Its legislative base is Article 12 of the EC-Treaty. These two norms are linked with each other, although non-discrimination is a general human rights principle and minority protection is based on population groups. 546 The first time that minorities were mentioned and respected in Romanian law after the collapse of communism was adopted in the constitution of 1991, which declares that “Romania is a sovereign, independent, unitary and indivisible National State” (Article 1), but “the State recognises and guarantees the right of persons belonging to national minorities, to the preservation, development and expression of their ethnic, cultural, linguistic and religious identity” (Article 6). 547 Article 4 of the constitution describes the right of non-discrimination. After the establishment of the constitution of 1991, Law no 69/1991 on public administration and Law no 68/1992 regarding the election of Chamber of Deputies and Senate were adopted. The most important right the minorities obtained by these laws, was the right of representation in the Parliament. Article 4, paragraph 1 of Law no 68/1992 states that: “equally constituted organisations of citizens belonging to national minorities which fail to obtain at least one seat in the Chamber of Deputies or the Senate in the elections shall have the right to one seat in the Chamber of Deputies, in accordance with Article 59, paragraph 2 of the constitution , provided that their share of the vote is at least 5 per cent of the average number of validly cast votes in the entire country for the election of a Deputy”. In 1993, representatives of national minorities and civil servants from ministries created the consultative body Council for National Minorities. Since it is only consultative, the lack of power and influence of minority groups in this Council is obvious. 548 In this century, one of the most important moments regarding the rights of minorities was the parliamentary vote on the new Law on public administration, no 215/2001, which provides for the use of minority languages in administrative-territorial units where a minority represents at 544

Interview B08. Schimmelfennig and Sedelmeier (2005), p.53. 546 Schimmelfennig and Sedelmeier (2005), p.53. 547 Constitution of Romania. 548 Constantin (2004). 545

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least 20 per cent of the population. Especially for the Hungarian minority this was an important development, one that will be explained in the next section. The National Council Combating Discrimination, a specialised body for the implementation of the equality principle and enforcement of non-discrimination legislation, was established in 2001. 549 In the Romanian constitution of 2003, the use of the mother tongue, both in relation with public administration and in the Courts, became a constitutional principle. 550 This last development meets the wishes of the Hungarian population, which is largely integrated in Romanian society. The only problem they have is the language difference that causes political conflicts between Hungarian and Romanian officials. The Hungarian population is a strong cultural autonomy in Romania, which fought for its rights to integrate into society without losing its cultural identity. Therefore, the preservation of their language is of great importance. 551 In comparison with the Hungarian cultural identity, the missing force to strive for their rights and to live with the same standards as the Romanian population does, could explain the lack of a Roma shared cultural identity. Furthermore, the historical differences between the two minority populations clarify their different positions in Romanian society. Not only did the Hungarians fight for their own rights, but also for minority rights in general. The national Hungarian party, the Democratic Alliance of Hungarians in Romania (DAHR), focuses on the earlier mentioned issues concerning minorities: restitution of church property confiscated by the communist regime; the right to use their mother tongue in their public administration and tribunals; the right to have instruction at all levels of education in their mother tongue; and limited local autonomy in the regions where they form the majority. 552 One of the main DAHR achievements in the period of 2004-2007 is the elaboration of the Draft Law on the Statute of National Minorities living in Romania. The Draft Law can be described as follows: “The draft law is in full accordance with the stipulations of the constitution. It is a framework law so it does not comprise minority rights guaranteed by already existing laws. Yet, in principle it does regulate all the aspects of the right to the use of the mother tongue and the right to education and culture in the mother tongue. Besides the provisions of this principle, the law concretely defines those national minorities that can be regarded as traditional and historical minorities in Romania due to their long-lasting co-existence with the Romanian majority. The introduction of the national community concept constitutes a breakthrough since it is the first time that the draft declares national minorities to be state-forming factors. The draft law also defines the status of minority organisations, more specifically, the fact that a minority organisation can take part in political life, local and parliamentary elections according to specific criteria. Defining the particular numbers, proportions, and percentages describing this representatively is a technical issue. The most important element of the draft law on minorities is the establishment of the legal framework for the practice of cultural autonomy. Thus, it does not only state that they have the right to their independent cultural, education and press institutions, but also specifies the way a minority community can decide about the supervision and functioning of these institutions. In the democratic and open spirit of the draft law, it would be through internal elections that the particular bodies would be elected and then they would be invested with the appropriate competences by government resolution. The creation process of cultural autonomy does not differentiate between political, civil or church institutions.” 553 Because the draft law is still being discussed in Parliament, the main political parties have already turned their backs on it. It needs to be followed closely by the Hungarians, in order to realise the 549

Constantin (2004). Constantin (2004). 551 Interview C16. 552 UNPO (2008). 553 UNPO (2005). 550

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adoption of this draft law. 554 The accession to the EU caused more juridical reforms in the legal field of minority rights in Romania. As a part of the European Social Charter, The Framework Convention for National Minorities, adopted in 1994, is the first legally binding multilateral instrument to protect national minorities in Europe. The objectives outlined by the Convention ensure equality before the law; preserving and developing cultures; safeguarding identities, religions, minority languages, and traditions; guaranteeing access to media and establishing free and peaceful contact across borders with people legally residing in other states. Since the official start of the Convention in 1998, a Committee of Ministers and the Advisory Committee of eighteen independent experts are both responsible for the implementation of the Convention. NGOs and minority organisations are allowed to submit information and share reports with the institutions of the EU. 555 More recently, in the accession year of 2007, two more European laws have been ratified regarding the rights of minorities: Law 282/2007 for the Ratification of the European Charter for Regional or Minority languages, and governments’ Decision 893/2007 for the setting up and functioning of the Institute for the Study of National Minorities. 556 The Council of Europe plays an active role in different projects concerning the protection of minorities in the context of the Stability Pact for South-Eastern Europe relating to minorities. The following goals are to be pursued by the projects: a non-discrimination review to identify discrimination in regional legislation, policies and practices and to bring legislation and practice into line with European standards; a project on acceptance and implementation of standards; a bilateral co-operation agreement project to strengthen and develop bilateral co-operation regarding minorities in line with existing multilateral standards, and in particular those of the Framework Convention for the Protection of National Minorities. 557 The question is whether enough progress has been made with regard to the protection of minorities before and during the accession process. According to the European Economic and Social Committee not enough progress has been made in the protection of the Roma minority: its opinion of February this year shows a number of necessary reforms, because every attempt for improvement fails. 558 Other institutions share this opinion: in the 2005 report of Amnesty International 559 , it has been recommended to the Romanian Government that the people belonging to the Romani community of Romania should enjoy their human rights in a safe environment free from intimidation and racial hatred and violence perpetrated by non-state actors and the media; and that the increase of racial intolerance in the Romanian media is effectively addressed. The Report of Amnesty International of 2008 states the following about minorities in Romania: “Minorities, and in particular Roma, continued to confront serious discrimination, including in employment, housing, health and education.” 560 The European media and other sources outline a permanent image of abuse and discrimination of minorities in Romania. Especially Roma live in unbearable circumstances, missing the basic elements to live. It seems that the EU cannot reach that low level of society, which makes European Law and its implementation questionable. European subsidy for Romania stays at governmental level for economic investments. 561 This is the opposite of what is needed: investment in the poor Romanian citizens so they can build up a life from scratch, which starts with education and the creation of labour. In contrast to the Roma, Hungarians are more integrated into society and fulfil government or police functions. This distinction points out even 554

UNPO (2008). Council of Europe official website (2004-2009). 556 Minority Rights official website (2005). 557 Council of Europe official website (2004-2009). 558 European Union official website (2009a). 559 Amnesty International official website (2005). 560 Amnesty International official website (2008). 561 Interview A02. 555

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more the need of an equal law in a state as Romania. The Romanian government has trouble putting the European and international law concerning minorities into practice. The national constitution describes general terms concerning the equality of minorities that can be interpreted differently by several institutions. There is no official body that controls the practice of minority rights. Only NGOs and other minority organisations of the civil society strive for their rights. In order to realise the practise of European law, the establishment of a new institution could be helpful. It is understandable that the implementation of new law is a long process for a transition country, nevertheless, the improvement of the life of its citizens, Romanians as well as minorities, should be the priority of a state. Especially because the existence of minorities is an international issue that needs to be acknowledged. Therefore, decentralisation could be a solution to reach the lowest levels of society. One way or another, Romania should find a solution to improve the basic elements of daily life of neglected minorities.

12.4.1 Post-1989: the rise of nationalistic extremism In Europe extremism manifests itself in various ways, be it in a nationalistic, anarchistic or religious fundamentalist form. “In the case of Romania, [the] tendencies are racist, chauvinistic, xenophobic attitudes and their political manifestations.” 562 Nowadays these characteristics are often interpreted as elements belonging to right-wing extremism. However, as we saw in the previous section on national communism, chauvinism and xenophobic attitudes can also be manifested by the extreme left. There is no academic consensus on the roots of post-1989 nationalism in Romania or in Eastern Europe as a whole. Three main assumptions regarding the origins of the rise of nationalism can be distinguished. The first approach perceives nationalism to be the outcome of the post-communist transformation which created sudden social changes, resulting in an atmosphere of insecurity and instability. Extreme nationalistic movements are believed to be reactionary movements, which “should be understood as a radical form of protest against the degradation of the quality of life and widespread social dislocation and unemployment.” 563 A second line of approach interprets nationalism as the “result of the re-emergence of [the] deeply, culturally ingrained perception of social belonging.” 564 In other words, an ethno-cultural, exclusive form of nationalism is embedded in Romanian political culture. Whereas the first explanation perceives the rise of nationalistic movements as a by-product of the troublesome modernisation process which Romania experienced after 1989, the second approach considers it to be a structural element of Romanian political culture. A third approach ‘blames’ the direct import of the western modernity model together with its structures and institutions. The thoughtless copying of western liberal democracy might result in ‘the feeling of conquest’, which can produce a growing feeling of inferiority. 565 Nationalism should therefore be seen as the defence of the dignity and pride of the nation.

12.4.2 Nationalistic actors: PUNR, PRM and Orthodox extremism Romanian Hearth was the first extremist movement to come into being after the fall of communism. The organisation was established in February 1990 in the town of Targu Mures, one month before the outbreak of violent ethnic clashes in this village between Hungarians and Romanians, which left several dead and hundreds injured. The ideological foundation of Romanian Hearth was anti-Hungarian and the organisation cleverly capitalised on the antiHungarian sentiments voiced by the media those days. The movement engaged in the provocation 562

Andreescu (2003), p. 10. Blokker (2005), p. 371. 564 Blokker (2005), p. 371. 565 Andersen (2006), p. 4. 563

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of the large Hungarian minority, among others by the organisation of a demonstration which resulted in the assault on the local office of the Democratic Alliance of Hungarians in Romania on 19 March 1990. Two days later the notorious bloody clashes between Romanians and Hungarians took place in Targu Mures. Before the elections of 1990, Romanian Hearth created the Party for the National Union of Romanians (PUNR) which became an important political actor. In 1992 Gheorghe Funar, the party leader, was elected mayor of Cluj Napoca, and in the same year the PUNR obtained 7.72 per cent of the votes for the Chamber of Deputies and 8.12 per cent for the Senate, 566 thereby becoming a member of the governing coalition together with the Democratic National Salvation Front (FDSN). The PUNR would never be as successful again as during the 1992 elections. In the subsequent election of 1996 it obtained only 4.36 per cent (Chamber of Deputies) and 4.22 per cent (Senate), and in 2000 the nationalistic party failed to win any seat. This was partly due to the fact that Funar left the party to become the secretary general of the PRM, taking with him the supporters of the PUNR. Unlike the PUNR, the PRM would secure the support of a larger part of the electorate. The percentages show an upward trend for both the Chamber of Deputies and the Senate: in 1992 3.89 per cent and 3.85 per cent; in 1996 4.46 per cent and 4.54 per cent, and the year 2000 proved to be a true boom: 19.48 per cent and 21.01 per cent. 567 Moreover, the party’s leader and face, Corneliu Vadim Tudor, run second in the 2000 presidential elections. Although Ion Iliescu defeated Tudor with a large majority, still 33.17 per cent of the Romanian people desired him as president. 568 Whereas the PUNR voiced anti-Hungarian sentiments, the PRM expanded this target group with Jews and Roma. Using its own publishing house to distribute the daily Tricolorul (‘The Tricolor’) and weekly magazine Romania Mare (‘Greater Romania’), the PRM has its own media outlet to frequently emit chauvinistic messages. 569 A small selection of quotes shows the harsh rhetoric against the minorities. On 21 August 1998 Romania Mare published a statement in which Tudor advocated that “gypsies that will not go to work […] will be sent to work camps.” Hungarians are often portrayed as barbarians, traitors and fascists, while the UDMR is described as a terrorist organisation. 570 Although after 2000 the support for the extreme right-wing party diminished (the party was even excluded from parliament after the most recent elections of 2008), the PRM remained a political force not to be underestimated. In 1999 the PRM was actively involved in what has been labelled an attempted coup d’état. Under the leadership of Miron Cosma, the vice-president of the PRM, 12,000 miners marched to Bucharest demanding the resignation of the government. The events were similar to 1990, when Cosma stirred up miner riots which led to the overthrowing of the government. Although the government remained in power in 1999, the president was forced to declare a state of emergency to restore public order. Throughout the whole situation, the PRM was actively involved and was accused of preparing a forced regime change. The third nationalistic actor worth mentioning here is the Romanian Orthodox Church. It should be emphasised that we do not refer to the entire institute as nationalistic; rather we highlight certain fundamental trends within or closely associated with it. An example is the Association of Christian-Orthodox Students in Romania (ASCOR), a powerful fundamentalist student organisation which aims to attract supporters in universities and acts under the auspices 566

Andreescu (2003), p. 30. Andreescu (2003), pp. 32-33. 568 Andreescu (2003), p. 33. 569 In 2008, Romania Mare had a circulation of approximately 46,000 copies a week and Tricolorul between the 4200 and 5200. “While Romania Mare does have a considerably smaller audience than […] mainstream papers, […] there does appear to be an audience for a certain level of nationalist content, even, perhaps, in the mainstream.” Stewart (2008), p. 412. 570 See Stewart (2008) for a detailed study of the anti-Hungarian attacks by Romania Mare. 567

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the Romanian Orthodox Church. Furthermore, some periodicals, linked to the Church (albeit the Church is not the official publisher, these periodicals do include clerics as editors) have negative attitudes toward any foreign involvement in Romania, in the form of NATO and EU membership; the purchase of land by foreigners; inflow of foreign capital; the ‘Americanisation’ of Romanian culture and the abundant ‘privileges’ of minorities. 571 Moreover, the Church regularly teams up with the above mentioned PRM and PUNR when it come to the combating of ‘Westernisation of Romanians’ mores’, like abortion and homosexuality. 572

571 572

Andreescu (2003), p. 36. Stan and Turcescu (2000), p. 1480.

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13. Corruption and judicial reforms According to Article 29 of the EU Treaty, the EU does everything in its power to prevent and combat corruption, “as an objective enabling the creation and safeguarding of a European Area of freedom, security and justice through closer judicial, police and customs cooperation and, where necessary, approximation of criminal law.” 573 As an EU member, Romania ought to do everything to combat corruption, which means, to use the definition that the EU maintains, “abuse of power for private gain.” 574 However, several member states of the EU have in recent years questioned the depth and pace of the judicial reforms and the political willingness in Romania to fight corruption. 575 Although Romania has put the fight against high-level corruption high on the agenda, there have been only few prosecutions in this field until 2003. 576 Since then, the level on which the prosecution on corruption were carried out remained low. This chapter will discuss the judicial reforms and corruption in Romania since the fall of communism up until today.

13.1 Corruption in the judicial system in Romania after 1989 Corruption in Romania, or any other East-European country, could be the result of the inheritance of communist clientelistic networks and the rigged privatisations in the economic sector in the years directly after communism. 577 In the communist era, civil society was weak and political leadership was highly personalised and full of personal enrichment. In this period, personal interests and relationships were far more important than legal and institutional frameworks. Corruption did not only occur at a high-level but also at a lower political level. Since local and public officials were paid less, they were more inclined to accept bribes. In communist Romania, the political establishment and its leaders misused their position to stay in power. This was a common situation throughout the communist bloc because there were no checks and balances on power. The political machine did everything to stay in power: from ballot-rigging to censorship and from the imprisonment of political opponents to death squads and terror. 578 During this period people did not trust the state and therefore tended to rely on informal networks for their survival. 579 After the fall of communism, the clientelistic networks did not disappear and this made democratic and free market reforms difficult. 580 It has been argued that a weak rule of law and political instability can foster corruption. 581 Furthermore, high corruption is said to erode democracy since it increases the profit of acquiring power. In order to punish public officials that accept favours and bribes, there is a need for an effective punishing mechanism. However, such effective punishing mechanisms did not exist in Romania directly after the fall of communism. What mostly counted in the years after the fall of communism were the (political) personalities and their ability to use the mass media for their own purposes. Not only did they abuse the media, politicians also used the law for their own gain. 582 It appears that the communist networks of patronage and clientelism survived the transition and that these kinds of networks are also able to function in the post-communist 573

Article 29 of the Treaty on EU. The EU has taken over this definition of corruption from the United Nations and its Global Programme against Corruption. 575 The New York Times (2008). 576 Interview B35. 577 Savin et al. (2005). 578 Burduja (2006), p. 28. 579 Interview B05. 580 Craiutu (2004). 581 Burduja (2006), p. 28. 582 Interview B06. 574

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context. 583 Besides the political instability in the years after the regime change, there was another problem that threatened Romania, namely corruption in the field of the judicial system. There was not only a lack of knowledge and analytical skills but also a weakness of ethical values within this field. It was likely and easy for judges to demand or accept bribes and to delay cases for personal gain or to please the regime. 584 The main features of judicial authority were settled in the constitution of 1991. This constitution also declared the independence of the judges. 585 The organisation of the judiciary was established by a 1992 law and this law was amended throughout 1999. Many of the practices that limited the judicial independence during the communist period were removed. However, obstacles to the realisation of a fully independent judiciary remained and the matter of judicial independence has been critical ever since the transition. The judicial apparatus was always seen as an extension of the executive power. The judiciary remained politically controlled and people seemed to regard this phenomenon as common since it was embedded in the Romanian mentality. 586 There was a constant involvement of the executive power in the affairs of the judiciary. Judges were not completely and effectively protected from political manipulation. Such manipulation behaviour was seen as normal due to the heritage of the communist political culture, 587 and after 1989, this mentality was hard to change. It has been argued that corruption, both low and high-level corruption, is deeply rooted in society. 588 The verdicts from many judges reflect the fact that many of them continued to function as they did under communism. Especially when it comes to the defending of the State’s interest and the judges’ devoted compliance of the bureaucratic chain of command. 589 Before judges took their decisions in (political) cases, they regularly consulted their respective court president. Outside the legal boundaries, there appeared to be an informal mechanism by which judges could be put under pressure and forced to act in compliance with certain political interest. 590 There were many attempts by high officials to influence the decisions of the judges throughout the years after the transition. One example of executive interference occurred in 1995 when the Supreme Court reversed a large number of judgements about restoring nationalised property to its original owners. 591 The reversion of the judgements followed a 1994 speech in which President Iliescu publicly criticised the judgements and instructed the executive power not to enforce them. 592 Although it was a formal statement and not a law, he tried to put pressure on the courts by advising them not to answer positively to the claimers of properties. 593 Another example of interference in the judiciary was an attempt to influence the appointment of a judge. In March 2001 the prefect of the Caras-Severin county sent a letter to the Ministry of Justice to recommend a particular candidate as district court president in his county. 594 This letter was published by Evenimentul Zilei on 4 April 2001. 595 There is furthermore, a case in which the president publicly attacked judges of the Supreme Court who, by a final judgement, had convicted two army generals for ordering the killings during the 1989

583

Carey (2008), p. 5. Transparency International Romania (2007), p. 4. 585 Transparency International Romania (2007), p. 6. 586 Interview B06. 587 Open Society Institute (2001), p. 7. 588 See, for instance, interview B05. 589 Open Society Institute (2001), p. 6. 590 Open Society Institute (2001), p. 7. 591 Open Society Institute (2001), p. 7. 592 Open Society Institute (2001), p. 7. 593 Interview B43. 594 Open Society Institute (2001), p. 7. 595 Open Society Institute (2001), p. 7. 584

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uprisings in Timisoara. 596 In the end, the General Prosecutor suspended the enforcement of the judgement but without any legal basis. 597 This shows a deficit in the judicial process to investigate and prosecute criminal acts which took place during the last months of the communist regime and its aftermath. Although the judiciary’s separate role is declared in by law, in practice, this was ill-defined in the post-communist era. The judiciary in Romania had no independent control over its own funding and budget process. 598 Until 2005, the judiciary funding remained under the control of the Ministry of Justice. Even though there was no clear link between the budgetary control by the Ministry of Justice and the political compliance of the courts, one might say that this financial dependency acted as restraint upon the willingness of the judiciary to assert its independency. 599 In 2005, legislation transferred the management of the judiciary budget from the Ministry of Justice to the Superior Council of Magistracy, effective from 2008, in order to ensure proper operational and staffing procedures. 600 Furthermore, to reduce the effect of political patronage, the mandate of the members of the Council has been extended from four to six years.

13.2 National Anti-Corruption Directorate The National Anti-Corruption Directorate (DNA), set up in 2002, was the first specialised prosecutor’s office in Romania. DNA enabled Romania to fulfil its obligation to the United Nations Conventions against Corruption, which was to establish an independent body specialised in fighting corruption. 601 It was initially set up as a distinct prosecutor’s office, specialised in combating corruption offences, under the name National Anti-corruption Prosecutor’s Office (PNA). Eventually PNA became DNA in 2006, and through legal changes a structure with legal personality within the Public Prosecutor’s office attached to the HCCJ came into existence, specialised in the fight against high and medium-level corruption. 602 DNA is an independent body whose jurisdiction covers the whole of Romania. The DNA is led by a Chief Prosecutor, currently Mr. Daniel Morar, who is assisted by two Deputy Chief Prosecutors. The Chief Prosecutor and his deputies are appointed by the President, at the proposal of the Minister of Justice and with the approval of the SCM, for a period of three years, with the possibility of being reappointed once more. Aside from the Chief Prosecutor and his deputies, there are 145 Prosecutors, 170 Police Officers and 55 experts working for DNA, each specialised in different areas. These experts, specialised in economics, finance, IT, banking etc., are important as they are responsible for enhancing the efficiency and the quality of the criminal investigations. 603 The DNA is responsible for many important missions. Law No. 78/2000 specifies that it “has the duties to investigate suspected corruption committed by social, political and public dignitaries including Members of the Parliament and public officials.” 604 According to article 13 of the Government Emergency Ordinance, regarding the National Anti-Corruption Directorate, all “the offences provided in Law no.78/2000 for preventing, discovering and sanctioning corruption deeds fall under the competence of the DNA.” 605 596

Open Society Institute (2001), p. 7. Open Society Institute (2001), p. 7. 598 Open Society Institute (2001), p. 5. 599 Open Society Institute (2001), p. 5. 600 Transparency International Romania (2007). 601 Public Ministry official website (2007). 602 Interview B35. 603 Interview B35. 604 Law No. 78/2000 on preventing, discovering and sanctioning of corruption acts. 605 Article 13, The Government Emergency Ordinance no. 43, from April 4th 2002, regarding the National Anticorruption Directorate. The following categories of offences are also examined by the DNA: 1. classical 597

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Moreover, by improving and implementing the National Anti-Corruption Strategy, DNA has also been actively involved in the prevention of corruption. Based on these strategies, DNA has set up partnerships with several institutions inside and outside Romania, such as The Court of Accounts, The National Agency for Integrity (ANI) and The European Anti-Fraud Office (OLAF). 606 The National Anti-Corruption Strategies were replaced in 2007 by the Co-operation and Verification Mechanism reports of the EU, which formed a new strategy for DNA to follow. 607 These reports will be discussed in section 13.5 and further. In January this year, the Minister of Justice Predoiu reinstated Morar as head of the DNA. According to the minister, this proposal was “meant as a clear message to the International Community that Romania’s justice system is determined to fight corruption and defend the European Union’s financial interests.” 608 DNA itself pointed out that Morar is of extreme importance to DNA and has created more transparency within the organisation. 609 The European Union has also continuously expressed its confidence in Morar as head of the DNA and sees him as “guarantor of efforts to fight corruption.” 610 And although the last EU report on progress in Romania was far from positive, as will be discussed later on, the European Union made clear that DNA continued to show a stable and positive track record for prosecuting cases of high-level corruption. 611

13.3 Challenges for the judicial system in the years before accession into the EU During the transition, reforms in the field of the legal system were difficult. Ever since Romania wanted to join the EU, it has made an effort to improve the rate and effectiveness of judicial reforms. Judiciary reforms in the legal system are important since courts are the most significant institutions to or enforce the rule of law and it is the final institution in determining the legal interpretation, authority and the rights accumulating under a state of law. 612 In order to meet the EU standards, Romania had to enact legislation before the country became directly governed by EU-law in 2007. 613 To strengthen the judicial system and to fight corruption, it was necessary for Romania to make institutional and procedural changes in the field of the legal system. Worth mentioning is the fact that reforms of the judicial system were not received well by prosecutors and military court officials. They feared that their power and influence would be reduced due to the changes. 614 It was a big challenge for Romania to reform its judicial system as it had to set up many institutions in a short time. 615 Moreover, it has been stated that Romania did not have enough time to restructure the whole judiciary in a correct way. 616 The European Union was aware of the difficulties of coping with all these reform challenges and therefore stimulated the Romanian justice sector during this process. In line with the EU recommendations, the Romanian corruption when the bribe involved is of more than 10,000 Euro, 2. crimes facilitated by corruption when the amount of money involved is more than 200,000 Euro; 3. tax evasion, abuse of office, fraud and those related to the customs system, if the value is of more than 1,000,000 Euro; 4. crimes against the financial interests of the European Communities. 606 Public Ministry official website (2007). 607 Interview B35. 608 EU-business (2009). 609 Interview B35. 610 EU-business (2009). 611 European Commission official website (2009c), p. 5. 612 Carey (2008). 613 Carey (2008). 614 Open Society Institute (2001), p. 7. 615 Interview B38. 616 Interview B38.

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government adopted a strategy in 2003 with the aim to reform the field of justice. 617 Government Decision no. 1052/2003 outlined three major judicial topics that had to improve: legal certainty, quality of judgments and independence of the judiciary. 618 Legal certainty - to increase the impartiality, transparency, credibility and effectiveness of the sector; to create a unitary jurisprudence; complete transition of the acquis communautaire in the field of justice; to improve the judicial system’s capacity in applying the law and consolidate the administrative capacity and to continue the process of penitentiary system reforms. 619 Quality of judgments – reasonable periods of time for trials in the public and private sector; structural changes in the judicial system organisation, aimed at restructuring the Romanian courts and prosecutors offices based on European examples and to solve cases in special matters; to reform the administration of the judicial sector and to ensure professional training for magistrates and auxiliary personnel. 620 Independence of the judiciary – to ensure that the transparency of judicial activities, through interaction with the civil society; in order to consolidate the independence of justice by defining the prerogatives of the Superior Council of the Magistracy and the Ministry of Justice and to establish a magistrates statute with their rights and obligations. 621 In order to create an independent judicial system in line with the other member states of the EU, the Romanian government took multiple initiatives. However, since the pace of the progress was not fast enough, more specific strategies were needed. The government designed fifteen more projects in the years 2004-2005 with the same aims, though more specific, as mentioned above. Until today the process is not finalised completely and, according to the EU, legislation looks good on paper but is not translated in a satisfactory manner into practice. 622 In the next sections, judicial reforms in the pre-accession period, also in relation to corruption, will be further discussed.

13.4 The pre-accession process of Romania and the 2006 Monitoring Report Since it has been questioned whether 2007 was the right year for Romania to accede the EU, 623 it is important to examine the progress of reform implementation that Romania made in the judiciary strictly a year before the accession. Therefore, the 2006 Monitoring Report of the Commission will be the key element in this section. This report highlights the essential reforms that Romania put into practice (un)successfully right before its accession. Although the Commission concluded in her 2006 Monitoring Report that Romania fulfilled the political criteria for EU membership and that it has done so continuously since 1997, 624 the Commission also recognised that there were still a couple of areas where further improvement was needed since 2005. The 2006 Monitoring Report aimed to assess the development of the reforms for EU-accession that occurred since the October 2005 Monitoring

617

Rem and Gasper (2008). European Commission official website (2004). 619 Rem and Gasper (2008), p. 15. 620 Rem and Gasper (2008), pp. 15-16. 621 Rem and Gasper (2008), pp. 15-16. 622 Rem and Gasper (2008), pp. 18-21. 623 See, for instance, interview B05. 624 European Commission official website (2006b), p. 5. 618

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Report. 625 This section will focus on the reforms in the areas of effective implementation of the justice reform, the fight against corruption and effective restitution of property.

13.4.1 Justice system Since the October 2005 Monitoring Report, the implementation of the strategy and actions plan on justice reform continued. New provisions on the organisation and functioning of specialised court section and panels were adopted in October 2005. 626 Other legislation was adopted in December 2005 in order to make it easier for Romanians with low incomes to use bailiffs to enforce court judgements. The report recognised that a substantial reform of the legal and aid system is still an ongoing process. The 2006 report also stated that the random allocation of cases to judges continued to function throughout the country. 627 To ensure a more uniform interpretation of the law and legal certainty, courts of appeal were now able to refer civil appeals to the High Court. In 2006, all courts of appeal, tribunals and prosecutor’s offices as well as almost all courts of first instance now had electronic access to legislation. The majority of the courts have also had access to the electronic version of the Official Journal since March 2006.

13.4.2 Superior Council of Magistrates The responsible institution for ensuring the independency and the effective functioning of the courts is the SCM. Since the appointment of the SCM’s new president and vice president in January 2006, cooperation between the judiciary and the Minister of Justice has improved. A system that assigns a unique registration number to each case to allow obtaining accurate statistics and an effective allocation of resources, has been designed by the SCM. This system already operates on a pilot basis in some courts in Bucharest and was planned to be fully operational throughout the country by the end of 2006. 628

13.4.3 Budgetary and planning As regards the judicial budgetary, the initial budget for 2005 was increased by eighteen per cent to 362 million Euro in November 2005. The budget in 2006 further increased to 403 million Euro. Considering the payments of the judges, prosecutors and clerks, arrears on salaries were settled in full in November 2005. Furthermore, the 2006 budgets for training of the National Institute of Magistracy (INM) and the National School for Clerks both increased with roughly 35 per cent. The two year INM programme is supposed to remain the main gateway into a career as a judge or a prosecutor. This aims to prevent partisan appointment in the judicial system. The report also stated that competitions had been organised for applicants with significant legal experience.

13.4.4 Points of concern The above mentioned reform successes in the judicial system were shadowed by certain outstanding areas that need to be addressed. 629 The 2006 report stated that of the fourteen members of the SCM, eight members continued to work only on a part-time basis despite their responsibility to represent all of Romania’s judges and prosecutors. Six of these eight members faced potential conflict of interest in disciplinary matters, given the fact that they hold leading positions in courts or prosecutor’s offices. There was still the need to develop the staff and to strengthen the role of the SCM in modernising management in courts and prosecutor’s offices; in applying disciplinary procedures, in checking the quality of judgements and in controlling the full 625

European Commission official website (2006b), p. 5. European Commission official website (2006b), p. 7. 627 European Commission official website (2006b), p. 7. 628 European Commission official website (2006b), p. 7. 629 European Commission official website (2006b), p. 8. 626

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observance of objective criteria for recruiting magistrates. 630 There were other necessary improvements such as the procedural codes which needed to be further rationalised, the need of widespread use of alternative dispute settlement mechanisms, the carrying out of the reform of the legal aid system and the further improvement of the management of human and financial resources in courts and prosecutor offices. 631 The report stated further that training needs to remain high-level, particularly for judges, prosecutors and clerks who are already employed as a consistent interpretation of the law at all level of courts is not fully ensured yet throughout the country. In general, significant progress had been made in the reform of the justice system, especially in strengthening its administrative capacity. The conclusion of the 2006 report in this area was that Romania still needed to maintain the pace of implementation of judicial reforms to ensure tangible results.

13.4.5 Fighting corruption First, the report started with the announcement that since the October 2005 report there had been progress in the anti-corruption field. In December 2005, the criminal immunity for bailiffs was eliminated. 632 In the same month, the law on granting non-reimbursable contract financing from public funds was adopted. The government presented amendments to the Criminal Code including provisions on the criminal liability of legal persons. 633 The government approved in March 2006 the law transforming the lead agency in the fight against corruption, PNA into the DNA, and allowed it to investigate all cases of high-level corruption including allegations involving members of Parliament. 634 A law to amend current rules on financing political parties in order to oblige all finance sources to be published in the Official Gazette was proposed by the government on April 2006. The DNA shifted its focus from petty corruption cases to mediumand high-level corruption. Since taking office, the new DNA head has evaluated the performance of DNA prosecutors and judicial police officers and as a result, thirty people left the institution. Fifteen replacement prosecutors have been recruited and there are 32 current vacancies out of 345 allocated staff positions. 635

13.4.6 DNA investigations Since October 2005, DNA has investigated fourteen high-level political figures from the opposition and the former ruling coalition parties who either hold, or have held, cabinet rank or are members of the parliament. 636 As a result, these investigations have led to four indictments so far. Most of these investigations were initiated on the basis of the wealth declarations that about 100,000 officials have to reveal annually and that are publically accessible. 637 Since October 2005, 89 other individuals were indicted by the DNA, and among them were judges, lawyers, police officers, a number of public officials with executive positions in national and regional administrations as well as directors in private enterprises. 638 At the same time, the courts passed initial convictions against 77 individuals based on earlier PNA investigations and the courts pronounced a further 102 final convictions. The report stated that the quality and quantity of nonpartisan investigations into allegations of high-level corruption have substantially increased compared to the previous period. There has also been a clear qualitative improvement in DNA’s 630

European Commission official website (2006b), p. 8. European Commission official website (2006b), p. 8. 632 European Commission official website (2006b), p. 8. 633 European Commission official website (2006b), p. 8. 634 European Commission official website (2006b), p. 8. 635 European Commission official website (2006b), p. 8. 636 European Commission official website (2006b), p. 8. 637 European Commission official website (2006b), p. 9. 638 European Commission official website (2006b), p. 9. 631

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investigation, especially by reopening investigations closed under the previous management team for unclear reasons. 639 DNA has concluded cooperation protocols with a number of agencies with a role in fighting corruption. The report concludes that DNA now has the staff, financial resources and training to conduct effective investigations into high-level corruption. 640

13.4.7 DGA The Directorate General for Anti-Corruption (DGA) in the Ministry of Administration and Interior became operational in October 2005. It has now exclusive competence to plan and conduct integrity tests on the ministry staff. 641 Since October, DGA has conducted 754 investigations on 1859 persons and 74 cases were transferred to DNA for investigations, a 185 per cent increase compared to last year. 642 DGA regional officials work closely with DNA regional officials.

13.4.8 Points of concern There were also marginal notes in light of the anti-corruption measures taken by the Romanian government; there were still certain outstanding issues that remained to be addressed. The 2006 report argued that on the legislative side, there had been delays in the implementation of three of the 47 actions foreseen in the strategy and action plans, pending adoption by Parliament of some important laws. Legislation establishing an independent agency to verify wealth declarations had not yet been adopted and amendments to the Criminal Procedure Code introducing liability for legal persons were still pending in Parliament. 643 The Parliament rejected a request made by DNA to search the property of a Member of Parliament. The Senate tried in February 2006 to prevent DNA form investigating Members of Parliament; there had been attempts by the Senate to change the nomination and revocation procedures for high-level prosecutors. The 2006 report stated that this would have undermined the accountability of the system and decreased the operational capacity of DNA. 644 Furthermore, it remained to be ensured that all judges have sufficient specialist knowledge to hear and judge complex economic and financial cases based on DNA’s investigations into fraud in privatisations and public procurement. 645 There was still a need for further indictments, prosecutions, trials, convictions and dissuasive sentences. In sectors such as health and education, petty corruption remains a concern as it is confirmed that doctors and teachers are underpaid and in order to survive, they need the bribes. 646 In general advancement had been made in fighting corruption but Romania needed to keep up its efforts to consolidate and continue the progress made in its fight against corruption. The reforms which were led by the Minister of Justice and DNA, needed to be followed by sustained efforts of all other executive agencies of the legislative branch, and of the justice system as a whole in order to make the progress achieved irreversible. 647

13.4.9 Effective restitution of property In the Monitoring Report, it was stated that progress was made in the area of restitution of property, especially in reinforcing the administrative capacity and setting up the legal framework of property restitution. Romanians were able to submit their application claims up to January 639

European Commission official website (2006b), p. 9. European Commission official website (2006b), p. 9. 641 European Commission official website (2006b), p. 9. 642 European Commission official website (2006b), p. 9. 643 European Commission official website (2006b), p. 9. 644 European Commission official website (2006b), p. 9. 645 European Commission official website (2006b), p. 9. 646 Interview B05. 647 European Commission official website (2006b), p. 9. 640

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2006, which was the deadline for claiming restitution. A central commission for the establishment of compensation became operative in 2006. Despite this progress, there were still some concerns about unclear criteria. In 2006 a special Property Fund was set up for the claims of restitution. However, the fund was not yet able to address claims for financial compensation within a reasonable delay. The conclusion of the report was that the pace of processing claims remains low. It has been confirmed that it remains difficult for Romanians to claim properties or land successfully. 648 It has taken, and still is taking a very long time for an owner to reclaim his property in a proper manner. 649 Reclaiming property remains a bureaucratic procedure since owners are asked to hand over a lot of paper work which is hard to complete. 650

13.5 EU reports on judicial reforms and corruption after Romania’s accession Since weaknesses remained in Romania after its accession into the EU in the areas of judicial reform and the fight against corruption, the European Commission took the obligation within the Co-operation and Verification Mechanism to assist the country to tackle problems on these issues. 651 In the Commission’s decision of 13 December 2006, 652 with which a mechanism for cooperation and verification of progress in Romania was established and received its legal basis, the European Union emphasised that every member state needs to have an impartial, independent and effective judicial and administrative system properly equipped, inter alia, to fight corruption. 653 The Commission’s reports, which are published twice a year, also enable the Commission to verify progress regularly against four benchmarks set for judiciary reform and the fight against corruption. These benchmarks together form part of a broad reform which still needed to be taken after Romania’s accession to the EU. Benchmarks In the context of the Co-operation and Verification Mechanism, the following benchmarks have been set for Romania: 1. Ensure a more transparent, and efficient judicial process notably by enhancing the capacity and accountability of the Superior Council of Magistracy. Report and monitor the impact of the new civil and penal procedures codes; 2. Establish, as foreseen, an integrity agency with responsibilities for verifying assets, incompatibilities and potential conflicts of interest, and for issuing mandatory decisions on the basis of which dissuasive sanctions can be taken; 3. Building on progress already made, continue to conduct professional, non-partisan investigations into allegations of high level corruption; 4. Take further measures to prevent and fight against corruption, in particular within the local government. 654 With the establishment of these four benchmarks, the EU is able to monitor progress and to extend support in dealing with remaining shortcomings. It shows the commitment of the EU to 648

Interview B43. Interview B43. 650 Interview B43. 651 European Commission official website (2009b). 652 Commission Decision 2006/928/EC of 13 December 2006 establishing a mechanism for cooperation and verification of progress in Romania to address specific benchmarks in the areas of judicial reform and the fight against corruption (OJ L 354, 14.12.2006, p. 56). 653 Commission Decision 2006/928/EC of 13 December 2006 establishing a mechanism for cooperation and verification of progress in Romania to address specific benchmarks in the areas of judicial reform and the fight against corruption (OJ L 354, 14.12.2006, p. 56). 654 European Commission official website (2009c), pp. 1-5. 649

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keep a special eye on Romania and its progress towards an effective administrative and judicial system. Progress on judicial reform and corruption in Romania are of great importance to the EU as it gives the Romanian people the possibility to enjoy their full rights as EU-citizens. Although it has been stated that the Co-operation and Verification Mechanism reports of the EU sometimes cause feelings of de-motivation and frustration in Romania 655 -the reports are often rather criticalthey seem to put pressure on Romania to continue with its reforms. 656 As said before, the Cooperation and Verification Mechanism replaced the old strategies of DNA, and seems to also set out the right to follow for others. 657 In general it can be said that Romania has made progress in its commitment to judicial reform and the fight against corruption since its accession to the EU in 2007. In its report of 23 July 2008, 658 the EU was relatively positive about developments in Romania, although it pointed out that improvements in many areas still needed to be accomplished. The report of February this year was less positive. In the next section, the main problems which Romania is facing today as regards the judicial field and the fight against corruption will be discussed.

13.6 Main problems in the judicial field and fight against corruption today 13.6.1 Capacity problem In the Cooperation and Verification Mechanism report of July 2008, the EU stated that judicial reform was progressing. However, it underlined that this progress was uneven. Under benchmark 1, the EU pointed out that the capacity situation in the judicial field remains a problem. Although the number of vacancies had dropped in 2008, Romania still faced serious staff shortages in the public ministry. 659 In its report this year, the EU made clear that the capacity of the judicial system in Romania is still weak. The number of vacancies continues to be very high; 433 vacancies for prosecutors and 344 vacancies for judges at the end of 2008. About half of these vacancies are related to managerial positions. The capacity problem in the judicial field and the problem of finding the right people for these vacancies is something which has been brought up often. 660 In order to protect the independency of the judicial power, it is clear that selecting people to fill the vacancies needs to be done carefully. 661 However, the fact that many magistrates, who are currently active, are allowed to retire at any moment might increase the number of vacancies. 662 Since Romania is currently changing the Criminal Code, the Criminal procedure Code, the Civic Code and the Civic Procedure Code, this process could be accelerated, as many of the old judges might not have the time to learn these new Codes. 663 Something else that can explain the capacity problem in the judicial field is that, to become a judge, one has to complete a tough exam and study. It has been said that not many people seem to succeed in actually becoming a judge. 664 However, as law enforcement is said to be well paid in comparison to other jobs, fulfilling one of the remaining vacancies should at least financially be interesting. 665 Unfortunately, the SCM’s Human Resources Strategy, adopted in November last year, 655

Interview B38. See, for instance, Interview B18. 657 Interview B35. 658 European Commission official website (2008a). 659 European Commission official website (2008a), p. 4. 660 See, for instance, Interview B32. 661 Interview B38. 662 European Commission official website (2009c), p. 4. 663 Interview B05. 664 Interview C14. 665 Interview B05. 656

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has not yet proposed “appropriate emergency measures such as a temporarily reallocation of staff between court levels and locations to address the pressing staffing shortfall.” 666 There is a need for Romania, despite a high quality of recruitment and training, to tackle the capacity problems of the judiciary, since it causes a high workload for those judges and prosecutors that are active. This can, as a consequence, create problems in the preparation and realisation of cases, which will be explored in the next section.

13.6.2 Case problem and lack of transparency According to EU reports, Romania cannot show many tangible results in its fight against highlevel corruption. 667 Although an increase of investigations can be perceived, court sentences remain mild and inconsistent. Possible measures to improve the way corruption cases are dealt with, e.g. a comparative analysis of court decisions or the use of sufficiently deterrent mandatory minimum sentences, have either been delayed or have not been started. 668 DNA, which, according to the EU, has showed a stable and positive track record for prosecuting cases of highlevel corruption, 669 has also pointed out that trials take too long –sentences are frequently suspended- and that many of the sentences that are given are very mild. 670 This can be explained by the fact that the investigation of people accused of high-level corruption is a very sensitive matter, as (former) public officials are often powerful and influential people. There seems to be a certain reluctance by the courts to judge high-level corruption cases, 671 and if done so, judges are relatively mild with their sentences. What complicates the investigation of top-level politicians is that ministers and former ministers cannot be investigated unless the president or a member of the Parliament asks for this investigation. EU-law changed this Romanian law, but it was changed back again by the Constitutional Court, stating that it was wrong to lift the immunity. 672 In the opinion of the Constitutional Court, (ex-)ministers should be protected for the rest of their lives. Although DNA has asked for the abolishment of this law, it is still not possible for prosecutors to start an investigation without the approval of the president or a member of the Parliament. This makes the judging of top-level politicians, more difficult. Romania has been criticised frequently for the fact that cases are not prepared properly before coming to court. Due to the capacity problem, as discussed above, prosecutors and judges have a very high workload, which might be the reason why files are said to be “not well put together” 673 and why indictments are prepared insufficiently. 674 The enormous amount of cases which the Romanian judiciary has to deal with does not make this process easier. Since there is a lack of judges, it has been said that a judge can have a workload of no less than a hundred cases a day. 675 Therefore, it is difficult for judges to handle the cases in a proper way and to give a quick and fair indictment. Furthermore, the EU has pointed out that although the quality of jurisprudence improved over the last years, recent inconsistencies in jurisprudence of high-level corruption cases were shown by higher courts, including the HCCJ. In its last report, the EU stated that there is still no unified and clear jurisprudence on the level of penalties in cases of corruption, which is of high concern as regards the legal certainty and transparency. It is worth noting that, although 666

European Commission official website (2009c), p. 4. European Commission official website (2008a), p. 4. 668 European Commission official website (2008a), p. 4. 669 European Commission official website (2008a), p. 5. 670 Interview B35. 671 Interview B06. 672 Interview B35. 673 Interview B18. 674 Interview B06. 675 Interview B14. 667

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jurisprudence of the HCCJ is considered to be law, jurisprudence of the other courts is not considered to be law in Romania. 676 This might hinder consistency in jurisprudence of high-level corruption cases. However, Romania has established a working group in order to address these problems, and the first results of this working group are expected to be released in May this year. 677 In order to improve transparency, a decision that obliges courts to publish all relevant judicial decisions on the Internet was adopted by the SCM in November 2008. Yet, due to technical shortcomings, a forum on which the SCM is ought to publish everything does not yet exist. Still, the publicity of every judicial decision on the Internet is an important goal, as pointed out by the Ministry of Justice. 678

13.6.3 Lack of support and lack of accountability In its report of July 2008, the EU criticised the Parliament for a lack of explicit commitment in tackling high-level corruption. It has blocked several investigations concerning cases that involved former ministers. Not only the Parliament, but also the HCCJ is said to have dismissed certain cases, which means it has undermined the positive efforts undertaken at pre-trial level. 679 In its last report, the EU restated that the Parliament has a big responsibility as regards the handling of high-level corruption. It should allow the investigation of all appropriate cases by the judicial authorities. 680 Last year, the Parliament rejected investigation in two cases and postponed three others cases. The European Commission has criticised the Parliament and Romanian judges before for a lack of ‘equivocal support’ in the fight against corruption. 681 Aside from a lack of explicit commitment in tackling high-level corruption across all political parties, the EU has stated that there is no broad based political consensus behind the judicial reforms either. 682 Not only the Parliament, but also the judiciary has been criticised for a lack of accountability. 683 Magistrates have to, according to the EU reports, improve their accountability. The SCM has worked actively last year in order to remove remaining problems in the judicial field, but although these efforts are, according to the EU, encouraging, they need to be translated into deeds. 684 The claimed lack of accountability has been connected to a certain mentality, which Romanians would have as a consequence of the communist period. Romanians are said to be rather reluctant in taking action. 685 Due to a claimed lack of models, there would be no one ‘to look up to’. 686 This could also explain the fact that the Cooperation and Verification Mechanism reports of the EU are, in general, very much appreciated by Romanians, as they set out a line to follow.

13.6.4 Implementation problem In order to aim for accession to the EU, Romania had to undergo many reforms in the judicial system. However, it has often been stated that although Romania seems to have ‘check marked’ many of the EU’s proposals, the problem remains with the actual implementation of laws and regulations. 687 Many new laws do not function yet. 688 This problem can be seen in relation with 676

Interview B32. European Commission official website (2009c), p. 4. 678 Interview B38. 679 European Commission official website (2008a), p. 4. 680 European Commission official website (2009c), p. 5. 681 EU observer (2009). 682 European Commission official website (2008a), p. 2. 683 Interview B18. 684 European Commission official website (2009c), p. 2. 685 Interview B06. 686 Interview B05. 687 See, for instance, Interview B18. 688 Interview B23. 677

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the claimed lack of accountability, as discussed above. Furthermore, the inconsistent application of law, pointed out before, has been “hampered further by the frequent resort to emergency ordinances.” 689 This uneven application of the law and the excessive use of emergency ordinances have resulted in overlaps and contradictions and, eventually, procedural flaws in implementation. Still, as regards the implementation problem, it is worth mentioning that Romania, after having faced communism for decades, had to re-shape the whole judicial system. The amount of laws that had to be implemented in order to become a member of the EU was enormous. Financial criteria and an often rather conservative attitude have hindered this process. 690 The fundamental changes, which had to be made within a relative short period of time, have sometimes caused feelings of frustration. 691 As regards the problem of implementation, the EU has also been criticised for its ‘benchmark-checkmark’ system within the Co-operation and Verification Mechanism reports, and for not having a firm mechanism which actually addresses the implementation problems. 692

13.6.5 Lack of confidence in judicial system It has been said that there is a lack of confidence in the judicial system in the Romanian society. As many high-level corruption sentences are relatively mild, and high-level corruption often still not investigated at all, the Romanian people would not have much confidence in the judicial system. 693 The duration of the cases causes the average Romanian to be cynical about the situation. 694 According to the EU, “the failure of the judicial system to deliver sentences in highlevel corruption cases has weakened the public perception of respect for the rule of law.” 695 However, since investigations have increased in number over the past few years, Romanians are said to be more confident that petty-corruption is investigated as well. 696 In relation to the lack of confidence, it has been stated that Romanians are not aware of what is happening at judicial level. According to Transparency International Romania (TIR), that carried out research regarding the perception of the judiciary among the population and concluded that this perception was bad, there is a lack of ‘society-consulting’ in Romania. As regards the drafting of the four new Codes, TIR has set up a not-funded civil society campaign in order to block these Codes. The Codes were, according to TIR, adopted without respect of the law on transparency in decision-making; the Romanian society was not consulted. 697 The EU confirmed that there is a need for public consultation in the preparation of laws. 698 It has been stated frequently that the Parliament should be more open to public debate. 699 A lack of consultancy as regards new laws can explain the claim that Romanians would not rely on the judiciary.

13.7 Progress in the judicial field After underlining the main problems in the judicial field today, it is important to note that Romania has made significant progress on this issue as well. According to the EU, the government of Romania has been successful in 2008 in restoring a “reform drive and relative 689

European Commission official website (2008a), p. 4. Interview B32. 691 Interview B38. 692 Interview B18. 693 Interview A03. 694 Interview B05. 695 European Commission official website (2008a), p. 6. 696 Interview B35. 697 Interview B18. 698 European Commission official website (2008a), p. 5. 699 See, for instance, Interview B07. 690

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stability in the legal and institutional framework for the fight against corruption.” 700 The SCM, the Public Ministry and the DNA had shown good results considering the reform of the judiciary and the fight against high-level corruption. In order to counteract local corruption, the country had been able to achieve awareness by raising campaigns and introducing preventive measures. According to the EU, the quality of the jurisprudence was, although problems as regards this issue remain, improving. 701 The EU concluded in its report of July 2008 that Romania had started to move into the right direction. Although lots of progress is still to be made on the judicial level and in the fight against corruption, the Romanians seem to be aware that certain reforms are still necessary. Fundamental elements of a functioning system are put in place, although this foundation is fragile. Unequivocal support from all actors at all levels is still needed. The European Commission underlined that it encourages Romania to intensify its reforms and to cooperate closely with other member states in order to tackle remaining challenges successfully. 702 The EU has expressed their confidence, noting that in order to stabilise the legal framework, the new Codes should be finalised. Finalisation of the new Codes will supply a clearer and effective framework for prosecution and make better cooperation with other member states possible. DGA has reported an increase of about fourteen per cent of corruption investigations in 2008 within the ministry compared to the year before. Furthermore, under benchmark 4 it pointed out that the General Prosecutor has adopted a set of measures in order “to increase the effectiveness of local prosecutors’ offices in corruption cases.” 703 ANI, which was established under benchmark 2, has reached its initial staffing goals with the recruitment of sixty inspectors. ANI was set up as a body to verify decorations of assets, wealth and interest of all those who have a legal obligation. 704 As it is relatively early to make out whether ANI’s investigations will be followed up by the judiciary, it will need to show that it can extend its investigations without outside interference. 705 However, in its last report of February 2009, the Commission emphasised that the pace of progress, which was noted in the Commission’s report of July 2008, had not been maintained. Despite the rejection of amendments by the Constitutional Court which would restrict the rights of the prosecution, the legal situation remained unresolved and uncertain. The Commission pointed out that major improvements still need to be made in the “access to and unification of jurisprudence, the accountability of magistrates and the shortcomings in staffing and management of the judiciary.” 706 Romania must demonstrate that it has an autonomously functioning, stable judiciary that is able to recognise and sanction corruption and protect the rule of law. Everything needs to be done in order to turn around backward movements of recent months. Mr. Barrosso, president of the Commission, pointed out that concrete results in Romania’s judicial reform and fight against corruption need to be accomplished. “I have urged the new government to turn round the negative trend which is visible over the last six months. Romania needs to be able to convince the Commission and other member states that it can deliver on its commitments that remain from accession.” 707 In his answer to Mr. Barrosso, President Basescu stated that the current government is doing everything they can in order to achieve a good EU report coming summer.

700

European Commission official website (2008a), p. 3. European Commission official website (2008a), p. 4. 702 European Commission official website (2008a), p. 7. 703 European Commission official website (2009c), p. 6. 704 Interview B38. 705 European Commission official website (2009c), p. 5. 706 European Commission official website (2009c), pp. 2-3. 707 EU observer (2009). 701

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13. 8 Conclusion Civil society has the important task to protect citizens by making them aware of their status and their rights. Romanian law provides a good legal framework for the establishment of civil society organisations. However, a weakness of the non-profit sector is the absence of a tradition of civil society, due to a history of foreign interference and communism. A positive trend is the rise in the number of NGOs over the last couple of years. Nevertheless, the biggest threat facing civil society is its limited influence. Civic activism among Romanians is low and the government is reluctant to recognise and cooperate with civil society. The non-profit sector and the rest of society, were aided and strengthened before 2007 by the EU pre-accession funds (PHARE, ISPA, SAPARD). The funds were aimed at a whole range of objectives like, strengthening public administration; implementation of EU legislation, economic and social cohesion; environment and infrastructure. A weakness was the inappropriate allocation of some of the pre-accession assistance. The European Anti-Fraud Office made several reports of fraud. Nevertheless, now that Romania is an EU member, the Structural and Cohesion Funds create new opportunities for Romania. For the allocation of the 19,7 billion euro granted to Romania, a strategy has been set out which identifies priority areas for reducing the prosperity differences between the regions itself and between Romania and other member states. However, there are also threats concerning the accession to EU funds. The application processes for acquiring EU funding are lengthy and complicated. This contrasts sharply with funding coming from the US. Moreover, especially in rural areas there is a lack of knowledge on how to accede funds. Another problem facing small communes is budget restraints. EU funds are only available in combination with co-financing of the applicant itself. However, small villages often have an inadequate local budget. A democracy is based on its social structures within the society: it is the link between the state and its citizens, which consists among others out of the non-profit sector, the educational system and citizens’ rights. Resolution 2003 (81) states the legal basis of cooperation between the Council of Europe and voluntary organisations. The Council’s goal of this cooperation is to have a dialogue with European citizens about their rights, as voluntary organisations are widely accepted as the voice of citizens. The cooperation is a way to reach all levels of society, which is difficult for an enormous institution like the European Union. Next to the European cooperation, the non-profit sector needs support from its national government to act efficiently in society. Unfortunately, there is a lack of support on behalf of the government for Romanian civil society. The absence of trust and exchange of expertise between the government and the civil society causes a non-effective situation and creates an obstacle for the future development of the Romanian society. Civil society has the important task to protect citizens by making them aware of their status and their rights in order to establish a participatory democracy in Romania. Most Romanian citizens are not aware of the value of their own rights. Transparency, mediation and trust are aspects that should develop the citizens’ awareness of rights in Romania. In the end, the goal of the accession is to assure all European citizens of their international rights. It is time to put the new system in practise. Therefore, it is an absolute necessity to create a better relationship between government and the non-profit sector. Corruption still is considered to be a part of everyday life in Romania. It needs to decrease in order to create a transparent system were people trust the government, NGOs and each other. A possible solution is the establishment of more government institutions that watch over the use of transparency in the Romanian society. A true participatory democracy can only be established if there is a framework were NGOs are given the space to act freely and were the government does not sabotage them. This is a challenge for the future in order for Romania to develop.

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13.8.1 Education Since 1995, the education system law contains a section regarding university autonomy, which is directed towards management, administrative and financial tasks. Besides autonomy, academic freedom is guaranteed by law within all educational institutions and students are free to choose their study. These features can both be considered as strengths of the Romanian education system. Regarding the weaknesses of the educational system, it can be concluded that there are increasing shortages of qualified teachers, in particular for areas highly demanded and better paid by employers on the labour market, for example ICT and foreign languages. Moreover, school attendance is not reviewed by inspectors, which makes it hard to increase the rate of children going to school. There are several opportunities for the Romanian education system. With the signing of the Bologna Declaration, Romania conceded formally to several reforms in higher education in Europe. In order to improve the mobility of students and teachers, all obstacles to their freedom of movement were removed. This created an opportunity for Romanian students, who now are able to study abroad and to take home their knowledge about modern European societies and put it into practice in Romania. Regarding financial support of students, the government is obligated by law to support students with low financial means. Furthermore, a general loan scheme will come into force next year, widening access to higher education in Romania. The most striking threat to the Romanian education system seems to be the lack of congruence between university programs and labour demand. The Romanian society is desperate for highly-educated people with business skills and technology specialisations. However, due to the disability of the government to change the content of the curriculum after the fall of communism, a significant rotation in content is not visible. This lack of congruence is creating a threat for the Romanian labour market and its unemployment rate. Another discouraging factor within the Romanian education system is the award that university teachers and professors receive. The wages they obtain are in such a degree dissatisfactory that many university teachers eventually switch jobs. They are often unmotivated and disillusioned with their jobs, an attitude which can affect students in a discouraging way. Another threat is the corruption within the Romanian educational system. Access to higher education normally depends on a secondary school diploma. However, in practice, one can exchange money for permission to university. Corruption within the educational system evolves already at a very low level, since parents who can afford it, are able to buy a secondary school diploma for their child and, similarly, permission to university. This is a threat, not only to the quality of education, but also to the quality of human capital in Romania in general. Finally, among the higher educated population one can observe a tendency of graduated students leaving the country, a so called ‘outflow of human capital’. Higher educated people seem to encounter minimal satisfaction within the Romanian labour market and, although highly educated, wages are poor compared with other European countries. This phenomenon of brain drain leaves Romania in an unfavorable economic position.

13.8.2 Human rights Although Romania has ratified most of the international treaties and legal instruments concerning human rights, the country still faces problems. The Romanian constitution and the organic laws seem to be in order, regarding the Copenhagen Criteria. One of the problems can be found in practicing these rights; legal certainty backing these rights is sometimes absent. In order to ensure the wide range of human rights this needs to improve in the next years. As regards the rights of children, Romania has a long way to go. Nevertheless, a lot has changed already since children did not have any rights under communism. Under pressure of the European Commission, Romania reformed its laws and with the help of PHARE Romania tried to create awareness among the people. Although this is not realised yet, it is a challenge for the

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future. The legal aspects need to be improved as well: an example of this is the law regarding adoption that still violates some aspects of human rights and the Convention on the rights of the child. European institutions, NGOs and European media have pointed out that Romania does not attain the international and European level of protection of minorities. Especially regarding the Roma minority, a lot of progress still needs to be made. The problem seems to be in the field of law practice. Therefore, the importance of the civil society is obvious. Cooperation between civil society and government could guarantee a better protection for minority groups. One of the most important elements of a democracy is the assurance of equal rights for every citizen: an urgent task for the Romanian government as article 12 of the EC-Treaty does not seem to be respected in Romania. Romania has a men society; the position of women is not equal to men. Their neglected position is rooted in society; democratic law does not cause immediate change of inequality. Domestic violence, trafficking and sexual assault are still present. The last few years a lot of national initiatives were taken under European pressure. But these initiatives have only reached a part of the suppressed women. There is no awareness and the courage to stand up for their rights. Again, NGOs can cause a lot of change on this field, if the government supports them. The Romanian government should be aware of the fact that they should respect their own constitution, as well as European and international law regarding human rights. Having written down the protection in law does not mean that it is practiced in reality. The practice of human rights is a future task for government, civil society and citizens; all levels of society should cooperate to realise the use of and respect for human rights.

13.8.3 Nationalism extremism The 1990s as well as the first years of the new millennium were characterised by the rise of extreme nationalism. Several (political) parties with a highly nationalistic and often xenophobic agenda mushroomed. The year 2000 proved to be a peak, when the leader of the PRM ran second at the presidential elections, securing the support of a considerable part of the electorate. Afterwards, support for extreme nationalistic parties started to decline, and not one nationalistic party was able to gain enough support to be represented in the parliament after the most recent elections. This might be considered remarkable due to the sense of disillusionment felt by the Romanian voters nowadays: in times of disappointment it has often proved tempting to protest against the ruling parties by voting for the extreme ones.

13.8.4 Judicial Reforms and Corruption After the collapse of communism in 1989, it was necessary for Romania to re-shape the whole judiciary in order to create a democratic framework. Since Romania did not have a judicial system based on democratic principles under communism, changing the judiciary was a big challenge beforehand. Establishing an effective and viable judicial apparatus indeed did not go without obstacles. Communist networks of patronage and clientelism survived the transition and hindered this process. In order to strengthen the judicial system and to fight corruption, it was essential to make institutional and procedural changes in the legal system. The two most important institutions which were set up to maintain the independence of the judges and to fight corruption were the SCM and DNA. So far, they seem to function properly and they give the right results that are needed for the reforms. The SCM managed to hold sufficient training conditions for magistrates and clerks in order to guarantee the experience level of the magistrates. Another satisfying point is that the budget for the judiciary has increased; this is a clear indication that the Romanian judiciary is on its way towards more independence. However, the reforms that had to be made in the judicial field were very difficult for Romania. For example, the restitution of property to the rightful owners remains a big challenge for the

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Romanian executive power. Owners who try to get their property or land back complain about the bureaucratic manner which is still a big problem in Romania ever since communism. As long as official institutes keep asking for a huge amount of paperwork, the problem of restitution will not be solved within a reasonable period of time.

13.8.5 Current situation Nowadays, the capacity situation in the judicial field remains to be a problem; Romania still faces serious staff shortages. Due to this lack of judicial staff it is hard for judges to cope with the amount of work within a reasonable period of time. The pressure which is put on judges to deliver effective penalties leads to unprepared cases in courts, which does not give the people the legal certainty that needs to be guaranteed within the European Union. Another problem in relation with penalties can be found in the prosecution of corruption. Judges tend to give low and inconsistent sentences for those guilty of high-level corruption. As a consequence, Romania has been criticised by the EU for not showing many tangible results in the fight against high-level and medium-level corruption. There is still no unified and clear jurisprudence on the level of penalties in cases of corruption, which hinders the legal certainty and transparency. This lack of transparency can be seen as an overall problem within the judicial field. Since the parliament has blocked several investigations against ministers accused of corruption, there seems to be no true commitment in combating high-level corruption from the legislative power. Strong support from all people at all levels is essential in order to knock down corruption effectively. As regards judicial reforms, political consensus throughout the country is also still needed. Both the parliament and the judiciary seem to be reluctant in showing accountability, which needs to improve. Although many laws – both national- as EU-law – have been adopted by the Romanian government, some of them have not been implemented properly yet. Many new laws do not function so far. Due to the remaining problems in the judicial field and the fight against corruption, there seems to be no true confidence in the judicial system within Romania in general. However, the situation as regards the judiciary and corruption has improved significantly in recent years. In general, the Romanians seem to realise that a lot needs to be done in order to guarantee a healthy judiciary. As mentioned above, the SCM, the Public Ministry and DNA have shown relative good results as regards the reform of the judiciary and the fight against high-level corruption. The quality of jurisprudence has improved. With the establishment of ANI, a great effort was made as regards the investigation of cases. Although fundamental elements of a functioning legal order - an essential element of the Copenhagen Criteria used by the EU - have been put in place, this foundation is fragile. The legal and institutional framework still must show that it is stable. As long as Romanian judges have to cope with an extreme high workload, no unified and clear jurisprudence can be guaranteed and the implementation of new national- and EU-law is struggling, question marks can be post as regards the legal order. Transparency and efficiency of the judiciary should be improved. Law should be applied in a consistent and uniform way, at all levels. Public confidence in the fight against corruption and in respect for the rule of law can only be realised when true results in high level cases can be shown. With its Co-operation and Verification mechanism reports, the EU underlines remaining problems in Romania’s judiciary and corruption. It tries to stimulate the country to approach these problems as it is not only in Romania’s own but in the EU’s wider interests to have a strong judiciary in Romania. Romania has started to move into the right direction. In order to make sure that Romania can tackle remaining problems in the judicial field and its fight against corruption, continuous strong support from the EU, as well as from other member states, is needed in the future.

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14. Privatisation and restructuring In order to comply with the EU Copenhagen criteria regarding economic issues, Romania had to reform its economic structure significantly. From all the Eastern European countries Romania was the most Stalinist and therefore the country had a more difficult task to make the transition from central planning, autarky and inefficient industrial choices to a free market making full use of the country’s comparative advantages. 708 Following Bucharest’s formal application to the EU on 22 June 1995, Brussels was pressing for the “existence of a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union.” 709 Privatisation is a key part in the transition to a functioning market economy and it consists of privatisation, deregulation, liberalisation and a release in domestic price control. In addition, privatisation is an essential path to a competitive enterprise sector in post-communist countries. 710 Privatisation can occur through two different approaches, namely the gradual process or the big bang/shock therapy approach. 711 In Romania’s case initially a gradual approach was applied of what is called the neoclassical paradigm. According to the neoclassical paradigm, enabling private property necessitates three steps which are the following: commercialisation, restructuring, privatisation. 712 The Romanian government undertook the first step in July 1990 with the introduction of a law recognising the state owned enterprises (SOEs) as commercial enterprises (commercialisation) and removing price controls on 80 per cent of goods and services gradually by July 1991. Another law preparing privatisation was adopted in 1991 implying firstly, a reform of economic entities followed by a modernisation phase (restructuring). At that moment, the idea of rapid transition was favoured. 713 The state controlled NAP (National Agency for Privatisation) was put in charge of commercialisation, and 1991 saw the creation of 5 Private Ownership Funds (POFs), which were established in 1992, and a State Ownership Fund (SOF). The POFS were in charge of 30 per cent of the equity shares of the commercial enterprises to be formed. The SOF was responsible for the privatisation of the remaining 70 per cent. 714 The SOF was supposed to privatise 10 per cent of the shares every year over a period of five years, but managed to sell only 8 per cent over the entire period. The reason for this slow progress was twofold. Firstly, there was no clear idea about the boundary between the private and the public sector and secondly, the funds were headed by members from the political class and of course this second problem reinforced the first one. 715 The second step following commercialisation was the restructuring of SOEs. The Agency of Restructuring was created in 1993 with the task to reorganise companies with technical and financial support. Progress was very limited due to political pressures and therefore the work of the agency strongly delayed the privatisation process. 716 Before 1997, the process was mainly focused on the small and medium-size enterprises (SMEs), since the powerful trade unions (especially within the much politicised state-owned enterprises) were less felt in that sector. 717 The bigger industries had more vested interests, not only from the unions but also from local

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Calcagno, Hefner and Dan (2006), p. 31. European Union official website (2009c). 710 Peev (2008). 711 Calcagno, Hefner and Dan (2006), p. 28. 712 Calcagno, Hefner and Dan (2006), p. 30. 713 Calcagno, Hefner and Dan (2006), p. 32. 714 Calcagno, Hefner and Dan (2006), pp. 32-33. 715 Calcagno, Hefner and Dan (2006), p. 33. 716 Calcagno, Hefner and Dan (2006), p. 33. 717 Ahrend and Martins (2003), p. 344. 709

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authorities, especially in distressed regions, where there is little alternative employment. 718 Prior to 1997, 58 per cent of industry was still publicly owned. 719

14.1 The privatisation pipeline One could say that the government was still planning, but this time they were planning a free market. 720 The lack of decisive action made the transition of Romania towards a free market more problematic. 721 Unprofitable and enterprises working at a loss were kept alive by subsidisation and an overrated currency to make imported inputs cheaper. 722 In order to keep Romania’s lossmaking heavy industry (like it was in place in the beginning of the 1990s) producing while trying to restructure the SOEs, large-scale subsidies were provided by the government. These were made available via direct subsidies but also through indirect channels. The figure below illustrates this direct and indirect support. In addition to the direct subsidisation, SOEs received government-guaranteed loans, which were repaid by the state budget in 90 per cent of the cases, and they were allowed to run up arrears to the state and also to the state-owned energy suppliers. Subsidies did decrease between 1996 and 2001, but this is hard to quantify and might have been negligible, mainly due to the indirect support. 723

0.1 Figure 14.1 Direct and indirect state subsidies in Romania Source: Ahrend and Martins (2003). However, by 2005 the European Commission noted that many enterprises were still subsidised and supported by debt-cancellations while running large losses. 724 By 2000 the arrears were around 40 per cent of GDP and the major offenders were enterprises fully, but especially partly owned by the government. While the arrears in the private sector amounted to 14 per cent of turnover, this was near 70 per cent of turnover for the 718

Ahrend and Martins (2003), p. 345. Ahrend and Martins (2003), p. 333. 720 Ahrend and Martins (2003), p. 333. 721 Ahrend and Martins (2003), p. 333. 722 Calcagno, Hefner and Dan (2006), p. 33. 723 Ahrend and Martins (2003), pp. 336-337. 724 European Commission official website (2005c), p. 23. 719

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enterprises that were partially state-owned. The worst non-payments occurred among enterprises that were in the process of being privatised (in the privatisation pipeline). The managers and the workers had little incentives to stick to hard budget constraints and arrears kept rising since the SOF was unable to oversee the several thousand companies under its umbrella. 725 In 2005, the European Commission still observed that: “many of the companies remained unprofitable and continued to accumulate arrears.” 726 Subsidies and especially arrears kept highly unprofitable enterprises producing (the worst being the mines that are working at a loss despite government support). 727 In addition, Romanian industry benefited from energy prices that were administratively set below production costs and this has lead to massive overconsumption of energy and a lack of innovation. 728 However, the European Commission found that the “energy prices were raised gradually, thereby limiting the implicit subsidies to enterprises and consumers, but non-payment of energy bills remained pervasive.” 729 Despite making losses while receiving support through subsidies and arrears, enterprises like RomArm, Tarom and Drumurilor have been paying high salaries to their employees in contrast to private sector, police and judiciary salaries. 730 Inefficient firms seem to have been extracting rents from the Romanian society.

14.2 Acceleration of privatisation The election of a reform-oriented government in 1997 proved to be an important stimulus to the restructuring and privatisation of the remaining large SOEs. In addition to the creation of a Ministry of Privatisation, in the following two years some important privatisations have been made, with a 35 per cent share of RomTelecom to a Greek telecom operator and the sale of DACIA to the French car manufacturer Renault. In addition, foreign investors took over two large Romanian banks. 731 Many inefficient firms were closed and restructuring became very hard after 1997. The privatisation of profitable assets after 2000, varying from banks to telecom and energy, also caused more inflow of FDI, which had been lower previously. 732 Many firms were sold to foreign hands to get rid of loss-making enterprises. In addition, these sales served to cover the state budget. 733 Despite the failure to sell Petrom SA (national oil company) initially and TAROM (national airline) due to a lack of investors’ interest, some progress in restructuring was achieved through the unbundling of Conel and Romgaz (an electricity and gas company respectively). In 2001, the SOF was replaced by the Authority for the Privatisation and Management of State Assets (APAPS), but a number of companies the SOF was in charge of, were transferred to the relevant line ministries. In 2004, APAPS was replaced by the State Assets Authority (AVAS) and in the end of that year Petrom SA was privatised and sold to an Austrian oil company and now forms a leading company in South-Eastern Europe. 734 In February 2009, AVAS had a portfolio of 412 companies, and it held a majority stake in 36 of them. 735 The agency operates under the government’s authority in order to implement its privatisation strategy. 736

725

Ahrend and Martins (2003), pp. 337-339. European Commission official website (2005c), p. 23. 727 Ahrend and Martins (2003), p. 339. 728 Ahrend and Martins (2003), p. 337. 729 European Commission official website (2005c), p. 23. 730 Ahrend and Martins (2003), p. 341. 731 Calcagno, Hefner and Dan (2006), p. 33 and Ahrend and Martins (2003), p. 334. 732 Interview B04. 733 Interview B10. 734 Bucharest Business Week official website (2004). 735 Bursa website (2009). 736 ARIS website (2008). 726

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In addition to the sale of Banca Agricola, the main development has been the take-over of Sidex Galati by LMN holdings (Mittal and nowadays ArcelorMittal). What makes this take-over very important for Romania is the fact that Sidex was responsible for 75 per cent of Romanian steel production and 15 per cent of gross industrial output. 737 Mainly because of this sale the state ownership in the industrial sector declined from 42 per cent in 2001 to 35 per cent in 2002 and Mittal Steel was able to turn an unprofitable company (losing 1 million euro a day) into a profitmaking one by 2003. 738 More should be said about the steel sector specifically since it is considered as a major industry in centrally planned economies. 739

14.3 The steel industry in transition During the industrialisation in the 1960s, Romania developed a heavy steel industry and by 1989 there were 33 steel companies. 740 The first step to move SOEs into private hands was the commercialisation process which started in July 1990 (the shares being divided between POFs and SOF). A decade later, the SOF was still in charge of big parts of the steel sector. In addition to the sale of Sidex to Mittal Steel, between 2002 and 2005 the focus was on restructuring with 590 million dollars being invested from state budget, investors and external sources. However, much restructuring has taken place with money from state-owned banks without considering the business strategies of steel companies. Steel industries therefore lack economic calculation (private property should create this economic calculation). This absence of economic calculation is also reinforced by the lack of inputs against market prices. Due to all above mentioned arguments, steel privatisation had been sluggish in Romania. 741 In 2002, the Romanian government had still failed to privatise many of the SOEs, many steel companies were still state owned and all 33 enterprises were continuing to operate. However, steel output and export declined strongly during the transition and unemployment rose significantly. 742 In the years to come a lot would change as the steel sector became dominated by foreign multinationals.

14.4 Future restructuring and macro-economic stability According to a senior monetary and economic expert in the National Bank of Romania, the main challenge for Romania is to balance structural reforms with macro-economic stability. 743 The latter is needed to converge with the EU and to attract investment while the former includes social and fiscal reforms, agricultural transition, improvement in infrastructure and the energy sector and finally increasing competition, investment and SME productivity. These will be dealt with in the following sections, but firstly, an overview of Romania’s macro-economic situation will be given.

737

Ahrend and Martins (2003), p. 334. Calcagno, Hefner and Dan (2006), p. 33 and OECD official website (2005), p. 24. 739 Calcagno, Hefner and Dan (2006), p. 28. 740 Calcagno, Hefner and Dan (2006), p. 38. 741 Calcagno, Hefner and Dan (2006), p. 40. 742 Calcagno, Hefner and Dan (2006), p. 39. 743 Interview B20. 738

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15. Macro-economic situation 15.1 Overview of macro-economic indicators 2000-2008 Figure 15.1 gives an overview of the most important macro-economic indicators as regards the Romanian economy for the period 2000 - 2008. Year Economic growth (%) GDP (billion €) GDP per capita (€) GDP p.p.p. as % EU27 Inflation (%)

2000 2.1

2001 5.7

2002 5.1

2003 5.2

2004 8.5

2005 4.2

2006 7.9

2007 6.2

2008 7.1

40.65

45.35

48.61

52.57

61.06

79.80

97.75

123.84

137.03

5000

5500

6000

6500

7400

7900

9100

10,500

11,300

26.1

27.8

29.4

31.3

34.1

35.0

38.3

42.1

44.9 744

45.7

34.5

22.5

15.3

11.9

9.1

6.6

4.9

7.9

Unemploy7.3 6.8 8.6 7.0 8.1 7.2 7.3 6.4 ment rate (%) Export 13,3470 14,9967 17,1933 18,2841 21,8828 26,4011 31,5532 36,5741 (million €) Import 15,5017 18,4470 19,9270 22,2152 27,3723 34,5123 43,2967 53,9134 (million €) Current -5.5 -3.3 -5.8 -8.4 -8.9 -10.4 -13.9 account deficit (%) Budget -4.4 -3.5 -2.0 -1.5 -1.2 -1.2 -2.2 -2.5 deficit (%) Public dept -22.6 -26.0 -25.0 -21.5 -18.8 -15.8 -12.4 -12.7 (%) 0.1Figure 15.1 Macro-economic figures 2000-2008 Source: Eurostat official website (CA deficit figures: IMF official website (2009), p. 209).

15.2 Romania and the financial crisis In 2008, the Romanian economy still reported an annual growth of 7.1 per cent. During the last quarter of 2008, however, it already became visible that Romania, too, was affected by the financial crisis. In the first three quarters of 2008, the Romanian economy grew with respectively 8.2, 9.3 and 9.1 per cent, whereas in the last quarter of 2008 the Romanian economy grew with 4.5 per cent; marking a considerable slow down of the economy. 745 In 2009, the Romanian economy is expected to shrink with approximately 4 per cent, but will recover in 2010. The Romanian economy is not very much touched by the financial crisis because of toxic assets, but because of its large foreign-owned debt. The effect of the crisis is therefore not very visible in the financial sector, but to a larger extent in the real economy. 746

744

Together with Latvia and Bulgaria, Romania therefore has one of the lowest income levels of the EU27. World Bank official website (2009), p. 50. 746 Interview B28. 745

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5.8 42,3515 59,6316 -12.6

-5.4 -13.6

15.2.1 Building up imbalances 2002-2007 During the last five years the Romanian economy witnessed a boom. Between 2002 and 2007 the economy grew with an impressive average rate of 6.2 per cent annually. Nonetheless, the boom caused the economy to overheat and resulted in growing and unsustainable imbalances. Economic growth was fuelled by increased investments and domestic consumption, which, in turn, were a result of strong wage increases and the rapid expansion of credit. The boom, however, was largely foreign-financed by FDI’s, capital inflows and through subsidiaries of foreign banks in Romania and led to the rapid increase of Romania’s external-debt. 747 Between 2002 and 2007 the CA deficit grew from 3 to 14 per cent of GDP. The rapid increase in foreign-owned debt made Romania very vulnerable for exchange rate volatility. At the same time, the government pursued a very loose fiscal policy, which only fuelled domestic demand and hence contributed to the overheating of the economy. Excessive spending of the government on wages and pensions also caused large public deficits, in spite of high economic growth rates. 748 The government (20042008) pursued a pro-cyclical policy, because they thought it was good to stimulate the economy in order to converge with the EU and that it was important for Romania’s economy to grow rapidly. The pro-cyclical policy of the government, however, only served short-term convergence and was by no means supporting sustainable convergence of the economy of Romania. 749

15.2.2 Emerging financial crisis During the fourth quarter of 2008, these overheating pressures suddenly came to an end, as the financial crisis also started to affect the Romanian economy. Household consumption decreased, because of declining disposable income and limited credit lending and external funding possibilities. 750 751 Apart from limited access to credit, domestic demand was also affected by weaker consumer confidence as a result of the financial crisis, which created a strong saving propensity. 752 In addition, the government also needed to cut expenses. For 2009, private and public consumption are expected to shrink with respectively 3.7 and 11.0 per cent. Because of the contraction of domestic demand, the current account deficit is expected to decline from 12.5 per cent in 2008 to 7.5 per cent in 2009 and to 6.1 per cent in 2010. Exports are expected to contribute positively to growth in 2009 for the first time since 2002, in spite of weak demand from the Euro area that represents 70 per cent of Romania’s export. FDIs and capital flows are also expected to decline from 6.6 per cent of GDP in 2008 to 2.9 per cent in 2009. As a result, net borrowing from the rest of the world is expected to decline from 11.8 per cent of GDP in 2008 to 6.4 per cent of GDP in 2009. As regards inflation, the CPI inflation rate is expected to drop in 2009 and fall within the official target of 3.5 per cent (plus or minus 1 per cent) by the end of the year. Unemployment is also expected to adjust to the crisis and will increase in from 5.8 per cent in 2008 to approximately 8 per cent in 2009. Overall, a negative economic growth of 4 per cent is expected for 2009. The budget deficit is expected to be around the -5.1 per cent in 2009. 753 According to a monetary policy expert, it is necessary that the government keeps the budget deficit, because a reduction of the deficit would only amplify the recession. Overall, it will therefore be the private sector that will make the adjustment. The main challenge for Romania in the future will be to converge with the EU and implement the necessary reforms, while achieving 747

Out of the 41 banks in Romania, only two banks are not-foreign-owned. This allowed Romanians to have access to cheap money. ( interview B28). 748 IMF official website (2009a) and Ecofin official website (2009a), p. 98. 749 Interview B20. 750 Banks have reduced access to financing. In addition, the costs of borrowing money on the external capital market have also increased significantly. 751 Ecofin official website (2009a), p. 98. 752 NBR official website (2009a), p. 1. 753 Ecofin official website (2009a), pp. 98-99 and IMF official website (2009a).

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and maintaining macro-economic stability. This in turn requires the development and implementation of a medium to long-term coherent policy mix. 754

15.2.3 IMF Loan 2009 By means of guaranteeing the stability of the Romanian economy in these turbulent times, the Romanian government has concluded an agreement with the IMF. On 4 May 2009, the Executive Board of the IMF approved a 24 (two year) month Stand-by Agreement worth 12.9 billion Euro. The loan is supposed to support a comprehensive economic program of the Romanian government and aims to “cushion the effects of the sharp drop in capital inflows, while addressing the country’s external and fiscal imbalances and strengthening the financial sector”. 755 A proportion of the loan, i.e. 4.9 billion Euro, will become immediately available for Romania. The remainder will be paid in instalments, after quarterly reviews of the IMF of the performance of Romania’s economy. The loan of the IMF is supplemented with 5 billion Euro of the EU, 1 billion Euro of the World Bank and a combined 1 billion Euro of the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the International Finance Corporation (IFC). In total, the Romanian economy can therefore count on a support-package of 19.9 billion Euro. 756 The Stand-by Agreement of the IMF needs to ensure that Romania can meet its external obligations and will cushion the economic decline. 757 According to a monetary policy expert, Romania needed the IMF loan for two reasons. The first was to maintain stability of the exchange rate. For 2009, the finance needs for Romania are 45 billion Euro. The current account deficit is estimated at 12 billion Euro and the remaining 33 billion Euro are the short-term, medium-term and long-term debt. Out of the 33 billion Euro, only 2 billion Euro is public debt, the remaining debt belongs to the private sector. The NBR realised that such a large private debt inevitably would become a public problem, since people would change their RON into Euros in order to pay their foreign debt and this would destabilise the exchange rate. The NBR therefore wanted to make sure that the exchange rate would remain stable and needed money in order to intervene in the currency market and stabilise the exchange rate. 758 The second reason was to make sure that the NBR disposed over enough reserves in order to maintain an attractive investment climate. Due to the credit boom of the last 4-5 years, Romania faced huge capital inflows. In order to reduce the increase of credit, the NBR increased the minimum reserve requirements for banks from 20 to 40 per cent during these years. The NBR realised that the capital inflow was too high and the NBR tried to decelerate this process by this means. With the emerging financial crisis in the last quarter of 2008, the situation reversed. It became very difficult to obtain credit and therefore the NBR decided to reduce the reserve requirement. As a result, international reserves of banks will start declining and foreign investors could become worried about that. The NBR wanted to borrow money from the IMF to make sure that the NBR has enough reserves and investors would not become worried. 759

15.3 Adoption of the Euro The financial crisis emerged at a time when Romania planned to join ERM II in 2012 and to adopt the Euro in 2015. It is, however, questionable whether Romania will be able to reach those targets. According to a monetary policy expert, 2015 is still the right time for Romania to adopt the Euro. The year 2008 was a setback and the financial crisis might throw Romania’s plans in 754

Interview B20. IMF official website (2009a). 756 IMF official website (2009a). 757 IMF official website (2009a). 758 Interview B20. 759 Interview B20. 755

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shambles, when the crisis will prolong. 760 In this respect, the economic convergence criteria which are laid down in article 121, paragraph 1 of the Treaty Establishing the European Community are very important. In short these are: • To achieve a high degree of price stability. This means an inflation rate not exceeding the average inflation rate of the three best performing member states by more than 1.5 percentage points. For the year 2008 the reference value was 3.2 per cent. 761 • A sustainable financial position. Member states need to fulfil two requirements that show fiscal discipline: a) A budget deficit ratio of less than 3 per cent to GDP. b) A public debt ratio of less than 60 per cent to GDP. • A stable exchange rate. For at least two years a member state needs to participate in the Exchange Rate Mechanism (ERM II), without devaluing its currency and without severe deviations of the exchange rate from the ERM central rate. • Convergence of the long term interest rate. This means an interest rate not exceeding the average interest rate of the three best performing member states with respect to price stability by more than 2 per cent. For the year 2008 the reference value was 6.5 per cent. 762 763 Romania’s progress towards meeting these criteria will now be assessed.

15.3.1 Inflation In august 2005, the NBR adopted a new monetary policy strategy with respect to inflation, i.e. inflation targeting. This strategy was supposed to be an instrument of the NRB to control inflation by anchoring inflation expectations to an inflation target announced by the NBR. Henceforth, the NBR would also communicate with the public through the publication of Inflation Reports. 764 Since its introduction, the inflation targeting strategy of the NBR has not yet been very successful, since actual inflation always exceeded the inflation target. (see figure 15.2) There are, however, hopeful signs for the future. Year 2005 2006 2007 2008

Inflation target (%) 7.5 5.0 4.0 3.8

Variation band (%) 6.5 – 8.5 4.0 – 5.0 3.0 – 5.0 2.8 – 4.8

Actual inflation (%) 9.1 6.6 4.9 7.9

0.2Figure 15.2 Inflation target, variation band and actual inflation Source: NBR official website (inflation target and variation band), Eurostat official website (achieved inflation). After a drop in 2007, inflation rose again in 2008. Inflationary pressures were especially high from March to July and inflation peaked in July at 9 per cent. The high inflation rate was caused by the increase of crude prices and energy prices and the loose fiscal policy of the government. During the second half of 2008, inflationary pressures decreased, but increased again in the beginning of 2009 because of the sharp depreciation of the RON as a result of negative 760

Interview B19 and B20. Sum of lowest inflation in EU: Malta: 1.5 per cent, the Netherlands 1.7 per cent, Denmark: 2 per cent + 1.5 per cent. 762 Sum of lowest rates in EU: Malta: 4.8 per cent, the Netherlands: 4.3 per cent, Denmark: 4.3 per cent + 2 per cent. 763 ECB official website (2008), pp. 9-14. 764 NBR official website (2009b), p. 3. 761

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investment sentiment. For 2009 and 2010, inflationary pressures are expected to decrease because of low wage growth and low international commodity prices. Inflation is expected to fall within the target of 3.5 per cent (+/- 1 per cent) of the NBR by the end of 2009. 765 The NBR forecasts an annual inflation rate of 5.8 per cent for 2009. For 2010, the inflation target is set at 3.5 per cent (+/- per cent) and this target will probably be reached, since the NBR forecasts an annual inflation rate of 2.8 per cent. 766 Romania will therefore be able to meet the criteria of price stability in the future (2010), although the NBR remains prudent and continues to keep a wide uncertainty interval. (see figure 15.3)

0.3Figure 15.3 Inflation projection and uncertainty interval Source: NBR inflation report (2009a).

15.3.2 Budget deficit The budget deficit grew substantially from 2.5 per cent of GDP in 2007, to 5.4 per cent in 2008. In 2008, the deficit was two times higher than the initiative target. The larger deficit was mainly due to higher-than-expected expenses with respect to public wages, social policies and pensions. 767 In addition, tax revenues were lower than expected and most notably dropped in the last quarter of 2008, because of economic decline. The fact that 2008 was an election year only played a minor role. According to a monetary policy expert, the high deficit was a mistake of the previous government, because the economy grew by 7.2 per cent. For 2009, the budget deficit is projected at 5.1 per cent and the government has taken several measures in order to limit the deficit. 768 These are: • Measures to cut public expenses: o stop the recruitment of new staff in the public sector, o reduce bonuses in several sectors of the public sector, o cut expenses with respect to goods, services and subsidies, 765

Ecofin official website (2009a), p. 98. NBR official website (2009a), p. 3. 767 Ecofin official website (2009a), p. 99 and interview B20. 768 Ecofin official website (2009a), p. 99 and interview B02. 766

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o adjustment of pensions for inflation only, o 3.3 per cent rise of contribution for pensions, o the increase of excise duties earlier than planned. • Measures to increase revenues: o eliminate several tax deduction possibilities, o eliminate allowances on company cars, o eliminate depreciation of revalued assets. In the context of these measures, the Romanian government plans a substantial increase of public investment in 2009 in comparison with 2008 in order to stimulate the economy. For 2010, the budget deficit is expected to increase to 5.5 per cent of GDP. The financial authorities, however, still aim at a budget deficit below 3 per cent in 2011. 769 Reducing the budget deficit is the key to restoring confidence in the economy. During the last years the government was spending too much which caused a large deficit in spite of high economic growth figures. With respect to the budget deficit criteria, the government therefore needs to moderate expenses, implement fiscal reforms and create a more sustainable budget in the future. 770 At the moment, the budget deficit is excessive and Romania does not meet this criterion.

15.3.3 Public debt Starting from 2001, public debt as percentage of GDP declined in Romania (see figure 6.1). This was due to accelerating economic growth during the period 2000-2008, as well as a sharp deceleration in the creation of new debt. It was not a question of a reduction of the actual amount of debt. For 2008, public debt, however, is expected to increase for the first time since 2000 from 13.6 per cent of GDP in 2008 to 18.2 per cent in 2009. The increase is the result of currently high primary deficits and the increase of interest payments over the government debt. For 2010, public debt is expected to increase further to 22.7 per cent of GDP. 771 In spite of the increasing public debt, Romania still performs well by European standards and is able to meet the requirement of a public debt lower than 60 per cent of GDP.

15.3.4 Exchange rate On 1 July 2005, the NBR corrected the exchange rate of the legal currency of Romania, previously coded as ROL. Henceforward ROL 10,000 could be exchanged for 1 Leu (RON), i.e. 4 zero’s were scratched. Likewise the exchange rate of the Leu vis-à-vis the Euro was corrected. 772 The exchange rate of RON is very volatile and sensitive for international investment sentiment and starting from the fourth quarter of 2008, the exchange rate witnessed a sharp depreciation. The exchange rate fell from a stable annual rate of 3.68 RON in 2008 to 4.19 RON in April 2009. (see figure 15.4) The depreciation partly reflected a natural correction, because RON was overvalued. 773 In addition, the depreciation of the exchange rate was a sign of the declining interest in the Leu on the foreign exchange market, because of the lack of investor risk appetite. 774 During the last half of the first quarter of 2009, depreciation pressures, however, already started to weaken because of improved investor sentiment, which was mainly owed to the conclusion of the IMF loan. 775 The depreciation of RON has a positive side, because it makes export cheaper and hence improves Romania’s international competition position. This gives the

769

Ecofin official website (2009a), p. 99. IMF official website (2009a). 771 Ecofin official website (2009a), p. 99 and NBR official website (2009a), p. 3. 772 NBR official website (2009e). 773 Ecofin official website (2009b), p. 4. 774 NBR official website (2009c). 775 NBR official website (2009d). 770

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Romanian economy room for recovery. 776 With respect to the criteria of the EU, the exchange rate of Romania has proved to be very volatile and not stable yet. The plan to join ERM II in 2012 is ambitious. Month Apr. 2009 Mar. 2009 Feb. 2009 Jan. 2009 Dec. 2008 Nov. 2008 Oct. 2008 Sep. 2008 Aug. 2008 Jul. 2008 Jun. 2008 May. 2008

EUR - avg. 4.1954 4.2821 4.2839 4.2327 3.9153 3.7753 3.7454 3.6254 3.5268 3.5792 3.6557 3.6594

Year 2008 2007 2006 2005

EUR - avg. 3.6827 3.3373 3.5245 3.6234

0.4Figure 15.4 Exchange rate RON Source: NBR official website.

15.3.5 Interest rate On 5 February 2009 the NBR decreased the monetary policy rate with 0.25 per cent points to 10.0 per cent. (see figure 15.5) This move was driven by decreasing inflationary pressures in the last quarter of 2008, as well as the impact of the financial crisis on the Romanian economy in terms of limited access to credit. The NBR was still cautious, because overall inflation remained high and because of expected inflationary pressures as a result of RON depreciation in the beginning of 2009. On a meeting on 31 March 2009 the NBR decided to continue to be cautious and to maintain the monetary policy rate at 10.0 per cent, because of uncertainties related to the magnitude and duration of the financial crisis. 777 On 7 May 2009, the NBR decided to lower the monetary policy rate with 0.50 per cent points to 9.5 per cent. This decision was taken in the context of the need to revive the lending process in Romania in a sustainable way and to ensure medium-term inflation targets. 778 In spite of these recent reductions, the monetary policy rate still considerably exceeds the threshold of 6.2 per cent. 26 Mar. 2008 9.50 4Valid Feb. 2008 Policy rate since 9.00 8 7 Jan. May.2008 2009 8.00 9.50 1 Nov. 2007 7.50 5 Feb. 2009 10.00 1 Aug. 2007 7.00 1 Aug. 2008 10.25 27 Jun. 2008 7 May. 2008

10.00 9.75

776

Ecofin official website (2009a), p. 98 and Interview B28. NBR official website (2009a), pp. 1-3. 778 NBR official website (2009d). 777

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0.5Figure 15.5 Interest Rate of NBR Source: NBR official website.

15.4 Romanian view of the Euro There is a clear difference between how Romanian businessmen, the Romanian population and the NBR think of early adoption of the Euro. Businessmen are in favour of a quick adoption of the euro, because they often have large foreign debts and would like to have the Euro in order to avoid the exchange rate risk. The population of Romania, in general, is also in favour of adoption of the Euro, although they are not really aware of what they are talking about. On the one hand, they associate the Euro with more safety. But on the other hand, they fear that prices will increase with the Euro. The NBR is against a quick adoption of the Euro since this would result in NBR giving up its monetary policy. Without enough convergence of the Romanian economy (inflation and CA deficit) that would be very difficult for Romania to handle. Romania could experience high volatility in GDP and inflation, without having any instrument to address it. With the financial crisis it is better to still have those instruments. First and foremost, Romania needs to focus on convergence with the EU while maintaining macro-economic stability in order to not endanger the adoption of the Euro as soon as possible. 779

779

Interview B20.

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16. Fiscal policy 16.1 Analysis of tax revenues and tax rates 1990-2006 During the period 1990-2006 the degree of taxation 780 in Romania decreased from 35.5 per cent to 27.3 per cent. (see figure 16.1) The decreasing degree of taxation during the 1990s was a result of the contraction of the Romanian economy, which meant that there was less money to be taxed. In addition, the degree of taxation was influenced by a lack of compliance, the weak collection of taxes and the collapse of several big-paying firms. By the end of the 1990s, the government experienced difficulty in funding social security provisions, health care and education, and the budget deficit ran as high as 7 per cent in 2000. Therefore, the Romanian government introduced tax reforms in the beginning of the 2000s in an attempt to attract new tax payers (from the informal economy) and increase government revenues. 781 On 1 January 2000, the profit-tax rate was reduced from 38 per cent to 25 per cent and the standard VAT rate was reduced from 29 per cent to 22 per cent. Simultaneously, the tax base of these taxes was broadened. Social security contributions decreased from 55 per cent in 2001 to 46.25 per cent in 2006. Starting from 2000, the Romanian economy also recovered and recorded high economic growth rates. Nevertheless, the tax ‘relaxation’ policy in the beginning of the 2000s and economic growth did not lead to an increase in the degree of taxation. Total revenues decreased further during the 2000s as a percentage of GDP, probably because of the persistence of problems like non-compliance and the weak collection of taxes. 782

0.1Figure 16.1 Evolution of tax revenues as percentage of GDP Source: Toader (2007). With the introduction of the flat-tax rate of 16 per cent on profit and personal income in 2005, the relative rating of taxation (the sum of the main duties and taxes) decreased with 33 per cent, thus providing for a serious ‘relaxation’ of taxation. 783 (see figure 16.2) In doing so, the Romanian government attempted to at least reduce the evasion of taxes and hoped to bring a part of the 780

Total tax revenues as percentage of GDP. Encyclopedia of Nations (2008). 782 Toader (2007), pp. 2-3. 783 Toader (2007), pp. 3- 5. 781

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informal economy into the open and tax it. In addition, the government also hoped to reduce poverty. The new flat tax system would be easier to administer and should increase incentives for the unemployed to find work and encourage the working labour force to even work harder in order to increase their income. More importantly, the reform also was supposed to increase the revenues of the state. 784 The degree of taxation did indeed increase from 27.9 per cent in 2005 to 28.6 per cent in 2006. 785 Whether the government succeeded in its objective to tax more incomes from the informal sector is questionable. Nobody can confirm this, since informal employment not only depends on taxes but also on labour laws. It seems that the lower tax rate fuelled consumption, which can therefore be seen as the main cause of the increased degree of taxation in 2006, next to high economic growth rates. 786

0.2Figure 16.2 Relative rate of taxation: 2004-2006 Source: Toader (2007). With a degree of taxation of 28.6 per cent in 2006, Romania is still the country with the lowest degree of taxation in the EU. Romania’s degree of taxation is more than 10 per cent lower than the EU27 average degree of 39.9 per cent. Romania’s degree of taxation is comparable to countries as Slovakia (29.3 per cent) and the Baltic states (± 30 per cent). Other Central and Eastern European countries have far higher degrees of taxation, for example Slovenia (39.1 per cent), Hungary (37.2 per cent) and the Czech Republic (36.2 per cent). 787 This is not different from the EU15 which also have diverging degrees of taxation, e.g. Ireland 30 per cent and Sweden 50 per cent. 788

16.2 Overview of main taxes This section gives an overview of the most important taxes that the state levies in Romania.

16.2.1 Personal income tax As mentioned before, on 1 January 2005 a flat-rate tax of 16 per cent for personal and corporate income was introduced in Romania. With respect to personal income this flat-tax replaced a progressive tax system, which consisted of 5 rates ranging from 18 to 40 per cent. Romania followed Estonia which began the trend in 1994. Romania now ranks third within the EU with respect to the flat-tax, behind the Czech Republic and Bulgaria who have a flat-tax rate of

784

Paraipan (2005). Eurostat official website (2008a), p. 4 . 786 Interview B19. 787 Eurostat official website (2008a), p. 4. 788 European Commission official website (2006c), p. 85. 785

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respectively 15 per cent and 10 per cent. 789 An interesting aspect is that taxpayers can give up to 2 per cent of the annual income tax to charitable purposes in Romania. 790 The income tax is levied on income derived from independent working activities and agricultural activities, royalties, investments, gambling and income from the rental of movable and immovable property. As regards pensions, a 16 per cent tax over the amount exceeding the threshold of 1000 RON is levied. 791 There are also some exceptions. Payments in kind and meal vouchers, for example, are exempted from income tax. Additionally, income earned by employees whose main working activity is the development of software is also exempted from income tax. Allowances for maternity leave (maximum two years) and incentives granted to families for child care leave are also exempted from income tax. 792 793 From 2009, the Romanian government has introduced changes in the fiscal code, in order to counterbalance the downgrading of the Romanian economy as a result of the financial crisis. 794 Interest revenues earned by individuals from deposits in Romanian banks or other saving instruments are exempted from tax starting from 1 January 2009. In addition, capital gains from the trading of listed shares on the Romanian Stock Exchange are also exempted from taxation in 2009. 795 These kinds of ‘cheap, populist’ measures were taken in the context of a pre-election period, but do not pose a threat to the state budget. The Bucharest Stock Exchange was literally destroyed by the financial crisis since it lost approximately 95 per cent of its value. Therefore, the government did not expect to receive a lot of taxes from those transactions in 2009 and exempted the transactions of taxes. 796

16.2.2 Health and social security contributions Both employees and employers need to pay social security contributions in order to contribute to the state’s social, health and employment security system. 797 Services which are paid from the revenues of social security contributions are pensions, child benefits, illness (insurance), minimal unemployment benefits and grants which are aimed at creating employment. Contributions of employees 2009: • Social security contribution 9.5 per cent • National unemployment funds 0.5 per cent • Health fund 5.5 per cent Contributions of employers 2009: • Social security fund 18.5, 23.5, 28.5 (depending on working conditions) • Health fund 5.2 per cent • National unemployment funds 0.5 per cent • Labour Office Commission 0.25 – 0.75 per cent • Work accidents insurance 0.15 – 0.85 per cent (percentage depends on risk category) • Medical leave contribution 0.85 per cent • Guarantee Fund for payment of salary debts 0.25 per cent Total social security contributions can therefore vary from 41.2 per cent to 51.2 per cent of gross salary. The contributions of the employers can run from 25.7 to 36.9 per cent of gross payroll 789

Badarau (2008). PriceWaterhouseCoopers (2009a), p. 11. 791 PriceWaterhouseCoopers (2009a), p. 7. 792 PriceWaterhouseCoopers (2009a), pp.10-11 and Eurostat official website (2008b), p. 194. 793 There are more exceptions and exemptions, but these are the most remarkable. 794 Ionescu and Barbu (2009). 795 PriceWaterhouseCoopers (2009a), p. 9. 796 Interview B19. 797 All social contributions are deductable for income tax purposes and percentages are based on the gross salary. 790

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costs. During 2008, the Romanian government decreased social security contributions, but for 2009 an increase of social security contributions with 3.3 per cent can be expected, based on the 2009 budged law of the government. 798 Social security contributions in Romania are one of the highest in the EU as percentage of gross salary and represent a heavy burden for employers. 799

16.2.3 Corporate income tax The 16 per cent flat-tax rate on corporate income introduced in 2005 replaced the former rate of 25 per cent which was introduced in 2000. This in turn replaced a profit tax of 38 per cent. Corporate taxes are levied on multiple levels. Corporate profits are first taxed at the company level and after distribution taxed again at the corporate or individual shareholder level. 800 In compliance with the Merger Directive of the EU, cross-border mergers, acquisitions and divisions of companies and the exchange of assets and shares are exempted from taxation. 801 The ParentSubsidiary Directive, which concerns the payment of dividends between member state entities, also became effective as of accession to the EU. Foreign dividends received by Romanians are therefore exempted from taxation, as well as dividends paid to an EU parent company. 802 Romania has been granted a transitional period of 4 years (until January 2011) for the implementation of the Interest and Royalties Directive. During this period, the tax withheld on interests and royalties paid to companies or ‘permanent establishments’ situated in a member state of the EU cannot exceed 10 per cent (after 2011 taxes are abolished). In all other cases the 16 per cent rate is applicable. 803 With respect to companies the Fiscal Code of Romania provides certain investment incentives, i.e. tax incentives for enterprises, employment incentives for specific categories of employees, state aid and EU funds.

16.2.4 Tax incentives for enterprises •

• •

•

798

The government recognises the importance of research and development activities as a key instrument for the competitiveness of the Romanian economy with respect to the long-term development of the economy. Therefore, companies can deduct an additional 20 per cent from their expenses from research and development activities as from 1 January 2009. 804 Dividends reinvested in corporations in order to maintain or increase the employment level are exempted from taxation starting from 1 January 2009. 805 A reduced VAT rate of 5 per cent applies to the sale of buildings if those buildings are part of social policy. This concerns buildings like retirement homes, old people’s homes, orphanages and rehabilitation centres for children with disabilities. In addition, individuals and families also profit from the reduced VAT rate of 5 per cent on buildings, if the surface of the building is not larger than 120 square meters and the value of the building is not exceeding 380,000 RON. 806 Businesses located in industrial parks, as well as science and technology parks are exempted from local taxes. 807 These local taxes are property tax and land tax of which property tax is the most important one, since this tax is a percentage of the value of the

PriceWaterhouseCoopers (2009a), p. 4 and PriceWaterhouseCoopers (2009a), p.12. Interview B19. 800 Eurostat official website (2008b), p. 194. 801 PriceWaterhouseCoopers (2009a), p. 21. 802 Tic-Chiliment (2007), p. 5. 803 Tic-Chiliment (2007), p. 7. 804 PriceWaterhouseCoopers (2009a), p. 26. 805 PriceWaterhouseCoopers (2009a), p. 21 and PriceWaterhouseCoopers (2009a), p. 26. 806 PriceWaterhouseCoopers (2009a), p. 26. 807 PriceWaterhouseCoopers (2009a), p. 26. 799

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•

building and can be quite expensive. 808 There are also additional incentives for the development of industrial parks, like deferred payment of VAT during the investment period, the development of infrastructure and grants from structural funds. When companies are established in an industrial park they can hence benefit from special services offered by the park for which they do not have to pay or pay reduced fees. 809 An example of such a park is Tetarom Industrial Park which is located in Cluj County, in the North-West of Romania. In the year 2000, the Cluj County Council declared its intention to create a High-Technology industrial park. By now, Tetarom I, Tetarom II and Tetarom III have been established. Businesses that are located in one of these parks can, amongst others, benefit from infrastructure services (water-sewerage, electricity, gas, telecommunications), cleaning and security services, banking services, conference rooms and hotel services, leisure spaces etc. 810 From a fiscal point of view micro enterprises are treated in a special way. Micro enterprises are enterprises with an annual turnover up to 100,000 Euro, that consist of one to nine employees and that derive more than half of their income from non-consultancy or/and management activities. When enterprises meet these three conditions, they qualify for the micro enterprise regime. In this case enterprises pay a profit tax of 3 per cent over the monthly turnover of the enterprise, instead of the monthly profit. 811 Enterprises can also choose to pay the regular profit tax of 16 per cent, when they have a low profitability for example. 812 This regime is being phased out at the moment and will no longer be available as from 1 January 2010. 813

16.2.5 Employment incentives for specific categories of employees Employers can receive a monthly grant of 1-1.5 times 500 RON for a period of twelve months, when they hire a new graduate. The employer is obligated to hire the employee for at least three years. Hence, employers are also exempted from paying unemployment contributions for these employees for 12 months. The same incentives apply to recent graduates with disabilities. In this case, the period for which employers receive a grant and are exempted from unemployment contributions is 18 months. For each unemployed person exceeding the age of 45, employers also receive a grant and are exempted from unemployment contributions for 12 months if they hire the employee for at least two years. This also applies to employees who exceed the age of 45 and are the sole family supporter. In addition, employers can apply for a refund of 50 per cent of expenses related to professional training programs for a maximum of 20 per cent of their employees. 814

16.2.6 State aid State aid regulation in Romania has been in place since 1999, but its implementation was not effective for a long time. The accession to the EU, however, necessitated the alignment of national laws with the acquis in the field of state aid. There are, nonetheless, still some efforts that need to be made in the field of the implementation of state aid rules and compliance with procedures of the EU. For the period 2006-2013 the government has approved a National State

808

Interview B19. PriceWaterhouseCoopers (2009a), p. 27. 810 Interview C15. 811 PriceWaterhouseCoopers (2009a), p. 27. 812 Interview B37. 813 Tic-Chiliment (2007), p. 7. 814 PriceWaterhouseCoopers (2009a), pp. 27-28. 809

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Aid Policy, which focuses on the promotion of state aid schemes. In January 2007, the European Commission approved the regional aid map for the period 2007-2013. 815 The Law on Investment Stimulation provides the framework for state aid and focuses on encouraging certain types of investments. These types of investments are ‘large’ investments, e.g. investments over 50 million Euro creating more than 300 new jobs and investments over 100 million Euro creating more than 500 new jobs. Investments outside the region of Bucharest can count on higher levels of state aid than within the Bucharest region. 816 In order to benefit from state aid, investments must contribute to at least one of the following objectives: • development and regional cohesion; thus be localised in economically underdeveloped areas or areas with high unemployment rates or contribute to development of infrastructure or modernise existing infrastructure, • environment protection and rehabilitation; thus have a positive impact on the environment, • increasing energy efficiency, production and use of energy from renewable resources, • encouragement of research and development and innovation processes; thus involve R & D activities or high use of technology, • employment creation and workforce training; thus provide for the development of HR, involving training programs. 817 State aid and in particular problems with respect to state aid regulation and competition policy will be discussed more extensive in chapter 22.1.

16.2.7 EU funds Because of the Romanian accession to the EU, companies can seek financial support through the funds of the EU, i.e. the Structural and Cohesion Funds. For SMEs, in particular, a wide range of investment incentives are available. About 27.9 billion Euro is available for the period 2007-2013 for Romania under the European Agricultural Funds for Rural development, European Social Fund and European Regional Development Fund. SME’s, however, experience great problems when they try to obtain these funds. These problems will be discussed in more detail in chapter 22.3. 818

16.2.8 Indirect taxes 16.2.8.1 VAT The standard VAT rate is 19 per cent and also applies to imported goods and services. 819 The reduced VAT rate is 9 per cent and applies to pharmaceutical products, medical equipment for disabled persons, books, papers, magazines, the supply of school manuals, hotel services and cultural services like tickets for cinemas, museums and expositions. Activities that are exempted from VAT are healthcare services, educational, welfare and cultural services, insurance and reinsurance operations, radio and television stations, certain financial and banking services, immovable property (buildings and land) and public postal services. Other goods that are exempted from VAT are export products, intra-community supply of goods, import products from outside the EU, international transport of passengers and the supply of goods and services to diplomatic missions, IOs and forces of NATO. For certain goods there also are special VAT 815

PriceWaterhouseCoopers (2009a), p. 28. PriceWaterhouseCoopers (2009a), pp. 28-29. 817 PriceWaterhouseCoopers (2009a), pp. 29-30. 818 PriceWaterhouseCoopers (2009a), p. 30. 819 The minimum VAT-rate in the EU is 15 per cent and the maximum VAT-rate is 25 per cent, according to the Sixth Directive EU. 816

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schemes. A simplified VAT scheme is for example applicable to waste materials, wood, second hand materials and bankrupt entities. 820 In Romania, each enterprise/person with an annual turnover of more than 35,000 Euro is obligated to register for VAT purposes. Enterprises/persons that have an annual turnover of less than 35,000 Euro can choose whether they register themselves or not. 821 The Romanian government has probably set this threshold at 35,000 Euro, because compliance for companies with a turnover of less than 35,000 Euro was perceived to be too painful for those companies. Compliance with VAT law costs too much effort and money, since companies need to register themselves and need to comply with all the rules. 822

16.2.8.2 Excise duties Harmonised excise duties are levied on alcoholic beverages, tobacco products, electricity and mineral oils. Other non-harmonised excisable products are coffee, cars, perfumery, jewellery, natural fur products, crystal ware, hunting rifles, yachts and leisure motor boats. The excise duty on coffee will gradually evolve to zero by 2011. Both goods produced in Romania and imported goods are subject to excise duties. 823 Romania has been granted several derogations by the EU with respect to excise duties. For products like cigarettes and diesel, for example, Romania can gradually increase the level of excise duties to the minimum level set by the EU. 824 Romania has, in addition, been offered derogation with respect to a special excise duty scheme for alcoholic beverages distilled by farmers of self-produced fruit and solely intended for personal consumption. For such alcoholic beverages individuals need to pay 50 per cent of the standard excise duty for alcoholic beverages, up to a maximum of 50 litres per household a year with a maximum concentration of 40 per cent of alcohol. 825 Figure 16.3 gives an overview of the most important excise duties in Romania.

0.3Figure 16.3 Excise duty rates Source: Ernst and Young (2008).

16.2.9 Other taxes

820

Eurostat official website (2008b), p. 195 and PriceWaterhouseCoopers (2009c), pp. 36 -38. PriceWaterhouseCoopers (2009a), p. 37. 822 Interview B19. 823 Ernst and Young (2008). 824 PriceWaterhouseCoopers (2009a), p. 43. 825 Tic-Chiliment (2007), p. 3. 821

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16.2.9.1 Car registration tax In December 2008, the Romanian government decided to triple the tax on second-hand cars and to exempt new cars with a EURO 4 engine of up to 2000 cm2 from the tax. 826 This was a change of the environmental tax that was introduced in July 2008 and which calculated the height of the tax based on the age of the car. The older the car, the less tax one needed to pay. This boosted the import of second-hand cars and lead to a drop in the sale of new cars. The government, therefore, tried to increase the sale of new cars and to slow down the import of second-hand cars, by tripling the tax for second-hand cars. The current tax is not in compliance with EU-law and the government will adapt the law any time soon.

16.2.9.2 Environmental fund contribution For certain materials and activities companies need to pay a contribution to the Environmental Fund. These are amongst others for packaging waste, air-pollutant emissions from fixed sources and the sale of ferrous and non-ferrous waste, wood (products) and hazardous substances. In addition, companies that store recoverable waste on new land need to pay a contribution. For the sale of certain products, producers, importers and exporters also need to register with the National Agency for Environmental Protection. Those products are electrical and electronic equipment, batteries and carrier bags which are not made of biodegradable materials. 827

16.2.9.3 Local taxes Immobile property is subjected to a local tax. For individuals the tax rate is 0.1 per cent of the taxable value of the building. For buildings owned by enterprises the tax rate ranges from 0.251.5 per cent of the entry value of the building. If a building has not been revalued for three years, the rates are higher and range from 5 to 10 per cent. Land is also subjected to a local tax. The tax rate depends on the area where the land is located and of the category of land use. 828

16.2.9.4 Other taxes Enterprises that provide advertisement services for tobacco products and alcoholic beverages need to pay a 12 per cent health tax over the revenues of the advertising activities. Producers and importers of tobacco products also need to pay a health tax, i.e. 13 Euro per kg of tobacco products, 0.01 Euro per cigarette/cigar. Producers and importers of alcoholic beverages, with the exception of beer, wine, fermented drinks and intermediate products, also need to pay a health tax of 200 Euro per hectolitre of alcohol and 2 Euro per litre of pure alcohol. 829

16.3 Challenges with respect to taxation in Romania 16.3.1 Complexity of tax system Each year, PricewaterhouseCoopers (PwC) publishes a report called Paying Taxes, the global picture, which “investigates and compares tax regimes in economies worldwide and ranks them according to the relative ease of paying taxes” in particular for SMEs. Economies that rank high tend to have lower and less complex taxes and simple administrative procedures for paying taxes and tax returns. PwC published its first report in 2007, second in 2008 and third in 2009. In 2008 and 2009 PwC used rankings in order to indicate the ease of paying taxes in different countries 826

PriceWaterhouseCoopers (2009a), p. 44. PriceWaterhouseCoopers (2009a), pp. 44-45. 828 PriceWaterhouseCoopers (2009a), p. 33. 829 PriceWaterhouseCoopers (2009a), p. 33. 827

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around the world. In 2008 Romania ranked 134th out of the 178 tax regimes that were investigated. In 2009 Romania ranked 146th out of 181 tax regimes. In comparison with 2008, Romania’s tax regime even became ‘less easy’ in the year 2009. Within the EU, Romania has the least easy tax regime, followed by countries like Italy, Poland and Slovakia. 830 Local research confirms that Romania has got the most complex tax system of the EU; the most fragmented and down to the smallest details. 831 In order to determine the ease of paying taxes, PwC looks at three parameters, i.e. the number of payments, the time to comply and the Total Tax Rate (TTR; the costs of all taxes borne by the enterprise). 832 Figure 16.4 shows the rankings of Romania for these three parameters. As regards the number of payments, in particular, Romania performs very badly. In 2009, Romania even was the country with the highest number of payments, i.e. 113 payments and therefore ranked 181st of the 181 countries. Out of these 113 payments, most payments (84) were related to the payment of labour taxes. In comparison with 2008, the number of tax payments related to labour taxes even increased with 24 payments. 833 2008 (178 countries) 2009 (181 countries) +/Number of tax payments 175 181 Time to comply 70 74 Total tax rate (TTR) 107 119 0.4 Figure 16.4 Rank Romania as regards the ease of paying taxes Source: PriceWaterhouseCoopers (2008) and PriceWaterhouseCoopers (2009b). Local research confirms that the main problem with respect to taxation in Romania is not the tax level, but the amount of taxes that SMEs need to pay. Next to major taxes such as profit tax and VAT, there are a large number of small taxes and fees. 834 The burden of taxation is therefore not one in terms of cash-flow, but in terms of administering. 835 According to the report of PwC one enterprise needs to pay 17 taxes in 2009, i.e. 7 labour taxes 836 , 1 corporate income tax, 1 capital gains tax, 2 property taxes and 6 other taxes ranging from environmental tax to car registration tax. Romania is, therefore, by far the country in the EU with the most tax payments. 837 838 Some SMEs in Romania sometimes feel like they are being sabotaged and they are being strangled by the amount of taxes they have to pay. In addition, SMEs sometimes also feel like they are not able to fully comply with the regulation and pay all taxes, since they may not know about a small tax or fee they have to pay. 839 The government recognises the problem, because it discovered that some taxes cost more to administer than is received out of them. It is therefore likely that the number of taxes will be reduced in the future. 840 With respect to the time to comply and the TTR for SMEs, Romania performs less bad and finds itself in the mid-tier. 841 The TTR increased from 46.9 per cent in 2008 to 48.0 per cent in 2009. The TTR is composed of 10.4 per cent corporate income tax, 35.5 per cent of labour tax 830

PriceWaterhouseCoopers (2009b), pp. 73-75 and PriceWaterhouseCoopers (2008), pp. 47-49. Interview B30. 832 PriceWaterhouseCoopers (2009b), p. 3. 833 PriceWaterhouseCoopers (2009b), p.78. 834 These fees were developed in the period after the transition when the government could not close the budget and therefore introduced these fees, to compensate for the budget, Interview B28. 835 Interview B37. 836 Social security contributions, health insurance contributions, unemployment contributions, accident risk fund, labour inspectorate commission, guarantee fund and medical leave. 837 Poland is the runner up with 41 payments. 838 PriceWaterhouseCoopers (2009b), p. 30. 839 Interview B30. 840 Interview B37. 841 PriceWaterhouseCoopers (2008), p. 40. 831

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and 2.1 of other taxes in 2009. The increase of the TTR in 2009 was caused by the increase of labour taxes. The TTR shows that the corporate income tax is only one of the many taxes that companies have to bear and not the most burdensome tax either. 842 (see figure 16.5) Furthermore, the complexity of the tax system can invoke other problems related to taxes as well, like the problem of non-compliance and difficulties with the collection of taxes. These problems will now be assessed.

0.5 Figure 16.5 EU comparison of total tax rates Source: PriceWaterhouseCoopers (2009b).

16.3.2 Collection of taxes The efficiency of the collection of taxes is a problem in Romania, since the state lacks the capacity to collect taxes. 843 In 2002, the Romanian government launched a strategy in order to improve the administrative capacity as regards the collection of taxes. In February 2003, the Ministry of Public Finance unified the three existing fiscal administrations for the collection, auditing and enforcement of social security contributions under the Tax Administration Department (TAD). Furthermore, the Office for Large Taxpayers was introduced in January 2003. In order to modernise the tax administration and improve the tax collection system, the staff number of the Ministry of Finance was also increased. In august 2003, the National Agency for Fiscal Administration (NAFA) was established. The responsibilities of NAFA were the collection of taxes, fiscal control and maintaining taxpayer’s records. 844 In spite of these improvements, the European Commission reported in her Monitoring Report of 2005 that the capacity of the state to collect and control tax payments was still too weak. 845 According to recent estimations, the level of collection of taxes in Romania is around the 70-75 per cent today. The other 25-30 per cent is simply not collected, because the government has neither the workforce nor the desire to collect them. 846 .842 PriceWaterhouseCoopers (2009b), p. 84 and PriceWaterhouseCoopers (2008), p. 58. 843 Interviews B19 and B37. 844 European Commission official website (2002), pp. 72-73. 845 European Commission official website (2005b), p. 50. 846 Interview B19.

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16.3.3 Problem of non-compliance Romania is coping with a problem of non-compliance with respect to the payment of taxes. There are different factors that can be identified as the cause for this problem. First of all, the overcomplicated tax system of Romania. As mentioned before, the number of taxes SMEs need to pay, for example, is very high (17 taxes). It is therefore difficult for SMEs in particular to fully comply with all the rules and legislation and pay all these taxes, since they might easily end up not knowing about a small tax. Another reason why the risk of non-compliance is high in Romania is the fact that SMEs need to pay different taxes to different tax authorities, e.g. the unemployment contribution to the Unemployment Fund and the health contribution to the Health Fund. This shows that non-compliance can therefore also be non-voluntarily and can occur even when SMEs try to comply and pay all taxes. 847 Another explanation for the lack of compliance in Romania with respect to the payment of taxes is related to mentality. A story of a tax expert illustrates this point. The tax expert told a story of a client that asked him where Romanians are situated with respect to the seriousness with which they take the payment of taxes and he could choose between the Germans and the Italians. He responded: “Well, Italians of course”. Romanians therefore have, like Italians, less a culture of compliance in comparison than Scandinavian countries, for example. Historic experience is also an important factor which can explain the mentality or culture of non-compliance in Romania. Under the communist rule, everything belonged to everyone and that meant that nobody felt responsible anymore. That lack of responsibility may still be present in some cases and can result in a lack of responsibility to pay taxes nowadays. 848 In addition, the severe transition recession in the 1990s often drove people in the informal economy, since it was very hard to survive, even without paying taxes. Those people might also have gotten used to not paying taxes and see taxes as an obstacle for running their business. 849

16.3.4 Stability of tax environment The stability of the tax environment seems to have improved in comparison with approximately five years ago. Five years ago, people complained that changes with respect to taxes could not be predicted. But that seems to have changed. In the last couple of years, changes in the fiscal code were announced and businesses were able to prepare themselves to implement the changes. Moreover, there were no major changes. Most changes were of a technical nature and were not changes that had severe consequences for businesses. In spite of the fact that the fiscal code still changes annually, these are rather minor changes. The stability of the tax environment has also been fostered by the accession to the EU, since Romania’s fiscal code now needs to be in compliance with EC law and the EU controls Romania’s fiscal code. The fiscal code of Romania therefore has become more consolidated and stable. 850

16.3.5 Low corporate tax rates vs. high social security contributions In Romania there is a huge discrepancy between the low corporate tax rate of 16 per cent, which is perceived as normal, but is actually exceptional, and the high social security contributions that employers and employees need to pay. 851 On the one hand, the low corporate tax rate creates strong incentives to get involved in economic activity. On the other hand, high social security contributions negatively affect labour utilisation. 852 High social security contributions 847

PriceWaterhouseCoopers (2009c). Interview B19. 849 Interview B36. 850 Interview B19. 851 Interview B30. 852 European Commission official website (2006c), p. 85. 848

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significantly increase the cost and compliance burden of labour for employers. Labour taxes make up 74 per cent of the TTR for SMEs, 74 per cent of the tax payments SMEs need to make and 54 per cent of the hours to comply with taxes in Romania. 853 Employers therefore have more incentives to get involved in capital-intensive activities instead of labour-intensive activities. The government thus has to keep in mind that employees need to stay employable. 854

16.4 Romanian tax system in comparison with EU15 As stated before, Romania is the country with the lowest degree of taxation in the EU. Romania, in addition, tends to rely on indirect tax revenues. In 2006, indirect tax revenues accounted for 44.5 per cent of all tax revenues, in comparison to 38.9 per cent in the EU27. Social contributions accounted for 34.2 per cent and direct taxes for 21.4 per cent. Revenues from VAT accounted for 28.6 per cent of all collected taxes, in contrast with revenues from personal income tax, which accounted for a mere 2.8 per cent of all collected taxes. 855 In this respect, Romania’s tax system, like most tax systems of the ‘new’ members of the EU, differ from those of the EU15. In the EU15, the shares of direct and indirect taxes and social contributions in total tax revenues are roughly equal, e.g. 33 per cent. In Romania direct taxes account for a much lower share of total tax revenues, i.e. 20 per cent, while indirect taxes account for a higher share of total tax revenues, i.e. 44 per cent. In the EU15, direct taxes are used to redistribute income and increase equality, by means of progressive taxes on personal income. Indirect taxes are seen as too impractical for that purpose. In Romania this ‘idea’ has clearly not penetrated very far and this element of the welfare state still needs to be discovered. 856 An explanation for Romania’s reliance on indirect taxes may be that those are more difficult to evade and easier to control for tax authorities. 857

853

PriceWaterhouseCoopers (2009b), p. 30. Interview B 36. 855 Eurostat official website (2008b), p. 193. 856 Eurostat official website (2008a), p. 7 and European Commission official website (2006c), p. 85. 857 Interview B19. 854

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17. Social Policy 17.1 Social security system 17.1.1 EU legislation In order to broaden Community powers in the social domain, the social protocol was annexed to the Treaty of Maastricht in 1992. Only the United Kingdom is not a signatory of this protocol. The objectives of the social protocol are: • Promotion of employment; • Improvement of living and working conditions; • Adequate social protection; • Social dialogue; • The development of human resources to ensure a high and sustainable level of employment; • The integration of persons excluded from the labour market. 858

17.1.2 Romania’s social security system The Ministry of Labour, Social Solidarity and Family, a specialised body of the public central administration, ensures and coordinates the application of Government policies and strategies in the field of labour, social protection and solidarity. 859 When analysing the Romanian social security system, it can be concluded that Romania cannot be attributed to the Esping-Andersen’s typology of welfare regimes. Nevertheless, Romania shows some similarities within the Southern European welfare regime, for instance lower GDP expenditure on social protection, a high degree of familiarisation and segmented and often inefficient family policies. It has been stated that the term ‘welfare state’ is a paradox for most post-communistic countries, since the state provided a lot for its citizens during the communist regime. Solidarity is an important requirement for transformation towards a welfare state, and this is what is absent in Romania. The left wing of the parliament has no strong voice and therefore there is no significant support for a welfare state. 860 Figure 17.1 indicates that Romania is placed on a far distance from the EU25 regarding expenditures on social protection. It has been stated that “Even if facing a great increase in social allocations as an EU country, Romania still does not hold a sustainable social security system in European Union context”. 861 Kind of Welfare Scandinavian Continental Southern State (WS) WS– Denmark WS- Germany WS- Italy 29.5 29.8 25.6 Expenditure on social protection as % of GDP Expenditure per 121,8 110,0 100,7 capita PPS 0.1 Figure 17.1 Expenditure on Social Protection (2005) Source: Burlacu (2007), p. 309.

Liberal WS- UK 27.2

9.6

117,0

34,2 (USD)

Romania

858

European Union official website (2009c). Organisation of social protection Romania official website (2006). 860 Interview B23. 861 Burlacu (2007), p. 311. 859

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Moreover, data from Eurostat in figure 17.2 show the same picture for 2006. The total expenditure on social protection as a percentage of GDP in Romania is almost half compared to the average of the EU25. In addition, total expenditure on social protection per head of population (per capita) in Romania is almost five times lower than the average spending of the EU25. 2006 EU25 Total expenditure on social protection as % of GDP 27.0 Total expenditure on social protection per head of population PPS 6629,7 0.2 Figure 17.2 Expenditure on Social Protection (2006) Source: Eurostat official website (most recent figures available for 2006)

Romania 14.0 1277,0

The EU monitoring report of 2006 on Romania indicated that in the field of social inclusion a clear mechanism for coordination among relevant ministries and other stakeholders remains to be set up. Furthermore, analytical work and development of social statistics on poverty and social exclusion should be continued in line with the EU indicators on social inclusion. Romania should make efforts to continue to improve the situation of vulnerable groups, including the Roma, and to promote their full integration into society. In addition, access of disabled persons to public areas, buildings and transport, education and the labour market needs to improve. 862 In order to comply with the criteria of the EU, Romania set up a National Anti-Poverty and Promotion of Social Inclusion Plan for 2006-2008. Romania’s general strategic approach was to favour the active inclusion of vulnerable groups on the labour market. The government will, in order to ensure a steady economic climate by continuing economic growth efforts, aim at increasing investments in the economy and in the social sector, the promotion of social inclusion and the increase of the supply of better-paid jobs. Romania will pay special attention to avoid the creation of dependence on receiving social benefits and will encourage vulnerable people to find an active place for themselves in society. These measures - taken in 2006-2008 - will continue during 2008-2010. 863 Social inclusion has been and will continue to be on the Romanian government’s political agenda. In order to reach the objective of social inclusion, the government has set out the following main priorities: • The general growth of the population’s standard of living and the stimulation of revenues gained from work, based on facilitating employment; •

Enabling the access of citizens, especially of groups that are disadvantaged from resources, rights and services;

•

Improving the living conditions of Roma population.

17.2 Demographic situation Over the past decades, Romania has experienced significant alternations as regards its demographic composition. Starting in 1990, the total population has decreased each year with an average annual percentage of 0.2. The negative values of the natural increment together with those of the external migration caused the population to decrease during 2002 and 2007 by 268.000 people. The demographic evolutions between 1990 and 2007 show a decrease of the young population (age 0-14) of 8.3 per cent and an increase in the percentage of the elderly population (age 65 or older) of 4.6 per cent. Due to these demographic evolutions, the economic dependency ratio of inactive people (aged above 65) in every hundred active adults (aged between 20 and 59) is likely to increase dramatically over the following decades. 862 863

European Commission official website (2006d). Ministry of Labour, Family and Social Protection official website (2008).

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Taking into account the growth of mobility and the effects generated by external migration, it is forecasted that Romania’s population (now 21,5 million) will decrease towards 20,8 million inhabitants in 2013, 20 million in 2020 and 18,6 million in 2030. 864 Romania (together with Germany and Italy) is considered to be the most ageing society of Europe. 865

17.3 The labour market 17.3.1 The free movement of workers According to EU legislation, free movement of workers is a fundamental right in the member countries of the European Economic Area (EEA), which permits inhabitants of one EEA country to work in another EEA country under the same conditions as the member states’ own citizens. During the transitional period it is, up to seven years after the accession of the member states in 2004 en 2007 (including Romania), possible to apply certain conditions that restrict the free movement of workers from, to and between those member states. These restrictions only concern the freedom of movement for the purpose of taking up a job and they may differ from one member state to another. 866

17.3.2 Free movement of workers – Transitional arrangement Romania The way in which the free movement of workers would apply to the citizens of Romania was set out in the transitional arrangements of the Accession Treaty. For the first two years following the accession of Romania, access of Romanian workers to the labour markets of the EU25 member states will depend on the national law and policies of those states, as well as the bilateral agreements they may have with Romania. Some member states have fully opened their labour markets to Romanian workers. Other EU25 member states allow more restrictive access, which means in practical terms that a Romanian worker needs a work permit during the period the EU25 member states apply national measures. 867 Among the EU25, ten nations have already decided to open their labour market to workers from Romania. These ten nations include Finland and Sweden and the nations that joined the EU in 2004 (with the exception of Malta and Hungary). France has opened several branches of its labour market to workers from Romania, while Italy decided to restrict access only in specific sectors. The United Kingdom and Ireland have chosen to, for the time being, close their labour markets to Romanian workers. 868 At the end of the first two years following accession, the Commission will draft a report, on the basis of which the Council will review the functioning of the transitional arrangements. Furthermore, each of the EU25 member states will make a formal notification to the Commission whether they intend to continue with national law measures for a maximum of three more years or whether they will apply the Community law regime of full free movement of workers. In theory, the transitional arrangements should end five years after the countries’ accession into the EU. However, EU25 member states still have the possibility to ask the Commission for authorisation to proceed to apply national measures for another two years, but only if it experiences serious disturbances on its labour market. 869 Full freedom of movement for workers will be attained no later than January 2014. 870 Workers of one of the EU25 member states will not face automatic restrictions on the right to move to Romania to work. However, when a member state imposes restrictions on 864

Ministry of Labour, Family and Social Protection official website (2008). Interview B30. 866 European Commission official website (2009g). 867 European Commission official website (2007b). 868 Stockel (2007). 869 European Commission official website (2007b). 870 Stockel (2007). 865

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inhabitants of Romania, then Romania may impose equivalent restrictions on the workers from this member state. 871 It is estimated that around two million Romanian workers migrated towards other EU member states since Romania’s accession in 2007. Spain and Italy are considered to be the most preferred destinations, not only for their similarities in language and culture, but also for the field of work: construction. 872

17.3.3 The Romanian labour market The National Agency for Employment and the Ministry of Labour, Social Solidarity and Family manage the employment agencies, social dialogue and unemployment benefits. The unemployment benefits are paid from the Unemployment Budget managed by the National Agency for Employment. 873 Romania has to face many challenges concerning its labour market while integrating into the EU. The most important challenges include the rapid demographic ageing phenomenon, the workforce emigration from Romania towards the more developed countries of the EU and the technological ‘battle’ for competitiveness. 874 In the years of the economic transition, Romania experienced an almost continuous decrease of employment rate. In the period between 1977 and 2002 the employment rate in Romania decreased with 27.6 per cent. The distribution according to different sectors changed dramatically as well. Employment in certain occupational groups, such as technicians and skilled workers in agriculture, forestry and fishery, decreased. Occupational groups like legislators, specialists with intellectual occupations and operative workers in services and trade experienced an increase of employment. 875 Recent statistics show that at the start of 2009, 4.4 per cent of the population was unemployed. 876 According to the Romanian Minister of Labour, unemployment is expected to rise to 800,000 people (eight to nine per cent of the population) by the end of 2009. 877 At the moment Romania is experiencing a decrease of labour demand in the sectors of agriculture and industry, while labour demand in services and financial services has increased. There is a labour shortage in ICT, construction and textile industry. 878 At this moment, construction is facing a labour shortage between 100,000 and 300,000 employees. This could be explained by the large immigration flows of Romanian construction workers towards countries like Italy and Spain in the past few years. Romania is now attracting workers from China, Moldavia and the Ukraine in order to fill up this high demand in construction. 879 Fields of construction, real estate transactions, rental and services activities, health and social security, public administration and deference, commerce, hotels and restaurants and financial transactions are being considered as having potential in terms of employment over the next period. 880 There are significant regional differences regarding unemployment in Romania. Regions where state-owned companies have been restructured now contain a high number of unemployed people. However, at the Hungarian boarder the employment rate is increasing. In the 29 so-called ‘backward’ regions of Romania the unemployment rate is three times as high as the national average. 871

European Commission official website (2007b). Interview B30. 873 Organisation of social protection Romania official website (2006). 874 Abraham (2006), p. 2. 875 Abraham (2006), pp. 6-7. 876 Ministry of Labour, Family and Social protection official website (2009). 877 Interview B31. 878 Ministry of Labour, Family and Social Protection official website (2008). 879 Interview B30. 880 Ministry of Labour, Family and Social Protection official website (2008). 872

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17.3.4 Romanian labour market policies In order to improve the population’s standard of living and stimulate income gained from work, the Romanian government seeks to ensure employment and promote inclusive policies. In 2007, the national employment programme already had a considerable effect on the unemployment rate of Romania: 506,804 of all 1,083,491 registered unemployed persons were employed as a result of government measures. The Romanian government applied a Special Programme, which was enforced in 150 cities in disadvantaged areas or in cities with a high unemployment rate. Several of these measures have already been discussed in section 16.2. These measures enables employers to employ people by means of subsidisation above the age of 45 or those who are sole providers of single parent families. In order to promote employment of young people, the programme also involves the subsidisation of employers for the employment of (disabled) graduates of educational facilities. The Romanian government also provides professional information and counselling services to the unemployed. For example, the special ‘From school to professional life to career’ programme focuses on the improvement of employment opportunities by means of professional information and orientation activities for students in their final years of high school and future graduates. Finally, the National Programme for the employment of socially excluded people was drawn in order to minimise the social exclusion risk for some categories of people who have difficulty in becoming employed, for example youths coming from placement centres or child care facilities. In 2007, 2,212 solidarity agreements were concluded, guaranteeing a job for 2,212 socially excluded people. 881 Due to the international financial crises, Romania fears an increase of the unemployment rate. Many illegal labour migrants in countries like Italy and Spain are expected to return to Romania and to apply for unemployment benefits. Legal labour migrants, on the other hand, are expected to stay abroad since they are entitled to receive social benefits in their country of destination. 882 It has been stated that between 20,000 and 30,000 labour migrants are supposed to return to Romania. However, they will not all necessarily rely on support from the state, since they might have earned enough money to be able to start their own business in Romania. 883 As a result of large migrant flows towards other EU member states, Romania experiences the problem of brain drain. In order to stimulate Romanian labour migrants to return to the Romanian labour market, the Romanian government is organising job markets in Italy on a regular basis. 884 However, the main problem remains the difference in wages; the minimum wage in Romania is 150 Euro, while in countries like Italy and Spain this is around 1000 Euro. 885 Thus, there is no financial incentive to return to Romania. 886

17.4 Income differentiation 17.4.1 The Romanian situation According to the National Institute of Statistics (2007) 18.5 per cent of the Romanian population is poor. Concerning the residential environment, comparative analysis of 2006 show a greater occurrence of poverty and severe poverty in rural environment (29.6 per cent) compared to the urban environment (9.6 per cent). Furthermore, a regional discrepancy exists; the highest poverty rate in 2007 was in the North-East region (26.2 per cent) and the lowest in Bucharest-Ilfov (4.6 per cent). There is also a significantly high poverty rate in the South-East regions (24.2 per cent) 881

Ministry of Labour, Family and Social Protection official website (2008). Interview B30. 883 Interview B31. 884 Interview B30. 885 Interview B31. 886 Interview B30. 882

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and in the South-West regions (23 per cent). 887 See figure 17.3: the regional distribution of relative poverty in 2005. As regards income inequality, analyses show that in 2007 the total income received by 20 per cent of the population with the highest income was 5.1 times higher than the total income received by the 20 per cent of the population with the lowest income. Compared to 2006, income inequality decreased from 5.3 per cent to 5.1 per cent in 2007. This can be seen as the effect of the increase of GDP per inhabitant. 888

0.3 Figure 17.3 Regional distribution of the relative poverty, 2005 Source: Ministry of Labour, Family and Social Protection official website (2008). In Romania, income is relatively low compared to the EU27 average. The Romanian GDP per capita comes down to only 44.3 per cent of the EU27 average. 889 The average Romanian income is also low compared to other Eastern-European countries. It has been stated that the cause for this can be found in Romania’s past. Romania lost a lot of time erasing the ballast of its communist regime. Other Eastern-European countries, like the Czech Republic, were closer to countries like Germany and France, which has been an advantage. Romania was equal in chances, but not in position. 890

887

Ministry of Labour, Family and Social Protection official website (2008). Ministry of Labour, Family and Social Protection official website (2008). 889 Eurostat official website (2008c). 890 Interview B31. 888

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The average net monthly income is 365 Euro; the average gross monthly income is 495 Euro. The minimum income in Romania comes down to 150 Euro. Only in Bucharest, is the income far higher than the Romanian average. In the North-West average income is the lowest of the whole country; this is due to the high FDI’s. There are also significant differences in income between economical sectors (2008): • Metal industry 525 Euro monthly; • Teacher 270 Euro to 450 Euro monthly; 891 • Textile industry 325 Euro monthly; • Sales manager 2500 Euro monthly; • Representatives 500 Euro monthly; Since 2005, income has increased each year with more than ten per cent (in 2008 even 22 per cent). It will take years before the average Romanian income will be comparable to the ones of Western Europe. It is expected that in 2018 average income will rise above thousand Euro for the first time. 892

17.4.2 Romanian programme for the reduction of poverty According to the Romanian government, the reduction of poverty is a major objective, since several measures have been taken in order to prevent social exclusion. The most important programme released by the Romanian government for eliminating poverty is the guaranteed minimum income. In 2006-2007, the levels of the guaranteed minimum income were correlated to other types of income of the population (e.g. unemployment allowance). The initial amounts are now indexed annually according to the inflation rate. Figure 17.4 shows that the number of applications for social aid began to drop after 2004 and finally reached below the level of 2002 at the end of 2007, as a result of poverty reduction by the government. 2002 2003 2004 2005 2006 390,618 392,508 422,157 383,442 337,246 0.4 Figure 17.4 Number of social aid applications Source: Ministry of Labour, Family and Social Protection official website (2008).

2007 289,535

Trade unions in Romania convinced the Romanian government to implement a roadmap to improve the relation between minimum and average wages. At the moment, the average wage is 417 Euro and the minimum wage is 150 Euro, which means a difference of 130 per cent. In 2014, the difference between minimum and average wages should be fifty per cent; this is also required by EU directives. For 2009 it is agreed that the proportion should be 33 per cent, with which the Romanian Government already tries to meet with EU directives. However, the financial crisis has large implications for the Romanian economy, thus this target set by the Romanian government is expected to be impossible to achieve. 893 At the end of 2008, just before the elections, the Romanian government increased wages of teachers with fifty per cent by law. It has been stated that this will create problems for public financing due to the financial crisis. Moreover, other public servants now also demand an increase of their salary, since it is forbidden (also by EU legislation) to discriminate against other public servant groups. 894

891

Interview C01. EVD official website (2009). 893 Interview B31. 894 Interview B31. 892

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In addition, the Romanian government implemented a series of essential changes in the Romanian family benefit system, aiming to increase the citizens’ quality of life. These include: • Programmes aiming at supporting families with children (new-born allowances, child raising insurance, the support allowance for the single parent family etc.); • The support programme for newly-formed families by means of granting two hundred Euro of support upon marriage; • The programme for granting household heating allowances. The development of social services is not only supported by the Romanian government itself (2,5 million Euro in 2007), but also by investment of the World Bank (2,2 million Euro) and a loan by the International Bank for Reconstruction and Development (79,4 million Euro). They all aim at the promotion of social inclusion for the following vulnerable groups: disabled persons, victims of domestic violence, Roma population and youths who leave the child care protection system. The development of social services is also supported financially by the European Union by means of the PHARE programme. Within the PHARE programme there is an investment scheme in the course of implementation amounting to approximately 24,2 million Euro. In 2008, 91 social services projects were contracted (8,9 million Euro). It is expected that during 2008-2009 another 7,2 million Euro on social services projects will be implemented. 895 As regards the social integration of homeless children, the Romanian government approved the ‘Homeless children initiative’ project, financed by the Council of Europe Development Bank (5,739 million Euro). This resulted in the development of twenty centres for 300 children and in providing 150 social workers with training programmes. In the area of the protection of disabled people, the PHARE project ‘Supporting the reform of the system for disabled persons protection’ was carried out between November 2005 and October 2007. The project’s financing scheme was more than 21 million Euro, of which Romania itself co-financed four million Euro. The Romanian government’s objectives are the promotion of social integration for disabled persons by providing support to families that include disabled persons and improving the degree of employment for disabled persons on the labour market. As a result of the PHARE project, the number of employed disabled persons increased from 16,225 in 2006 to 21,906 in 2007. 896 However, it has been stated that the Romanian government does not take enough measures to increase minimum wages. The Romanian government is more focused on macro-economic targets, for example becoming the 6th economic power of the EU and increasing the national reserve of the central bank. Therefore, at micro-level there has been little change; although the GDP has increased, wages have not. It is said that the Romanian government is afraid of inflation; if wages would increase, this might lead to an increase of prices and therefore result in inflation. But now, as a consequence of low wages, people are not able to buy different goods. 897

17.5 Pensions The National House of Pensions and other Social Insurance Rights (NHPSIR), operates under the authority of the Minister of Labour, Social Solidarity and Family and has as its main responsibility the management and administration of the public system of pensions and other social insurance rights. In its subordination NHPSIR has country houses of pensions and the Bucharest House of Pensions, which are decentralised public services. NHPSIR ensures the

895

Ministry of Labour, Family and Social Protection official website (2008). Ministry of Labour, Family and Social Protection official website (2008). 897 Interview B31. 896

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coordination, guidance and control of the activity of local and territorial houses of pensions, thus applying the legislation in a uniform way. 898

17.5.1 The Romanian pension system In 1989, the year when Ceausescu’s communist regime ended, Romania had a PAYG pension system which covered all employees. During the 1990s, the pension system was abused as lots of employees took early retirement instead of unemployment. In 2000, a new law - Law no. 19 - for the public pension system was approved by the parliament, which included some modifications: a slow increase in retirement age (for women from 57 to 60 and for men from 62 to 65 in 2014) and the number of years of contribution (in order to qualify for the minimum pension) was raised from ten to fifteen years in 2014. The pension for old age was established on the base of contributions paid during the whole active life and not linked to the salaries in the last five years of activity. Each year pensions are indexed with inflation, though in some years this requirement has proven to be difficult to achieve. The main benefits provided by the pension system are for old age, disability and survivors. But the new law of 2000 also introduced some social benefits paid by the public pension fund, such as compensation for maternity leave, insurance for recovery after work accidents and holidays for retired persons. It has been stated that at all times, governments did not look after the farmers. Farmers were abandoned by the government and parliament and left alone with transnational companies. This is why a great part of agriculture is still at subsistence level. 899 Nowadays, farmers, who never contributed to the system, are granted the right to receive a pension for old age. 900 At this moment, the government seeks to attract farmers in the public system, based on a mixed system of individual contributions and state contributions. 901 The average contribution to the PAYG system in Romania is 31.5 per cent, divided between the employer (22 per cent) and the employee (9.5 per cent). The contribution is based on the gross salary, limited to a maximum of five times the average national salary. 902 The Romanian pension system consists of three pillars. The first pillar is the public pension system. It is managed and set up to ensure social protection, offering a rather low pension level. Still, it remains the main pension system, while consuming the biggest part of the contribution to social security. The second pillar is the privately managed mandatory pension fund system. It is an individual system of ‘defined contributions’ based on a part of the individual contribution to the public pension system. The individual contributions will be accumulated in an individual account opened with a pension fund manager. The third pillar is the privately managed optional pension fund system. This includes additional individual savings meant for retirement. It is a ‘defined contributions’ system in which participants make monthly contributions to an optional pension fund. 903 The Romanian pension system also includes special pensions approved for different social categories, which do not contribute to the pension system and only rely on the state budget (in these cases money of the state budget is transferred to the pension system). Judges, for instance, fall under this special social category. This category receives a service pension supplementary to the public pension and consists of 85 per cent of the average income earned in the last three months of activity. It has been stated that this is done in order to provide the judges a social standard and to avoid corruption. Other special social categories are pilots, policemen, soldiers and members of parliament. 904 898

Organisation of social protection Romania official website (2006). Interview B31. 900 European papers on the new welfare official website (2006). 901 Ministry of Labour, Family and Social Protection official website (2008). 902 European papers on the new welfare official website (2006). 903 Seitan (2008). 904 Interview B31. 899

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17.5.2 Reformation after EU-accession In the European context of reformation and modernisation of the pension system over the past years, Romania has adopted a system based on diversification of the pension obtaining resources. The implementation of private pensions generates financial safety for elderly people. The years 2005-2007 were crucial for the reformation process, since the legislative framework was set up in order to regulate the organisation and operation of entities on the private pension market. The reformation process is still continuing in order to develop a three pillar system. It is stated that this three pillar system is largely supported by the Romanian population, since they would not have great confidence in the provision of pensions by the state (the public pension). 905 Considering the dependency ratio of inactive people, Romania needs to develop a system for promoting active ageing by means of the introduction of specific measures stimulating the participation of elderly people on the labour market. 906

17.5.3 National strategy regarding pensions Romania has to deal with considerable demographic challenges with respect to the sustainability of the pension system. Of the potential working population (9,5 million), at present only 5,5 million contribute to the PAYG system. This is mainly due to the refusal of the employers to register all the employees. Of them, a considerable number of freelancers pay only part of their actual income for the pension contributions. At the same time, there also is an underground economy, estimated at approximately 1-2 million people who pay no contribution and who will therefore possibly gain no earning for pension once they are able to retire. Another concerning issue for the Romanian social security system is the large group of emigrant workers, estimated at two million individuals. While many of these workers shall contribute to the social security system in the host country, another significant group works on the grey market and does not contribute either to the foreign pension system or to the Romanian one. This makes this group of people potentially vulnerable, with no guaranteed income at the retirement age. As a result, the Romanian pension fund is in deficit and unsustainable. Therefore, pillar 1bis, the pre-financed component of the 1st pillar, was introduced during 2008. This means that a part of the social security contributions shall be compulsorily directed to the private administrative pensions. In 2005, the Private Pension System Supervisory Commission was established (according to Directive 41/2003/EC); a new institution in charge with the regulation of the provisions related to capitalisation. It is independent, but subject to legislative control by reporting to the parliament. At present, the Romanian government is also making an effort to encourage work not only until the standard retirement age, but also above such age. The rewards for long contribution are included in the value of the pension. 907 Unfortunately, since 2001, governments made more than seventy changes regarding this new law concerning the three pillar pension system. It has been stated that it is therefore impossible to follow a policy with predictable results in this field. Furthermore, because of the financial crisis, very few employers accepted to discuss and to implement this private pension provision as a component of the wages package. This would come down to five hundred Euro per worker per year which employers would invest as a deductible contribution in the private pension scheme. A collective agreement at company level should be established in which the employer is ready to accept to contribute to the private pension system. It has been stated that this is a question of mentality and economical environment. 908

905

Interview B30. Ministry of Labour, Family and Social Protection official website (2008). 907 Ministry of Labour, Family and Social Protection official website (2008). 908 Interview B31. 906

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17.6 Freedom to engage in trade union activity The trade union movement started to develop in Romania at the end of the 19th century. The first legal right to form professional associations was laid down in the constitution of 1866, but it was not until 1872 when the General Association of Workers in Romania was founded. The law on trade unions was abrogated in 1938 when the royal dictatorship was established and unions were banned until 1944. During the communist regime, trade unions covered almost the entire industrial labour force. In 1944, the Central Commission for the Organisation of the United Labour Movement from Romania was created. It is established that a trade union should be constituted in each organisation. 909 Thus, during the communist regime, trade unions had a large influence in Romania, especially in large- to medium size enterprises. 910 However, during the transition period, trade unions faced a lack of experience as autonomous institutions. Therefore, the post-communist trade unions had to create new identities and learn new functions, as the central communist union lost its raison d’être with the collapse of the communist regime. In 1996, the Law on Collective Labour Agreements gave representative trade unions the right to negotiate collective agreements at national, sectoral and company levels. However, to be representative, trade unions have to fulfil a minimum membership condition: • at the national level, the total number of trade union members must be equivalent to at least five per cent of the entire labour force; •

at the sectoral level, there must be a seven per cent membership of the labour force of that particular sector;

•

at company level, at least one-third of employees should be members.

In Romania there are currently more than twenty national confederations, but only five of them meet the representativeness criteria (see above). 911 The largest of the five is CNSLR-Fratia, with some 800,000 members, which developed from a merger in 1990. The next largest is BNS which has around 350,000 members and had its founding congress in 1991. Since 1996, BNS is a member of the European Trade Union Confederation. From 1996 to 2007 they were trained in the core values of the free trade union movement at the European level. They are proud to be part of ‘the European family’. 912 BNS is trying to be an actor, not merely a participant in the relationship with legal institutions of the EU. CSDR and CNS Cartel Alfa both have around 350,000 members and emerged in 1994 and 1990 respectively. The smallest of the five is Meridian, with approximately 150,000 members, and was set up in 1990. 913 As a result, 55 to 60 per cent of all employees in Romania are a member of a trade union. The power of trade unions is expected to decrease in the future since individual contracts are becoming increasingly popular. 914

17.7 Health care The Ministry of Health ensures and coordinates the application of Government policies and strategies in the field of health. The National House of Health Insurance and Ministry of Health manages medical care. The National Health for Insurance House and local health insurance houses have a public autonomous character and administer the Health Insurance Fund. Health

909

Trif (2004), p. 51-52. EVD official website (2009). 911 Trif (2004), p. 53-55. 912 Interview B31. 913 Fulton (2007). 914 EVD official website (2009). 910

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insurance is funded through the insured persons’ contribution, employers’ contribution, state subsidies and other funding. 915

17.7.1 The Romanian health care system Romania spends approximately six percent of GDP on health care each year. Health care is, to a large extent, in hands of the state. In 2005, there were 422 hospitals, of which eleven were private. However, the private sector of health care is expected to grow: the turn-over of the private sector will increase from 350 million Euro (2007) to 890 million Euro in 2011. 916 The amount of hospital beds per 1000 of persons in Romania is relatively high compared to the EU27: 6.6 in Romania and 5.9 in EU27. 917 Since the accession to the European Union in 2007, Romania has to follow EU-rules and regulations concerning health care. The European Union considers the right of citizens to high quality care services a fundamental right and supports the national policies targeting the introduction of the measures for guaranteeing the products, services and high quality management within the health care system. 918 Medical products and medicine must be tested by the ‘Directorate for Medical Instruments and Equipment Testing’, which is part of the Romanian Ministry of health care. The European Union’s ‘Regional Operational Programme’ is funding the restructuring and modernisation of the Romanian health care system. Until 2013, the Regional Operational Programme will invest substantially in the renovation of hospitals and the modernisation and acquisition of medical equipment. The Romanian health care sector is also intended to decentralise in the future. 919 According to the Strategic National Report regarding Social Protection and Social Inclusion (2008), the population’s health state has improved, as well as the development of human resources. Still, more resources are necessary in order to ensure a financial sustainability that would be adequate to the health system. It is furthermore important that the ongoing programmes guarantee access for all the citizens to quality health services. However, this can only be done by organisational improvement and by continuing the regulation of the minimum medical service package. 920

17.7.2 National Strategy for health The Romanian government wants to improve the health condition of the population and develop a modern and efficient health system, comparable to the health systems of other member states, based on the following values: • • • • • • •

915

observance of the right to population health protection; guarantee of the quality and safety of the medical act; increase of the role of preventive services; ensuring accessibility to services; observance of the right to free choice and equal opportunities; valuation of the professional competences and encouraging their development; decisional transparency. 921

Organisation of social protection Romania official website (2006). EVD official website (2009). 917 Eurostat official website (2009a). 918 Ministry of Labour, Family and Social Protection official website (2008). 919 EVD official website (2009). 920 Ministry of Labour, Family and Social Protection official website (2008). 921 Ministry of Labour, Family and Social Protection official website (2008). 916

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Disparities in the access to health care services may occur for four different reasons: ethnical or racial; economic; inadequate geographical location of health care facilities; unequal quality of health care services. 922 Furthermore, it has often been stated that access to health care in many cases depends on the ability of paying an extra fee to the medical staff. 923 In order to be treated well, people would need to pay extra money or goods to their doctor. 924 This could also explain the growth of the private health care sector, since people do not trust the quality of public health care. In order to make the Romanian health care system more accessible, more national health programmes are being implemented. For example, a facility package (providing free accommodation, salary increases etc.) is introduced in order to attract medical personnel in isolated, economically disadvantaged areas. With the purpose of reducing the inequalities in the provision of health care services, the pilot programme ‘Health Caravan’ is introduced, providing health care services in isolated and/or economically disadvantaged areas. At the same time, the Ministry of Public Health aims to increase the population’s access to medicines by reducing the prices, drafting adequate price standards and setting up pharmacies in disadvantaged areas. In 2007, the national programme for curative purposes was implemented. It ensured medical treatments, drugs and sanitary materials specific to high-risk diseases, such as HIV/AIDS, tuberculosis and cardiovascular diseases. Furthermore ‘The national programme for the assessment of the population health condition in the primary health care’ was installed. Its purpose is to find the determinant factors for the diseases with a major impact on the health condition of the population, the early diagnosis and monitoring of these diseases so as to avoid the non-senescent deaths. Another major priority of the Romanian health care system is to focus on the preventive health services and increase the level of health-related training of the population for the purpose of adopting healthy behaviour of the population. 925

922

Ministry of Labour, Family and Social Protection official website (2008). Interview B05, B30 and B36. 924 Interview B30. 925 Ministry of Labour, Family and Social Protection official website (2008). 923

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18. Romania’s EU-accession: the role of the EU in Romania’s transition to a modern democratic state and the implementation of the acquis communautaire Romania applied for membership of the European Union on 22 June 1995. Accession negotiations were opened on 15 February 2000 and lasted until 14 December 2004. The Accession Treaty was signed on 25 April 2005, providing that sufficient progress was made in fulfilling the criteria. Romania officially entered the EU on 1 January 2007 together with Bulgaria. This section discusses the role of the EU in Romania’s transition to a modern state fulfilling the membership criteria. An analysis is made of how the EU’s instrument of conditionality has impacted on, and created incentives for Romania’s development into a modern European state.

18.1 The theory: conditionality’s use and effectiveness The successful transition from authoritarianism to democracy after the collapse of communism in Central and Eastern Europe is often perceived to be the result of the EU’s efforts to anchor these countries into the democratic realm. Therefore, the EU is often labelled as ‘democratic centre of gravity’. Albeit the fact that the EU’s common foreign policy is still relatively young, its most successful branch until now has been the enlargement policy. Denominated as a soft power, the EU wishes to spread democratic values around the globe, starting with its own neighbours. For that reason, when it became apparent that the Central and Eastern European countries would bid for EU membership, the Union decided to adopt a new enlargement strategy in which conditionality became the dominant policy instrument. Conditionality can be defined as “the exercise of policy instruments by one party to secure compliance and shape the actions of another party.” 926 Within the context of EU enlargement, conditionality is used to impose both political and economic conditions as a requisite for membership. Conditionality is not an EU novelty; the IMF already applied it in 1952 and also the World Bank uses it with frequency. Neither is it a new instrument for the EU. Already in 1962 the European Parliament’s Birkelbach Report stated, in a response to dictatorial Spain’s application, that democratic conditionality was inherent to membership. When the Central and Eastern European countries reoriented their focus to the West, the EU quickly expanded and formalised conditionality. Through the Copenhagen Criteria of 1993 the EU advocated a liberal agenda incorporating economic requisites, such as a functioning market economy and the implementation of the acquis communautaire. Moreover, a set of political criteria was demanded, like respect for, and compliance with democracy and human rights. The reason for the extensiveness of conditionality is twofold: it both has to ensure that applicant countries fulfil the minimum requirements for membership, as well as to protect the existing values and interests of the Union itself. Conditionality can only be effective if two requisites are fulfilled: (1) the country which is applying perceives the benefits of a membership to be greater than the costs of domestic reforms, or vice versa, the costs of exclusion to be higher than adaptation; (2) the EU is willing to accept the applicant as long as it introduces the necessary reforms. Conditionality’s trump card is of course the final prospect of an EU membership. In the process of accession the EU applies several ‘carrots’ and ‘sticks’ in the form of rewards or withdrawal of benefits or even threats to postpone accession. Conditionality is most effective in the period between the start of the negotiations and the setting of the definite accession date. If the entrance date is not yet known, 926 Barnes and Randerson (2006), p. 352.

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both the EU and the applicant perceive the process of negotiation to continue indefinitely. This results in more leverage for the EU to demand adaptation and in a greater incentive for the candidate state to reform. Nevertheless, for conditionality to be effective the EU has to make sure that the costs of domestic reform do not exceed the benefits. Costs for domestic reform in a country such as Romania are high and can therefore be met with domestic political resistance. For that reason, the EU created several support programmes and funds to help candidates reform. Romania received substantial amounts from PHARE, ISPA and SAPARD (pre-accession programmes financed by the EU) to cover costs for adaptation. When the accession date is announced the negotiations convert from an infinite into a finite process. Subsequently, conditionality loses its effectiveness and candidate states are no longer willing to continue their reforms. By announcing the accession date the EU shows it is confident that the necessary reforms are introduced, while the applicant perceives that it has completed its goal and won the prize of an EU membership. The 2004 enlargement showed that hardly any progress was made after the signing of the Accession Treaties. It appeared that the Commission has learned from this defect; she introduced additional conditionality instruments and closer monitoring for the 2007 enlargement. In addition to the general safeguard clauses covering economic, internal market and justice and home affairs, the Commission introduced new clauses for Romania’s entrance. In Romania’s Accession Treaty a clause was included enabling membership to be delayed by one year until 1 January 2008 if the “preparations for adoption and implementation of the acquis is such that there is a serious risk of […] being unprepared to meet the requirements of membership by January 2007.” 927 Moreover, the EU intensified monitoring, which continued also after accession, unlike during the 2004 enlargement.

18.2 The practice: Romania’s track record The previous section outlined the theoretical framework of the EU’s conditionality instrument. This section focuses on Romania’s progress during two periods: (1) before the Accession Treaty was signed and (2) after the signing of the Treaty.

18.2.1 Romania’s progress: Pre-Accession Treaty Compared to the other Central and Eastern European countries, Romania had one of the worst points of departure. Romania possessed little pre-war democratic experience (unlike for example Czechoslovakia) and it had to bear the legacy of the most totalitarian regime in the communist bloc, isolated from any pre-1989 liberalisation efforts or ‘perestroika’ reform. Romania was also the only country where communism went out with a bang, in the form of a violent revolution which swept the streets of Bucharest. When the country was finally liberated from the Ceausescu regime, Romanian politicians embarked only hesitantly upon reform, initially leaving in place the political and economic structures of the previous regime. Therefore, prospects for the developments and consolidation of democracy were low in 1989. When Romania applied for EU membership in 1995, the basic democratic structures and institutions were, at least formally, in place, though not consolidated at all. In the beginning of the 1990s the EU focused mainly on drafting and subsequently formalising the conditions for future applicant countries, rather than instantly demanding strict compliance with these criteria. Yet, most Central European countries immediately showed a great devotion in fulfilling the political criteria set by the EU. Romania however did not embark in earnest upon reforms until “[it was] sanctioned either by the market and/or by the exclusion effect of the EU’s conditionality machine.” 928 Only after 1993 the Romanian government started to take

927 European Commission official website (2005a). 928 Noutcheva and Bechev (2008), pp. 119-120.

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the conditions for EU-accession more seriously. Some major steps in Romania’s progress are discussed below. The first significant step in the accession process was the signing by Romania of the Europe Agreement in 1993, which included a special clause on democracy and the respect for human rights. In October 1993 Romania obtained membership of the Council of Europe. Since the EU had adopted the Council’s standards on democracy and human rights, this was a meaningful event. 929 Further attempts to foster democracy before the start of the accession negotiations were made via the PHARE Democracy Programme, which sought to consolidate democratic experiences, enhance voluntary participation and stimulate civil society. Romania also made efforts to improve its minority rights record by signing the European Charter for Regional or Minority Languages in July 1995. In the same year the government also passed an emergency ordinance amending the Education Law, granting all national minorities the right of education in their mother tongue. Furthermore, a ‘National Strategy for the Integration of Roma’ was introduced. After 1997 the Commission began to evaluate the applicant countries stricter and started to demand more effort for the fulfilment of the Copenhagen Criteria. The first official assessment on Romania was released in July 1997. One month before the release “more than hundred governmental emergency ordinances were issued in rush […]”, which may raise questions marks over the ‘quality’. 930 The quality was indeed poor. The Commission severely criticised Romanian governance and the rule of law, which were considered unsatisfactory. “The more the Commission learned about the institutional structure and legal basis of […] Romania, the more deficiencies it saw.” 931 In the reports issued in the following years the Commission continued to comment Romania’s democratic flaws such as the problems in the judiciary system and public administration, the discrimination and marginalisation of minorities and the deep rooted problems with corruption. Romania’s progress paled in comparison with other former communist countries, and as a result Romania was excluded from the first accession group. The refusal was a clear signal from the Commission that if Romania wished to access the EU it had to step up its work in fulfilling the Copenhagen Criteria. The Commission was even reluctant to open negotiations in 2000, but pressure from several member states like the United Kingdom proved to be favourable for Romania. Another factor which helped Romania gain its candidate status was its geographical location on the Balkans which was torn up by the Kosovo war at the end of the 1990s. In this atmosphere Romania, together with Bulgaria, stood out as a positive example. Moreover, there was a fear that a refusal of the candidate status might further destabilise the region. On the whole we can conclude that Romania, together with neighbour Bulgaria “accelerated reform when they felt the ‘stick’ of EU conditionality. Every time the EU penalised the two laggards, their governments would rapidly respond by presenting revised reform strategies and making pledges for additional measures.” 932

18.2.2 Romania’s progress: Post-Accession Treaty In December 2004 Romania received the green light for membership. Though, as described in the previous section dealing with the theoretic framework of conditionality, the Commission introduced a so-called ‘super clause’ for the 2007 accession under which enlargement could be postponed for one year. If Romania wished to enter on 1 January 2007 it had to continue to reform after the signing of the Accession Treaty. Especially the judiciary system and competition 929 After Romania’s admission to the Council of Europe, Croatia and Russia were also admitted, albeit their poor human rights record. Therefore, membership has lost part of its prestige. Jora (2006), p. 7. 930 Jora (2006), p. 7. 931 Noutcheva and Bechev (2008), p. 121. 932 Noutcheva and Bechev (2008), p. 124.

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policy were not yet on the by the EU desired level. Remarkably, Bulgaria’s accession could be postponed for one year only by a unanimous vote; Romania’s entrance on the other hand, could be delayed by qualified majority voting if not all the specific commitments of the Accession Treaty were fulfilled. The Commission’s cautiousness with Romania’s accession reflected the lessons learned from the 2004 enlargement as well as the political climate of those days. The novote for the Constitutional Treaty in France and the Netherlands was also interpreted as a no-vote for further enlargement. That the Commission was prepared to postpone accession became apparent quickly after the signing of the Accession Treaty on 25 April 2005. Already in May 2005, EU Competition Commissioner Neelie Kroes warned that without further changes on state aid and industry subsidies Romania “[might] leave the Commission with no other choice than to propose postponing its EU membership.” 933 Subsequently in June, Olli Rehn, the Commissioner for Enlargement, sent a warning letter, also known as a ‘yellow card’, to the Romanian government, stressing the need for further reform in certain areas. In October 2005 the Monitoring Report again stated that the Commission would apply the ‘super clause’ if Romania would not be ready for the 2007 accession. Problematic areas remained to be the judicial reform, agriculture, free movement of goods and services, regional policy and last, but definitely not least, corruption. Apparently, the Romanian government took the threats seriously since the Monitoring Report of May 2006 stated that the country had taken significant steps since 2005, especially in the reform of the judiciary system. “It has established solid structures for the fight against corruption. The quantity and quality of non-partisan investigations into allegations of high-level corruption have substantially increased.” 934 However, in the same report the Commission also urged Romania to keep up the fight against corruption. In the meantime, the EU continued to support Romania financially in order to achieve the necessary reforms. For only 2006 1023 million Euro was made available for pre-accession assistance. 935

18.3 Assessment of the EU’s role in Romania’s progress The EU has provided Romania with a clear framework of conditions, striving for their fulfilment through the use of ‘sticks’ and ‘carrots’. The image arises that it were especially the sticks and threats of exclusion which animated the Romanian government to initiate reform and only to a lesser degree the carrots. Significant in this matter is the special adoption by the EU of the ‘super clause’ for the 2007 enlargement and the repeated threats of postponement expressed by the Commission after the signing of the Accession Treaty. The Monitoring Report of 2006 indicated that Romania had made good progress since 2005. However, the actual depth and impact of the development and reforms introduced by the Romanian government is questionable. It appears that not all reforms are carried out in a qualitative manner, as a result of which some reforms are merely cosmetic makeovers. Romania has gained a reputation of passing laws in a hurry while the quality of the legislation is a matter of secondary importance. 936 The EU on the other hand only seems preoccupied with output numbers, benchmarking and check marking and does not assess the true impact of the reforms made. 937 Romania behaves docile at the European level and accepts all comments made by the EU. However, when politicians arrive back home in Romania, they tend to ignore EU advise. 938 Nevertheless, the importance of the EU’s role in Romania’s modernisation is considered to be crucial. By providing Romania with a framework for development and monitoring the 933 Steunenberg and Dimitrova (2007), p. 9. 934 European Commission official website (2006a). 935 European Commission official website (2006a). 936 Interview B05. 937 Interview B18 and C14. 938 Interview B05 and B18.

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progress made, the EU created incentives for Romania’s development. The EU speeded up Romania’s reform and it knew what was good for Romania. The Romanians themselves in general believe that Romania would not be where it is now if it would not have been for the help of the EU. 939

18.4 The implementation of the acquis communautaire In this section, a brief overview will be given of the development of Romania’s judicial system in order to fulfil Community rules and obtain the membership of the European Union: the implementation of the acquis communautaire. This section is based on the progress reports written by the European Commission from 1997 until 2005. 940 The judicial sections of the acquis discussed in this section are police, customs and judicial cooperation in criminal matters; data protection; freedom of movement of persons and the Schengen agreement. This section ends with some concluding remarks regarding the implementation of the acquis.

18.4.1 Police and Judicial Cooperation on Criminal Matters In the area of police and judicial cooperation on criminal matters Romania has adopted and amended several acts and laws over the past years in order to bring Romanian legislation in line with EU legislation. In this section, human trafficking, cross border organised crime, terrorism, corruption, forgery and drugs will be discussed. Regarding human trafficking, in 2001 Romania adopted the Prevention and Combating of Trafficking in Human Beings Act together with an action plan. Subsequently in 2002, the same programme was launched for children. In the same year the Romanian government also introduced the Police Organisation and Functioning Act, and the Police Officers Act, by which a special training for policemen on human rights came into being. Training of police officers was furthermore improved in 2003 and 2004 by several amendments and new professional conduct codes. On the European level, Romania adopted domestic legislation transposing the European Convention on Mutual Assistance in Criminal Matters. In 2001 Romania also adopted the additional protocol to the European Convention regarding the transfer abroad of convicted persons. Moreover, in 2002 Romania reached an agreement with France to facilitate the return of illegally residing minors. In 2004, a law on international judicial cooperation in criminal matters was adopted and in 2005 Romania designated a contact point for Eurojust; an EU agency which and is engaged in cross border judicial cooperation. As regards the fight against cross border organised crime, Romania has signed several protocols with its neighbours since 2002 and it also ratified the UN Convention against Transnational Organised Crime together with the UN’s protocols against trafficking in persons and the smuggling of migrants by land, sea and air. Furthermore, a cooperation agreement with Europol was approved in May 2003. Romania also dealt with terrorism. In April 2002 the Supreme Defence Council (CSAT) adopted a national strategy for preventing and combating terrorism and ratified the 1999 UN Convention for the Suppression of the Financing of Terrorism in November 2002. The national terrorism prevention system became operational in April 2004, which made it possible for the public to report useful information on the fight against terrorism. In order to combat corruption, the Romanian government established the National AntiCorruption Prosecutor’s Office, which began functioning in September 2002. Three years later, in September 2005, the Directorate-General for Anti-Corruption of the Ministry of Administration and the Interior began operating, which reports exclusively to the minister. On the European 939 Interview B16 and B05. 940 European Union official website (2006a).

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level, Romania ratified the Council of Europe Civil and Criminal Law Conventions on Corruption and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime in 2002. In March 2005 the Additional Protocol to the Council of Europe Criminal Law Convention on Corruption entered into force. Regarding forgery, a commission for the investigation of forged Euros became operational in January 2003. Moreover, in March 2004, a national coordinating office was set up to combat counterfeiting. However, Romania still has to bring its law into line with the 1995 ‘Convention on the protection of the European Communities’ financial interests. In March 2001 a drugs squad was set up. From a legislative perspective, Romania has acceded to all the international conventions referred to in Community drugs law. Nevertheless, to guarantee full functioning, efforts have to be made to improve the administrative capacity for liaising with the European Monitoring Centre for Drugs and Drug Addiction by strengthening the role and mandate of the National Anti-Drug Association (ANA). Furthermore, greater participation of Romanian experts in the Centre’s technical meetings should be facilitated.

18.4.2 Data Protection As far as data protection legislation is concerned, Romania adopted several laws since 2001: the Council of Europe Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data. This convention lays out a scale of charges for the notification of personal data processing operations. Moreover, a law establishing the National Supervisory Authority for Personal Data Processing was adopted together with an independent body separated from the Ombudsman’s Office.

18.5 Free movement of persons EU legislation regarding the freedom of movement, security and justice was established during the 1992 Maastricht Treaty. The asylum policy, the crossing of the external borders of the EU and immigration policy became part of the EC Treaty in 1999 (Articles 61 to 69). The intergovernmental Schengen agreement (1985), which creates the legal basis concerning the area of free movement, forms part of the acquis but is not applied immediately to new member states when they join. Only upon a unanimous Council decision, the new member state can join the Schengen zone. When new member states join the EU they have to put binding rules in place which include several regulations on visas; rules governing external borders and migration; asylum; police cooperation; the fight against organised crime; terrorism; fraud; corruption; drugs trafficking, customs cooperation; and legal instruments regarding human rights. As regards issues such as border control; illegal immigration; drug trafficking; money laundering; organised crime; police and legal cooperation; data protection and mutual recognition of court judgments, the new member states should be administratively capable of dealing with them. In order to deal with these themes properly, it is of crucial importance that the judiciary and the police are organised in an independent, reliable and effective manner.

18.6 Romania and The Schengen acquis Romania has largely aligned its visa policy with the EU policy; as a result, it has benefited from a visa-free regime in all Schengen member states since January 2002. Romania has also made progress at external border controls. In June 2001, two ordinances were adopted: one on Romania’s borders and one on the organisation and functioning of the border police. Furthermore, the border police has signed an agreement with the national airline TAROM, in order to improve the control on travel documents and visas. However, a problem facing the border police is the large number of vacancies that need to be fulfilled.

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As far as the progression in the field of the Schengen acquis is concerned, Romania has adopted two Schengen action plans: the first one in December 2001 and the second one in 2003. Along with these actions plans, Romania set up a strategy on border security for 2003-2007 and a strategy for an integrated border management for the period 2003-2006. In March 2003, a cooperation protocol was signed by the border police. As a result of this cooperation protocol, common border posts have been established at four Romanian border crossing points. In October 2005, Romania adopted an integrated border security system that was aimed to incorporate all measures needed before accession. Despite Romania’s progress in the field of the Schengen acquis, the Commission urged Romania to accelerate preparations for future participation in the Schengen Information System (SIS II) and the Visa Information System (VIS). In 2005 the Commission also called for improvement of the surveillance capacity along the Black Sea coast and the Danube, which is an important international waterway. In order to remove the internal borders for accession to the Schengen zone, Romania needs to start preparing the implementation of the VIS. Romania already agreed on the legislation for the issuing of new identity and state border crossing documents for third country nationals in June 2002. The government also concluded an agreement with the International Organisation for Migration on cooperation in the field of voluntary humanitarian assisted repatriation. Furthermore, a government decision in May 2003 implemented the long-term visa requirement regarding economics and commercial activity involving the countries which acceded to the EU in 2004.

18.7 Some final remarks on the implementation of the acquis In order to implement the acquis successfully and effectively, it was, and still is necessary for Romania to adjust its legal institutions, organisations and frameworks. From 2002 until Romania’s accession into the EU, monitoring processes intensified. Romania undertook various reforms in the areas of governance, but over the last couple of years the Commission repeatedly expressed its concerns about the judicial reforms still necessary.

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19. Agriculture Agriculture has been a very important theme in the negotiations between the European Union and Romania prior to accession. In the accession negotiations, agriculture was the largest chapter. It was opened in November 2002 and concluded by September 2004. The importance of agriculture is due to the fact that Romania has a relatively big agricultural sector, which could potentially be a heavy burden on the already highly debated budget of the Common Agricultural Policy (CAP) of the EU. Accordingly, one of the key issues dealt with to which extent the direct farm support payments (direct payments) should be available for Romanian farmers after accession. The result is that CAP payments to Romania under the Single Payment Scheme (SPS) are subjected to transitional arrangements. During a period of ten years, Romanian farmers will only receive a percentage of the direct payments which farmers in the EU15 receive. In addition, the Romanian government is given the possibility to top the CAP payments with additional funds, partly financed by means of their own national budget, partly by CAP funds. Also, Romania can opt for the Single Area Payment Scheme (SAPS) instead of the SPS. The SAPS links direct payment to production, while direct payment is independent from production under the SPS. Besides problems regarding the financial sustainability of the CAP after Romania’s accession, increasing competitiveness of Romanian, mainly subsistence farmers have been a main concern of policy makers. The CAP has been given a major role in this matter. A third issue is related to institutional reform; to ensure that Romania would be capable of administering the CAP and absorb all the funds the CAP offers. Nonetheless, Romania has high potential to reap the benefits of the internal market and the CAP concerning agriculture.

19.1 General aspects of Romanian agriculture In contrast to other countries in the EU, agriculture has traditionally always been a very important sector in the Romanian economy. After Romania’s accession into the European Union, agriculture has continued to play a substantial role in terms of use of area, contribution to GDP and share of employed population. The importance of agriculture can be attributed to the duality of the sector, in which efficient big commercial farms exist next to uncompetitive subsistence agriculture, being roughly equal in terms of utilised land. 941

19.1.1 Agricultural share in territory, GDP and labour force In 2005, 87.1 per cent of the Romanian territory consisted of rural areas, in which 45.1 per cent of the population resided, suggesting a low population density. 942 Although slowly declining in recent years, its estimated share in the composition of the Romanian GDP in 2008 was compared to EU standards relatively high with 7.2 per cent (EU27: 1.9 per cent). Moreover, the true significance of agriculture for the Romanian economy is demonstrated in terms of employment rates: in 2008, the agricultural sector had a share of 29.7 per cent in the entire labour force, which is by far the highest share in the European Union (the Netherlands: 2.0 per cent). 943 Although decreasing, the high proportion is indicative for hidden rural unemployment and low productivity levels. Notwithstanding the important role agriculture traditionally played in the Romanian economy, the enduring high share of the agricultural sector in total employment and its low productivity level can partly be explained by the transition of the Romanian economy after the collapse of communism in Eastern Europe. 941

Lazea (2008), p. 14. Lazea (2008), p. 13. 943 CIA official website (2009). 942

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The loss of input and product markets in the process of transition particularly affected the industrial sector severely. To a certain extent, this lead to a moderate de-industrialisation of the country. The result was massive unemployment in the secondary sector. Despite projects for labour force re-entry and re-training initiated by the government, many people faced long-term unemployment. Especially laid off people, aged over forty, migrated to rural areas where they were obliged to live of subsistence farms since they did not manage to get retrained. Thus, the agricultural sector was to a certain degree forced to absorb the labour surplus from the industrial sector.

0.1 Figure 19.1 Share of agriculture in total employment and GDP (%) in Romania Source: Salasan and Fritzsch (2009), p. 10. Simultaneously, the effects of transition resulted in the breakup of large-scale collective and state farms, in which agricultural production was typically organised. The restitution and privatisation of land, formerly belonging to the collective and state farms, started in 1991 and was conducted in successive waves as the legal framework was changing over the time. 944 More than five million claims were processed, of which the restitution commissions validated about 95 per cent. 945 The restitution and privatisation of agricultural land had a strong impact on the structure of agricultural production and labour productivity. Of the country’s 14,7 million hectares of agricultural land, 14,1 millions hectares are in private ownership. 946 As a consequence, not only does the agricultural sector employ a large share of the labour force, but it is also extremely fragmentised: it is organised in numerous private holdings, which mainly consist of a very small agricultural area. In addition, elderly people often run these holdings. Since small private holdings (run by elderly people) are less likely to profit from economies of scale and the diffusion of technology, their general productivity is low.

19.1.2 Commercial and subsistence agriculture The Farm Structure Survey (FSS), which is carried out by the European Union with an interval of two or three years in all EU member states, presents the latest available data (of the year 2005) on the utilised agricultural area of agricultural holdings and their potential to generate income. The 944

Luca (2007), p. 253. Pamfil (2005), p. 1. 946 Luca (2007), p. 253. 945

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analysis only focuses on farms above the threshold of one European Size Unit (ESU), which is equal to an economic activity of 1200 Euro. 947 In Romania, only 29 per cent of the agricultural holdings reach the threshold, which is a clear indication of the existence of widespread subsistence agriculture, since EUROSTAT defines a subsistence farm as a farm with an economic size lower than one ESU. The 29 per cent above the subsistence threshold farmed almost 75 per cent of Romania’s utilised agricultural land, whereas in the Czech Republic these figures are 99 per cent and in Hungary about 95 per cent. 948 Another indication of widespread subsistence agriculture is that 69 per cent of the farms over one ESU were producing mainly for selfconsumption. 949 Considering the number and physical size of the agricultural holding, EUROSTAT documents show that there were a total of 3,931,350 agricultural holdings in Romania in 2007. A significant majority of 89.8 per cent of the agricultural holdings consisted of an area less than five hectares, of which half of them even less than one hectare. About 9.5 per cent had an area between five and twenty hectares, 0.4 per cent between twenty and fifty hectares, while only 0.3 per cent had over fifty hectares of agricultural area. Generally speaking, agricultural holdings are extremely small in Romania. Farmland consolidation is rather slow. It is expected that an increase of the average size of agricultural holdings by one hectare will take over twenty years at current pace. 950 Although a legal framework for land markets does exist and the development of it is further stimulated through policy measures such as titling and registering land and flexible leasing arrangements, the market itself is distorted. Because of low taxes on property, people who after the privatisation of state owned farms claimed their land back but continue to live in the city are reluctant to sell off their land. Moreover, demand for agricultural land is low due to a lack of interest from the new generation, which makes it difficult to assess prices for farmlands. At the same time, after the absence of private property during the communist era, especially the older generation is hesitant to sell their land. Regarding the types of unit, agricultural production can be divided in; two main categories in Romania exist: natural persons and legal persons (either formal associations or private joint stock companies). Of the almost four million agricultural holdings, 3,913,650 were a natural person, working on 65.5 per cent of the utilised agricultural area. With respect to the age structure, 1,761,760 of the natural person units are older than 65 years, while only 166,870 units are under the age of 35. Summed up, the structure of the Romanian agriculture differs greatly from the European Union: it is characterised by the division between (very) small subsistence farms and big commercial farms. Relatively old holders to a great extent run the subsistence farms, with scarce assets and yield therefore low productivity. Their products usually do not reach the market. Consequently, income is low and does very likely not generate enough for investments, which could boost productivity. As a result, it is neither probable that these farms are competitive at the European market, nor have the potential to become so.

19.2 CAP related payments The guiding principles of the CAP are increasing competitiveness and sustainable growth in the coming years. According to the conclusions of the European Council of Göteborg (15 and 16 June 2001): “strong economic performance (in other words: increasing competitiveness) must go hand in hand with the sustainable use of natural resources and levels of waste, maintaining biodiversity, preserving ecosystems and avoiding desertification. Therefore, the CAP should 947

Eurostat official website (2008c), p. 27. Eurostat official website (2008c), p. 38. 949 Lazea (2008), p. 14. 950 Lazea (2008), p. 15. 948

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contribute to sustainable development by increasing its emphasis on encouraging healthy, highquality products and environmentally sustainable production methods”. 951 These principles were confirmed in the Lisbon strategy conclusions of the European Council of Thessaloniki (20 and 21 June 2003). 952 In 2003, the CAP was reformed, and it now foresees in a decisive step towards a better realisation of its two leading principles mentioned above. Originally, the CAP was designed for the EU15, where family farms, which were fully connected to international markets and had a certain production pattern, were dominant. Because of changes in the world market and the entry of new member states, the general farm pattern changed into a more diverse picture with more subsistence farms, far less integrated in the agricultural markets. To take into account these new realities, the reform established two main areas of agricultural expenditure: income and market support (pillar I), financed through the European Agricultural Guarantee Fund (EAGF) and rural development (pillar II), financed through the European Agricultural Fund for Rural Development (EAFRD). This model views agriculture not only as a source of food, but also as having important social, cultural and environmental function. 953 Income and market support measures include direct payments to farmers and marketrelated subsidies, such as export subsidies, the quota system, public interventions and the buying of products for public storage. The second pillar accompanies the support under pillar I and consists of rural development. These policies aim at resolving economic, structural, social and environmental problems in rural areas. Especially for Romania, the second pillar of rural development seems to be very promising. It offers opportunities to help restructure the agricultural sector and reverse the trend of ageing and de-population of rural areas, caused by a decreasing birth rate and external migration.

19.2.1 First pillar of the CAP: direct payments Under the first pillar, an important exception has been made for Romania: income support under the SPS, which is the most important system of direct payments, has been subjected to a transitional period of ten years after accession. Therefore, Romanian farmers will only receive a percentage of the direct payments farmers in the EU15 receive. Still, Romanian farmers will receive 5,501 million Euro of direct payments between 2007 and 2013. By comparison, market support is fully available for Romanian farmers directly after accession. Starting from accession year 2007, direct payments will only amount to 25 per cent of the direct payments level of EU15. The level will increase to 30 per cent in 2008, 35 per cent in 2009 and 40 per cent in 2010. After 2010, a yearly increase of 10 per cent will follow, reaching 100 per cent of the EU15 level in 2016. 954 Moreover, in order to secure sustainable development, farmers must meet certain standards. The European Commission states that these concern “public, animal and plant health, the environment and animal welfare and keep their land in good agricultural and environmental condition”. Furthermore, “where farmers fail to meet those standards, the direct payments they can claim are reduced or even withdrawn completely for the year concerned”. 955 Though, the European Union leaves the Romanian the possibility to top these direct payments under the SPS by developing a CAP-like national scheme of additional payments. The Romanian government is allowed to top-up the income of Romanian farmers up to 55 per cent of the EU15 level in 2007. The maximum top-up rate is always thirty percentage points above the applicable level for direct payments in the relevant year. This means, up to 60 per cent in 2008, up to 65 per cent in 2009 etc. A different maximum rate is applied to the dairy sector: 85 per cent 951

European Union official website (2006b). European Union official website (2006b). 953 Lazea (2008), p. 18. 954 European Union official website (2005). 955 European Union official website (2006c). 952

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in 2007, 95 per cent in 2009 and 100 per cent as from 2010. However, the total direct support the farmer receives is not allowed to exceed the 100 per cent of the EU15 level of corresponding direct payments in any case. 956 In the first three years after accession only, topping-up may be financed partly by funds for rural development (second pillar). In 2007, a maximum of 25 per cent of the funds from the second pillar may be used for topping-up. For 2008 and 2009 these percentages are 20 and 15 respectively. Any further topping-up must be financed from the national budget. In the first three years after accession, and with the possibility of a two-year extension, the European Union has given Romania the possibility to opt for a different and more simplified system of direct aid scheme than the SPS. This payment scheme is not on offer in the EU15. This different scheme, named the Single Area Payment Scheme (SAPS), involves payment of uniform amounts per hectare of agricultural land (in other words: Euros / hectare), irrespective of the crops produced (or not produced at all: as long as the land is maintained in good agricultural condition 957 ), up to a national ceiling resulting from the accession agreements. In this way, Romania avoids the requirements of the quite sophisticated administration with which it is not yet familiar and which is necessary for the direct payments under SPS. In contrast to the SAPS, the SPS is decoupled from production. The rationale behind decoupling is to guarantee farmers a more stable income. Because farmers receive the same amount of aid, they are enabled to adjust production to demand. Romania chose to opt for the SAPS starting from the date of accession for a period of three years and the possibility of a two-year extension. Meanwhile, Romania attempts to perfect its Integrated Administration and Control System (IACS), which is necessary to administer the complex SPS, in line with the requirements of the European Union. 958

19.2.2 Second pillar of the CAP: rural development The second pillar consists of rural development. According to the Council Regulation (EC) No. 1698/2005, rural development policy for the period 2007-2013 must be focused on the following three themes: improving the competitiveness of the agricultural and forestry sector, improving the environment and the countryside and improving the quality of life in rural areas and encouraging diversification of the rural economy. Besides these three themes, a part of the funding must support projects based on experience with the Leader Community Initiatives; a forth theme. According to the Council Regulation (EC) No. 1698/2005, this initiative involves “highly individual projects designed and executed by local partnerships to address specific local problems”. Funding under the second pillar must be spread over these four themes or ‘axes’ and laid down in National Strategy Papers, covering the period of 2007-2013, to achieve a coherent strategy for rural development across the European Union. As for rural development policy, the Romanian National Strategy Paper for 2007-2013 states as overall objectives: “increase the economic dynamics of Romanian rural areas including the development of a sustainable agriculture and forestry sector; preserve, protect and consolidate nature, environment and natural resources; enhance the social dynamics and the quality of life in rural areas”. 959 The general objectives of the strategy are in full compliance with Council Regulation 1698/2005 and take into account the strategic orientation of the European Union. The total expenses of the Romanian National Strategy Paper are estimated at 8,022 million Euro. 960 Therefore, 45 per cent of the financial means offered under pillar II are used for the improvement of the competitiveness of the agricultural and forestry sector (axis one). The Romanian government wants to realise this through the improvement of the skills of farmers, 956

European Union official website (2005). Lazea (2008), p. 21. 958 Ministry of Agriculture Forests and Rural Development official website (2007). 959 Ministry of Agriculture Forests and Rural Development official website (2007). 960 Ministry of Agriculture Forests and Rural Development official website (2007). 957

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allowing them a better management of their agricultural holdings. The focus here is vocational training of commercial farmers, semi-subsistence farmers and foresters, increasing their human capital. This should result in a better adaptation of their production to market demands according to the requirements of efficiency, while respecting the various standards imposed by the European Union. Moreover, the government strives for a ‘decent phasing out’ of subsistence farmers. Investment in physical capital will be supported as well, not only to introduce technical progress, to reduce production costs and rationalise production processes, but also to introduce hygieneand work-security standards. On top of that, the aim is to restructure and modernise the processing and marketing sectors for agricultural and forestry products. 961 Another 25 per cent of the rural development funds will contribute to improve the environment and the rural areas through the sustainable use of agricultural and forestry land (axis two). 962 Therefore, measures will be taken to protect biodiversity, tackle climate change and support environmentally friendly farming practices. As for the third theme, thirty per cent of the financial means for rural development increase the quality and attractiveness of life in rural areas and diversify the economy. Plans have to be made to maintain and develop economic activities aiming at increasing the employment in rural areas. This seems necessary since measures taken under theme one will probably see higher unemployment as a result: increasing farm productivity and competitiveness requires a substantial transfer of labour from farm to non-farm activities. Therefore, farmers will be stimulated and supported to acquire more skills to be able to diversify their activities, such as processing their raw products, marketing them directly and the encouragement of agro-tourism activities. 963 Infrastructure projects and the organisation of social events enhance the quality of life in rural areas. The share of initiatives via Reader (theme four) will be at least 2.5 per cent (2010-2013) of the funds associated with the second pillar. Goals are the promotion of the endogenous potential (physical and human resources which can contribute to social and economic development) of the territories and the improvement of local governance. 964

19.2.3 Consistency of pillar II of the CAP with national programmes In addition to the objectives in the National Strategic Plan of rural development, the Romanian government has set up its own measures for sustainable development to achieve economic development in rural areas. These measures are directly related to the second pillar of the CAP. Several goals have been identified, such as: a special credit policy for the farmers and companies in rural areas; a special scheme for early retirement; cadastre improvement as preparation for a successful implementation of the measures under Axis one of the National Strategy Paper; the setting up of socio-economic guidance services to the agricultural population; improvement of the genetic quality of cattle; upgrading of the primary irrigation networks and associative organisation for its cooperation. 965

19.2.4 Absorption of CAP-related funds The European funds form a big opportunity for Romania for further development of its economy. The Common Agricultural Policy particularly appears to be quite beneficiary for Romanian farmers. However, it is questionable to which extent the Romanian farmers will benefit from the funds offered through the CAP. First of all, only farms with an utilised agricultural area of more than one hectare are eligible for direct payments. Second of all, payments under SPS and SAPS 961

Ministry of Agriculture Forests and Rural Development official website (2007). Ministry of Agriculture Forests and Rural Development official website (2007). 963 Ministry of Agriculture Forests and Rural Development official website (2007). 964 Ministry of Agriculture Forests and Rural Development official website (2007). 965 Ministry of Agriculture Forests and Rural Development official website (2007). 962

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demand full compliance with standards set by the European Union regarding issues such as animal protection and environment protection. Concerning some characteristics of subsistence agricultural farms, such as a lack of technology and other knowledge, it is uncertain whether they comply with these sophisticated standards. Moreover, concerning the widespread poverty in the isolated rural areas and sometimes the absence of modern communication methods, basic infrastructure like roads, electricity and running water, it is disputable whether the rural population is at all able to meet those standards. The IACS information of 2008 shows 1,230,000 submitted application forms for direct payments, 966 confirming the idea that CAP related funds will only benefit a small share of the farms, which are very likely to be bigger (commercial) farms. Although funds offered through rural development (second pillar) were open for Romanian farmers at the first day of accession, the Romanian government needs to have sufficient bureaucratic capacity to design measures and policies, and implement them in order to absorb the available funds. In 2007, Romania reached an absorption rate of lower than ten per cent of all available European funds, which places the country below the member states that entered the European Union in 2004. Those ten states reached an absorption rate of twenty per cent in their first year of accession and an average absorption rate of 75 per cent in 2006. 967 Taking into account the problems Romania already has regarding finding suitable personal, it is dubious the government will have enough capacity to reap all the benefits of the second pillar of the CAP.

966 967

Lazea (2008), p. 24. Dobrecu and Barna Senior (2008), pp. 2-4.

181

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20. The energy sector This chapter will make an analysis of the energy sector in Romania emphasising the progress, challenges and opportunities of this industrial branch in the light of the country’s EU integration. An important issue is to what extent Romania actually applies the EU regulations that the country agreed to in the acquis communautaire. First an outline will be given of the current situation concerning energy: the generators of energy, transporters, distributors and suppliers. In the second part, problems and challenges that face Romania’s power sector will be discussed. The last part will investigate the plans for future development of the sector, such as the construction of three new reactors of the Cernavoda power plant and the involvement of Romania in the Nabucco gas pipeline project.

20.1 Overview of the Romanian energy sector Romania has a wide range of natural resources that can be used to produce energy, both renewable and non renewable. The non renewable energies are the major contributors to the production. The country’s non renewable energy includes oil, natural gas, coal and uranium. Nationally exploited oil and gas cover respectively 60 per cent and 69 per cent of the national consumption. The remaining approximately 30 per cent of the national gas consumption is mainly imported from Russia. 968 (see figure 20.1) Natural Estimated Reserves Production Percent of the resource national consumption Oil 73.7 mil. tonnes 5 mil.tonnes (2006) ca. 50 % Natural gas 184.9 bill. m3 12.3 bill. m3 (2006) 69 % Bituminous 755 mil. tonnes (105 mil tones 2.6 mil. tonnes coal exploitable by land concession) Lignite

1490 mil. tonnes (445 mil. tones 32.5 mil. tonnes exploitable by land concession) Uranium -till the year 2017 for 2 units of 50.000 tonnes the Cernavodă nuclear plant uranium ore 0.1 Figure 20.1 Overview of Romanian energy sector: statistics Source: Ministry of Economy and Commerce (2006), p. 3. Romania’s renewable natural resources consist of hydro, wind, solar, and geothermal energy, and of biomass and biogas. (see figure 20.2) By far the most important resource which is being exploited is hydro energy which generates 20-30 per cent of the total energy production. Type of resource Solar energy

Annual potential 60 PJ 1.2 TWh Wind energy 23 TWh Hydro energy 36 TWh Biomass and biogas 318 PJ

Applicability Thermo energy Electric energy Electric energy Electric energy Thermo energy Electric energy Geothermal energy 7 PJ Thermo energy 0.2 Figure 20.2 Overview of Romania’s renewable sources 968

Ministry of Economy and Commerce (2006).

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Source: Ministry of Economy and Commerce (2006), p. 4. The energy market consists of energy production, transmission, distribution, suppliers and consumers. In Romania, five state owned companies operate in the energy industry: Nuclearelectrica; Hidroelectrica; Termoelectrica for generation of respectively nuclear, hydro and thermo energy; Transelectrica for transmission and Electrica for distribution. The percentages of energy generated in Romania by natural resource type are: 17 per cent nuclear, 25-30 per cent hydro and more than 50 per cent thermo energy. The nuclear energy producer, Nuclearelectrica, operates the Cernavoda nuclear plant. Out of the five planned reactors, two are already functioning. The first one was finished in 1996 and the second one in 2007, which is of Canadian design. The completion of the next three reactors is expected by the year 2015. The hydro energy producer, Hidroelectrica, administrates all the hydro centrals in the country, out of which two of them, situated next to the Danube River, provide 40 per cent of the total hydro energy. Romania has 63 thermo producers in Romania. More than 50 per cent of the thermal energy (which is 30 per cent of the total energy produced) is produced by Combined Heat and Power (CHP) plants. There are twenty CHP plants in the major towns. Most of the CHP plants have a low efficiency because they are obsolete and lack capacity. The total efficiency of the Romanian CHPs is between 43.5 per cent and 74 per cent. 969 Romania also has three ‘energy complexes’: Turceni, Rovinari and Craiova, which are involved both in brown coal extraction and the production of thermo energy. Termoelectrica, the principal thermo supplier, has seven generators, of which the Electrocentrale Bucuresti is one of the biggest. There are also several independent producers and self-producers. As far as installed capacity is concerned, Romania has an important excess capacity and reserves (18.314 MW 970 ). A part of this excess capacity will disappear over the next years. According to the government, Romania will lose about 8000 MW of its capacity by 2015. 971 The government has plans to privatise some large generation plants, but there has been no concrete action so far. Some smaller plants have already been set up for privatisation, but this turned out to be an unsuccessful initiative. Romania is a net exporter of energy to Serbia, Bulgaria and Hungary (in 2006, 5.2 TWh). In the same year it imported one TWh from Serbia, Ukraine, Bulgaria and Hungary. 972 As far as distribution is concerned, since 2000 the existing monopoly is abolished through the division of Electrica into eight companies, out of which five were privatised. However, the privatisation of the generation sector has been delayed. 973 As for consumption, there are 8.6 million consumers, of which eight million are residential and six hundred thousand industrial. Consumers which have an income under the minimum wage previously benefited from a so-called ‘social tariff’, but this was against EU regulation. Therefore, the social tariff was abolished in 2007, and as an alternative, transfers are now made from the state budget as income support. 974 The energy sector is supervised and regulated by the Ministry of Economy, the Romanian Energy Regulatory Authority (ANRE) and the Competition Council. ANRE was founded in 1998 as an independent institution which is under the supervision of the prime minister. Its president and vice-president are appointed by the prime minister on recommendation of the Ministry of Economy, for a period of five years. The main tasks of ANRE are: establishing prices for

969

Diaconu, Oprescu and Pittman (2009), p. 115. Ministry of Economy and Commerce (2006). 971 Diaconu, Oprescu and Pittman (2009), p. 115. 972 Diaconu, Oprescu and Pittman (2009), p. 115. 973 Diaconu, Oprescu and Pittman (2009), p. 114. 974 Diaconu, Oprescu and Pittman (2009), p. 117. 970

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consumers; to monitor the energy market; the compliance with the regulations; to license companies; and to elaborate the Commercial Code in the power domain. 975

20.1.1 Reform in the energy sector The reform in the energy sector started in 1998 in order to meet the requirements of the acquis communautaire. Romania accepted the whole acquis regarding the build up of emergency oil stocks, nuclear safety and the internal energy market. Negotiations started in 2002 and finished two years later in 2004. Romania made significant progress in reforming its energy sector; in certain areas it even went ahead of some older EU member states. An example of such an important reform is the vertical separation of electricity industry, i.e. the division between generation and distribution of electricity. The energy market consists out of two sub-markets: the regulated market and the competitive market. The regulated market serves the ‘captive consumers’, i.e. those consumers that do not have the possibility to choose their supplier, due to legal, technical or economical reasons. Officially, since 1 July 2007 there is a complete market opening, which means that theoretically, every consumer has the right to choose its own supplier. However, the category of captive consumers continues to exist and the tariffs they pay are regulated by ANRE. As mentioned above, privatisation was only pursued in the distribution branch of the energy sector. As for now, further privatisations are not planned for the near future, among others because attempts to privatise big thermo plants like Rovinari failed. Another problem is that EU regulations do not allow any state aid to be given to Termoelectrica (see the section on problems below). The government found a solution by raising money for the necessary investments for this company by placing a small part of the shares of Hidroelectrica and Nuclearelectrica on the Bucharest stock exchange. The same strategy was successfully adopted in 2006 for Transelectrica, which also listed 10 per cent of its shares on stock exchange. 976

20.2 Problems and challenges Until recently one of the major problems in the Romanian energy market was the pricing system for electricity, gas and heating. The tariffs were administratively set under production cost. Regulation authorities advised to set realistic prices, but this option was overruled by the government. In addition, state subsidies were given to the energy sector. These events had major implications, especially for the heat production units. Their prices only covered a fraction of the production cost, which lead to a delay in payments to gas suppliers. Besides the tariff system, there was also a problem with the payment discipline of the consumers. Until a few years ago state owned companies could not cut off the energy supply to enforce payments. In order to recuperate some of the losses, the power plants accepted compensations from industrial debtors. 977 For example, Termoelectrica was not paid in cash by its debtors, but in kind. This impeded the possibilities for new investments to be made for the modernisation of the thermo plants. The government policy for Termoelectrica was the cancellation of its debts, but this constituted a blow to the country’s budget and this was also not in line with the EU regulations. 978 This policy is not practiced any more. This situation reflects the status of the energy sector in 2002. However, from that moment on progress has been made. As mentioned in the previous section, Romania has, for example, achieved a full separation between the producing and distributing companies. The partial privatisation of the distribution branch has led to more competition in this field. Also, regulation 975

Diaconu, Oprescu and Pittman (2009), p. 114. Diaconu (2008), p. 162. 977 Interview B24. 978 Diaconu (2008), p. 161. 976

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authorities are becoming more and more independent. Moreover, since 1 July 2007 the energy market is fully open, which means that every costumer can theoretically choose its own supplier. The situation is more problematic on the production side. There are difficulties regarding the privatisation of the energy generators. At the moment, the production companies are still state owned. The hydro plants are considered the most viable ones and could attract private investors. However, they are considered of strategic importance and therefore the state is not willing to privatise them. The government did offer a part of Termoelectrica for privatisation. However, the lack of success of this attempt was due to various reasons. First, the required investments to replace the old technology were too high for potential investors. Secondly, because of the pricing system, which was below production costs, the thermo centrals had accumulated a debt of 1.2 billion Euro by 2006. Third, the state made a ‘horizontal unbundling’ of Termoelectrica, which consisted of the separation of the Turceni, Rovinari and Craiova complexes from the parent company. They became independent producers and their debts were taken over by Termoelectrica in a failed attempt to make them attractive to foreign investors. As a result, Termoelectrica was left not only with a huge debt, but also with the less attractive plants operating with old and inefficient technology. A second problem, which also constitutes a cause for the failed privatisation of the thermo plants, is the fact that thermo centrals, especially the CHPs, are not competitive. These plants which provide heat and electricity become so-called ‘baseload’ plants in the winter. Baseload plants cannot regulate their electricity output and adjust to consumer demand since they produce energy at a constant rate. Not being able to regulate the electricity output implies electricity has to be sold at any price in the wholesale market. This is in contrast to ‘nonbaseload’ plants, which are able to regulate their output. Examples of such plants are gas and oil fired electricity plants which do not produce heat. In this context, Romania finds itself in quite an awkward position, as during the winter 70 per cent of the Romanian generation capacity turns into baseload production plants. This is not only because CHPs are considered baseload plants, but also nuclear, coal and hydro plants have difficulties adjusting their output to demand. For hydro plants, for example, it depends on whether they have storage ponds to store water in times when prices are low and to turn to full production again when prices are high. 979 These elements have as a consequence that the Romanian economy is energy intensive. This means that a high amount of energy is employed to produce one euro of GDP. The intensity is caused by the numerous industry branches which are high energy consumers. They have a low productivity and obsolete technology. The energy intensity is a hinder for economic growth and competitiveness and has a negative impact on the environment. 980 In September 2007 the government presented an alternative strategy to make thermo plants profitable. They wanted to reorganise the sector, by grouping viable and non-viable plants into two or three large regional companies. For example, the profitable hydro plants would be grouped with thermo plants and the latter’s losses would be compensated by the profits of the former. 981 The main motivations for these plans was to make Romania a large geostrategic player in the region and to make the Romanian energy sector more concentrated, like in other European countries. In its attempt to become an important player on the energy market in South Eastern Europe, Romania signed the Athens memorandum in November 2002 together with Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Kosovo, the Former Yugoslav Republic of Macedonia, Romania, Serbia, Montenegro and Turkey. All agreed to organise the South-East Europe Regional Energy Market (SEEREM) for electricity and gas. The countries agreed on a common energy strategy; on tariffs for energy that would be above production costs, on the 979

Diaconu, Oprescu and Pittman (2009), p. 120. Ciupagea, Diaconu, Turlea and Nita (2007), pp. 40-41. 981 Diaconu (2008), p. 162. 980

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creation of a social safety net for the power sector, on the set up of an independent regulator, and on a distribution system operator independent from the other branches in the sector. All these measures were to be implemented by 2005. 982 However, the concentration of the energy sector would inevitably lead to a less competitive market, with less efficiency and higher energy prices for the consumer. To prevent this tendency of concentration in the energy sector, the European Commission launched new legislation in September 2007. According to the Commission, an integrated and competitive energy sector is essential to guarantee safe supply and to achieve strategic goals. 983 The attempts to modernise and to make the Romanian energy sector efficient have also been hindered by the involvement of politics in this industrial branch. Corruption scandals involving managers from public energy companies have been an issue over the last couple of years. They are suspected to have other goals than maximisation of profit and to respond to political influence. For example, Hidroelectrica has given long term contracts to certain energy suppliers at tariffs below the market price or even below production costs. 984 Another issue is represented by suspicion regarding the political independency of ANRE. The fact that the prime minister, together with a commission in which also the president takes part, elects the head and the vice-president of ANRE, links this institution to the ruling political party. The actual president of ANRE, Petre Lificiu, is a member of the ruling PDL party. He started the position just a few months after the parliamentary elections of 2008.

20.3 Development and prospects for the future Romania has the opportunity to become an important player in the region. This is aided for example, by the fact that the Cernavoda nuclear plant has modern Canadian technology, while the other nuclear plants in the region, such as the Bulgarian Kozlodui nuclear central, were built with old-fashioned Russian technology and were forced by the EU to close down. Moreover, three more reactors of Cernavoda plant are expected to be ready in 2015. This will mean less dependency on energy import from Russia and the possibility for Romania to become a major energy exporter. Another potential for the future is the production of renewable energy, especially wind and solar energy.

20.3.1 The Nabucco project In February 2002 the first plans were made to construct a new pipeline, which will transport natural gas from the Caspian Sea to Central Europe. The pipeline, named the Nabucco pipeline, will run from Azerbaijan, via Georgia, Turkey, Bulgaria, Romania, and Hungary to Austria. The main incentive to construct this new pipeline is to diversify the gas supply to Europe. In the present situation Russia is the main supplier of gas to Europe. All pipelines reaching Europe run though former Soviet states, which can lead to uncomfortable situations. This became clear in the winter of 2005, when an argument between the Ukraine and Russia about the price of natural gas led to diminishing gas supplies to the European Union. Besides the problem of discontinuity, it has also become clear that Russia is using its vast gas supplies as a key element in its foreign policy. The construction phase of the pipeline is expected to start in 2011. At the Nabucco Summit, held in Budapest in January 2009, the strong commitment of all participants to the project was reiterated. There is some pressure from Turkey, who threatened not to participate financially to the construction of the pipeline if the accession talks with the EU remain blocked. 985 In spite of this potential threat and a possible postponement due to the economic 982

Kennedy (2009), p. 2202. Ciupagea, Diaconu, Turlea and Nita (2007), p. 43. 984 Diaconu (2008), p. 161. 985 Nabucco project official website (2009). 983

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crisis, it seems that the construction of the pipeline will go ahead. For Romania, the Nabucco project has both economic and political advantages. On the one hand, it secures gas supplies and decreases economic dependency on Russia. On the other hand, it provides work for Transgaz, the Romanian gas transport company. As part of the Nabucco project, Romania will become an important link in the gas supply towards Central Europe.

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21. Infrastructure and transport This chapter will make an analysis of the infrastructure and transport system in Romania. The first section will make an outline of all the means of transport that are present in the country. The second section will look at the main problems and challenges in the sector. The last section takes a glimpse at the future and outlines the developments and prospects.

21.1 Analysis of the current situation In Romania we find the following types of transport and infrastructure: road transport, railway, air transport and waterborne transport. Romania is connected with the rest of Europe through the Trans-European Transport Networks (TEN-T). The TEN-T is a project initiated by the EU to promote the goals of the internal market. Romania is situated on the following TEN-T Priority axes: • Priority axis 7 (road): Igoumenitsa/Patra-Athens-Sofia-Budapest •

Priority axis 18 (water): Rhine/Meuse-Main-Danube

•

Priority axis 22 (railway): Athens-Sofia-Budapest-Vienna-Prague-Nurnberg/Dresden

21.1.1 Road transport As far as road transport is concerned, the priority has been the construction of highways and of by-passes around the main cities; and the rehabilitation of the roads in the TEN-T network. The following projects were launched: 1. Rehabilitation of Bucharest – Pitesti motorway; 2. The construction of the Bucharest-Constanta motorway, financed by EIB, ISPA and the Romanian government; 3. The construction of the Pitesti-Sibiu-Nadlac motorway, along the TEN-T priority axis no. 7, part of the Sectoral Operational Program in Transport (SOP-T), under the European Economic and Social Cohesion Policy, financed by the EU Cohesion Fund, the ERDF and the Romanian government; 4. The construction of the Brasov-Cluj-Bors motorway launched in 2004, financed by the Romanian government. Known as the ‘Autostrada Transilvania’, the highway is built by the American Bechtel Group. It is a 3.2 billion dollar project for a ca. 400 km long motorway. It is expected to be finished in 2013. 986 5. The construction of the Bucharest-Brasov motorway, financed by the Romanian Budget. 987

21.1.2 The railway transport Besides the state owned Romanian Railway Company (CFR), thirty private railway undertakings are present which make up for 6.7 per cent of the total network tasks. In the railway sector, priority has been given so far to the modernisation of the TEN-T network (50 per cent of all train traffic runs on these tracks; this represents 20 per cent of the total network). The work began in

986 987

Business Week (2008). Ministry of Transport (2006), p. 14.

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1999, with financing from EBI, ISPA and JBIC. Rehabilitation of sixteen stations is also under way.

21.1.3 Air transport Romania has seventeen airports, out of which eleven are located on the TEN-T through agreement with the EU. 988 The main airport is Bucharest International Airport, Henri Coanda. Comparative data for the years 2006 and 2007 show an increase of 40 per cent in the number of passengers handled by this airport. 989 Passenger traffic has increased since 1998 by more than 10 per cent a year. Eighty-nine per cent of air passengers are passengers on international flights. 990

21.1.4 Waterborne transport The water transport makes use of sea harbours, river harbours, and inland waterways. There are three sea harbours, out of which Constanta is the major one and the largest at the Black Sea. It is placed at the intersection of the TEN-T priority axes 7 (road), 18 (waterway) and 22 (rail). It is connected with the harbour of Rotterdam through the Danube and the Rhine-Main-Danube Canal. Ports are administrated by a completely state-owned company. Also a new container terminal, Constanta South, was built and piers were rehabilitated. The port traffic increased in 2008 with 7 per cent as compared to 2007. 991 There are also four river and sea ports on the Danube. The maritime sector of the Danube has a length of 170 km. The total length of the Romanian sector of the Danube River is 1,075 km, out of which 320 km is situated solely on Romanian territory. The Danube is part of the TEN-T Priority axis no. 18. It has three bridges and two dams in the Romanian sector. The construction of a fourth bridge, the Vidin-Calafat, is a state project. We can conclude that Romania is located at the intersection of many roads connecting North and South, and East and West within Europe. Romania is also a hub between Europe and Asia. Romania can be described as the eastern gate of the EU. The country has competitive private road services, both for freight and passenger transport and an extended rail network with state and private operators. Constanta Harbour, located on TEN-T has the capacity to expand its activity and therefore possesses economic potential. Furthermore, the water transport is well developed. Multimodal transport (road/rail), which is more environmentally friendly, is extensively used for container transport. 992

21.2 Problems and challenges The following problems of the transport infrastructure were identified in Romania’s National Development Plan (for the period 2007-2013), according to the SOP-T Report of 2007: insufficient capacity of the domestic transport (freight and passengers); insufficiently developed infrastructure; limited access to West European corridors and to Eastern and Southern Europe (these problems regards road, water and rail transport). These problems were caused by a series of organisational barriers, out of which the most important are: insufficient skilled personnel; lack of institutional capacity regarding the increasing number of projects; poor planning skills at governmental level; lack of strategy in the domain; political interference in professional decisions and the sector’s limited financial means. 993 Furthermore, there is a low level of safety in all

988

Ministry of Transport (2006), p. 20. Bucharest International Airport official website (2009). 990 Ministry of Transport (2006), p. 35. 991 The Harbour of Constanta official website (2009). 992 Ministry of Transport (2006), p. 52. 993 Nutu (2008), p. 40. 989

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modes of transport except for air transport. 994 Other problems identified were the reduced use of public transport and the high level of bureaucracy. An example of the poor planning skills is represented by the inexistence of a General Transport Master Plan, a document which should be the basis for any long-term plan in the transport sector. The realisation of the Master Plan was financially supported by ISPA and was supposed to be completed in December 2008. Up to now, no data are available regarding its completion. Besides these general problems, specific problems have been identified for the different sectors of transport. As far as road transport is concerned, road congestion was noticed 995 , poor road safety (one out of three accidents is fatal, this is three times the EU average), as well as the existence of numerous black spots, due to low maintenance of the roads (60 per cent of the roads are in need of urgent rehabilitation) and to postponed maintenance. 996 Postponed maintenance is the consequence of the desperate need for financial support, necessary not to perform regular repairs, but full rehabilitations (this is also a proof of the lack of strategy in infrastructure). For example, out of the budget which was allocated for road maintenance in 2007, 64 per cent was dedicated to administrative costs, such as salaries. For the actual maintenance, the financial needs were not met: for the periodic maintenance of pavement structure the sum of ca. 800 mil. RON was needed, but as little as ca. 150 mil. RON was allocated (19 per cent). The low maintenance leads to indirect costs for the public, such as high costs of car repair, unsafe roads and reduced speed of traffic. Another problem is the low density of highways. However, the overcrowding of national roads is considered by some analysts to be not the result of little kilometres of motorway, but of the bad condition of local roads, which makes people prefer national roads even when driving cars for short distances or riding bicycles. The rehabilitation of secondary roads should be a governmental priority. 997 Further problems are the absence of good private freight and passenger services in most rural areas; speed limits for heavier trucks, imposed by the poor quality of the roads; and traffic congestion in the vicinity of big cities, because no city has a ring road. As far as the rail system is concerned, reduced rail speeds and a decline in the number of rail passengers were noticed. 998 These problems arose from the low maintenance of the railway infrastructure (630 km or 6 per cent of the network has speed limitations, compared to 386 km in 1995; there are 1110 dangerous locations). The speed limitation is 50 km an hour for 27 per cent of the rail network and 80 km an hour for 39 per cent. 999 Other problems are poor management, translated in inappropriate signalling; traffic control and bureaucratic hassles; and delay in implementing any kind of modernisation project (80 per cent of the IFI projects has a delay). This is due to poor implementation mechanisms and to the lack of strategic vision, but also to more concrete causes, such as the instability of management and the lack of autonomy of companies such as CFR. Also in the water transport problems were encountered, regarding low investment in construction and maintenance of fluvial and maritime ports infrastructure; limited Danube navigation for large vessels because of the depth and width of the canals; little bridges and ferries and no investment in river management, which makes rivers unattractive as transport routes. The problems in transport infrastructure have reduced competitiveness and attractiveness of the Romanian market for investment.

994

Ministry of Transport (2006), p. 52. Ministry of Transport (2006), p. 9. 996 Nutu (2008), p. 40. 997 Nutu (2008), p. 42. 998 Ministry of Transport (2006), p. 52. 999 Nutu (2008), p. 46. 995

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21.3 Development and prospects for the future Future plans for the Romanian transport infrastructure are set out in the SOP-T Report, elaborated for the period 2007-2013. Laid out in the report is “the modernisation and development of TEN-T priority axes aiming at sustainable transport system integrated with EU transport networks.” 1000 This project will lead to “territorial cohesion between Romania and the EU member states” 1001 improving the infrastructure along the TEN-T priority axes 7, 18 and 22.

21.3.1 Road transport The SOP-T’s main target is to finish the construction of the Nadlac-Constanta motorway and to start the Southern branch of it. (see figure 21.1)

0.1 Figure 21.1 Nadlac-Constanta motorway Source: The construction of the Nadlac-Constanta motorway: from Government of Romania, Ministry of Transport (2006), p. 124.

21.3.2 Railways Romania’s position on the TEN-T Priority Axis 22 means that in the future, a high speed train line will connect Bucharest with Budapest-Vienna-Prague-Nurnberg/Dresden. The SOP-T’s main 1000 1001

Ministry of Transport (2006), p. 60. Ministry of Transport (2006), p. 60.

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target for 2013 is to modernise and rehabilitate the rail network on the 22 axis Curtici-Constanta. Another objective is to have 51 per cent electrified rail by 2010 and to have passenger trains riding at 160 km an hour and freight trains at 120 km an hour. By 2015, the railway strategy is to insure the interoperability of 4300 km of rail in Romania (to be operable for foreign trains). 1002

21.3.3 Waterways The SOP-T’s main target is to conduct maintenance work along the Danube River to improve conditions of navigation. The Romanian government has manifested the intention to finish the project of digging a Danube-Bucharest canal. The works were started before 1990, but were abandoned after the fall of the communist regime. The Ministry of Transport has plans for a feasibility study in 2010 and for finishing the work on the canal in 2014. The advantages of this canal will be the following according to the Minister of Transport: the capital will become a fluvial port and will be set on the seventh Corridor; the canal will have a transit capacity of twenty million tonnes a year; and two hydro-centrals will be placed on the canal, to produce electricity. 1003

1002 1003

Nutu (2008), p. 46. Mediafax official website (2008).

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22. Competition, Small and Medium-sized Enterprises and investment 22.1 Competition policy Competition policy is an important element in guaranteeing a functioning market economy within the EU. Therefore adopting EU-law on antitrust, mergers and acquisitions, abuse of dominant position and state aid is essential for European integration. Competition can be distorted either by anti-competitive behaviour of companies or by authorities granting state aid. By November 2003, the EC found that Romania’s antitrust legislation was ‘broadly in line’ with EU-law. 1004 Regarding state aid, the European Commission (EC) was still pushing for more efforts in 2005 and in its 2006 report the EC concluded the Romanian Competition Council (henceforth, Competition Council) had to continue efforts in order to assess remaining state aid. 1005 However, in May 2006 Brussels was mainly positive about the progress Romania had made on state aid enforcement. One must bear in mind that many developments regarding competition policy in Romania came through not long before admission to the EU. Both antitrust legislation and state aid law were amended in 2004. Knowledge about the competition legislation and the Competition Council seemed to be still lacking among economic agents in Romania a few months before EUaccession. 1006 A majority had not heard about the Competition Council at the time it was set up with the Competition Law of 1996/1997. By 2006, awareness about anti-competitive practices, like setting prices, division of the market, production-selling rates, eliminating competitors, suppliers or buyers or exchanging information among competitors, was still very low. 1007 This was partly confirmed by a survey carried out for the Competition Council by an independent authority in 2007. It found that though big companies were aware of competition policy, the small and medium enterprises (SMEs) were less aware of this issue, including local state aid. Therefore the Competition Council established a new strategy after identification of these problems. 1008 Knowledge about competition legislation is crucial for economic actors in order to defend themselves against anti-competitive practices, but also to avoid infringing the rules and risking fines that can go up to 10 per cent of turn-out. However, even the government seems to lack knowledge when it comes to competition policy. In 2007 the government did very little to obtain structural funds, because of its difficulties in understanding state aid rules. Because the government fears it infringes competition law, it tends to avoid the development of more sophisticated state aid schemes or to use exceptions. To authorise a scheme, a well designed programme is needed for which knowledge of competition policy is essential. Therefore, there is a tension between policy development on the one hand and competition policy on the other hand. 1009 Following advice from the EC, the Competition Council has established a national network on state aid and holds meetings to reduce friction between suppliers of state aid and the Competition Council. 1010 In addition to the assessment of remaining state aid and informing economic actors about competition policy, the Competition Council has an important task in promoting competition in the utilities sector and infrastructure industries. The Competition Council is working actively with the utility sector and is applying a policy of prevention instead of repairing by maintaining good 1004

European Commission official website (2003), p. 60. European Commission official website (2006e), p. 22. 1006 Dima, Prejmerean and Vasilache (2007). 1007 Dima, Prejmerean and Vasilache (2007), p. 173. 1008 Interview B15. 1009 Interview B37. 1010 Interview B15. 1005

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interaction with the regulatory authorities. 1011 However, in the liberalisation of the energy market most developments have been relatively new within the whole of the European Union. Therefore, in Romania debates at national levels have been stimulated by the Competition Council, but many doubts persist regarding the internal energy market (high prices, few alternatives in suppliers and lacking transparency). 1012 Currently, liberalisation in energy transport and distribution has already been dealt with, but the production side remains a hot topic in Romania. 1013

0.1 Figure 22.1 Public ownership and state involvement in business operations Source: World Bank official website (2007), p. 18.

22.2 Declining state involvement? By 2006 many companies had been privatised, including the banking sector, which is almost entirely in foreign hands. Despite the government’s golden share in Petrom SA, the national oil company was privatised and more generally, the gas and electricity distribution was privatised and important unbundling occurred in this sector. The steel sector has been privatised and is owned by big foreign multinationals like Mittal, Mechel, TMK and Tenaris. 1014 Another element crucial for a market economy, namely price liberalisation, took place in a wide range of sectors such as retail distribution, air travel and the telecommunications sector. 1015 Despite this declined state involvement, when Romania adhered to the EU in 2007, public companies still controlled substantial parts of the Romanian economy, especially in the energy sector where energy prices had still not approached import prices. 1016 The reduction of the state’s involvement in the economy was an important condition for Romania’s accession to the EU. By May 2006 the economy was considered to be a functioning market economy according to the EC, but the monitoring report did not describe the relative progress Romania had gone through in terms of the state’s presence in the economy. 1017 In order to establish Romanian state control in the year leading up to EU-accession a comparison with older member states can provide some useful insights. Looking at the level of public ownership and state involvement in business operations in figure 6.20, the Romanian state seems to be more present in the economy than is the case for the EU15. 1018 However, regarding public

1011

Interview B15. UNCTAD official website (2006), p. 7. 1013 Interview B15. 1014 Radio Romania International official website (2009a). See also, interview B15. 1015 World Bank official website (2007), p. 21. 1016 World Bank official website (2007), p. 18. 1017 European Commission official website (2006e), p. 17. 1018 Important to notice is that the levels in the graphs represent scores from 2006 for Romania and Bulgaria and 2003 for the other countries/groups. World Bank official website (2007), p. 18. 1012

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ownership Romania does not compare unfavourably with Poland a year before EU-accession. 1019 Romania’s state involvement in business operations was smaller than that of Hungary, Bulgaria and Poland a year upon entering the EU. Nevertheless, Romania’s public sector remains important, mainly in energy and road and rail infrastructure. 1020 Apart from the large size of the public sector (see appendix 1), two issues stand out, namely the scope of the public sector and the control of public enterprise by legislative bodies. Regarding the scope (“the extent to which the state holds equity stakes in the largest firm in different sectors” 1021 ) of the public sector Romania seems to be in a better position than many EU15 countries (including Germany, France, Italy and Spain). 1022 However, when it comes to control by public bodies on public enterprise, Romania stands on top together with Hungary. For the figures in 2006 this was mainly due to the golden share the government held in the oil sector (Petrom SA). With a golden share of more than 25 per cent, the government is able to block important decisions on mergers, acquisitions and management decisions since these can only be taken with 75 per cent of the votes. 1023 However, as can be concluded from the figure in appendix 1, the influence of legislative bodies on public enterprise varies significantly among the older EU members themselves, ranging from Sweden and Denmark with very low levels to Italy and Portugal where exerted control is much higher and not far from Romania’s level.

22.3 Product market regulation obstacles Romania seems to have met most of the acquis’ requirements on competition policy. In addition, the Romanian government has gone beyond that, implementing policies that were in its discretionary power. 1024 From 2001 onwards the Romanian government has been implementing annual Action Plans to cut down administrative barriers to business. 1025 As a result, regulatory and administrative procedures have been simplified, but since then the main problem has been efficient enforcement. 1026 By incorporating EU-law in its national legislation, Romania has reduced barriers posed by licences and permits. 1027 In reforming its rules and regulations, Romania is not far from EU averages and has performed better than most other Central and Eastern European countries. 1028 However, the above measured progress reflects officially adopted policies, not their implementation and enforcement. In practice there seems to be a gap between policies and the latter. 1029 Especially production and construction licences are problematic and procedures to connect buildings to utilities take long. 1030 The last issue might be due to a lack of competition in network and utility sectors like energy, infrastructure and telecommunications. This limited competition is caused by legal restrictions to entry in network and utilities sectors, though these restrictions are also present in many other EU member states. 1031 In addition, in eliminating antitrust exemptions Romania does better than the EU15 and it also fares well in lowering burdens on starting business (business creation) compared to the older member states. 1032 1019

Since figure 2 shows Poland’s levels in 2003 (a year before its accession) to Romania’s levels in 2006 (a year before accession as well). 1020 World Bank official website (2007), p. 19. 1021 World Bank official website (2007), p. 19. 1022 See appendix 1. 1023 World Bank official website (2007), p. 19. 1024 World Bank official website (2007), p. 12. 1025 World Bank official website (2007), p. 7. 1026 World Bank official website (2007), p. 8. 1027 World Bank official website (2007), p. 13. 1028 World Bank official website (2007), p. 11. 1029 World Bank official website (2007), p. 1. 1030 World Bank official website (2007), p. 17. 1031 World Bank official website (2007), p. 14. 1032 World Bank official website (2007), p. 13.

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However, notwithstanding the progress Romania made in adopting EU policies, effective implementation and enforcement remain crucial and as described above this causes problems in Romanian society (see also the section on SMEs). The capabilities of local government in catching up on and in enforcing adopted policies are confined. The World Bank points to an important issue that has to be improved in order to make legislation effective. Local administration seems to have low levels of qualifications, especially at the lower ranks, which make local enforcement of legislation difficult. This is mainly caused by relatively low remuneration and inefficient selection in human resources (including promotion). 1033 Therefore, successfully adopted formal procedures need to be completed by enhancing the capacity of local administration, before improvements of the business environment can be perceived by entrepreneurs.

22.4 Small and Medium-sized Enterprises Although the state owned enterprises (SOE) sector has suffered from job destruction concentrated in sectors like machinery, equipment, agriculture, construction, mining and metal industry, the SMEs have been responsible for job creation and in 2001 roughly half of total employment was in small and middle-size enterprises (covering only 24 per cent in 1995). In fact job growth has been slowest among SOEs, slightly higher in private companies, and highest in private firms created after 1989. 1034 The SME sector is playing an increasingly important role with 56 per cent of total turnout by 2001 and also became the main source of exports, with apparel, clothing, footwear and furniture accounting for 37 per cent of exports in 2001. 1035 According to today’s figures, SMEs employ over half of the workforce, account for over 50 per cent of exports and represent 74 per cent of Romania’s GDP. 1036 The production from the labour intensive light industries proved to be closer to Romania’s comparative advantage than the heavy industries which had been receiving government support for many years. 1037 The SMEs’ success was partly made possible by preferential agreements with the EU and by subcontracting by European firms. 1038 Despite the relative success of the SMEs, the sector remains small in comparison with other transition countries. 1039 The relatively slow development is partly due to the low income of the Romanians, but more specific problems can be named on this issue. The difficulties SMEs face can be divided between problems at governmental level and at SME level.

22.4.1 Difficulties caused by government (in)action At governmental level a variety of reasons can be put forward: political uncertainty; a difficult administrative and regulatory business environment; and inefficient functioning of the judicial system. 1040 Moreover, many institutions, like a stable currency and reliable credit providers have not always been present in Romania. 1041 Romanian entrepreneurs have been facing significant administrative and bureaucratic barriers. Many have been complaining of constantly changing laws and regulations, which are the result of numerous Emergency Ordinances by the Romanian president. Because of this constant

1033

World Bank official website (2007), p. 30. Calcagno, Hefner and Dan (2006), p. 33. 1035 Ahrend and Martins (2003), p. 347. 1036 Radio Romania International official website (2009b). 1037 Ahrend and Martins (2003), p. 333. 1038 Ahrend and Martins (2003), p. 347. 1039 Ahrend and Martins (2003), p. 348. 1040 Kelemen and Lightfoot (2000), p. 91. 1041 Kelemen and Lightfoot (2000), p. 94. 1034

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change in regulations it is nearly impossible for entrepreneurs to comply with the law. 1042 As one entrepreneur said: “Changes are so fast that no one, including public functionaries, knows what the law requires on any given day.” 1043 In most cases, it is cheaper to ignore the law than to try to respect it. In addition to this complexity, which is aggravated by administrative incapacity of government bodies, laws are not enforced and corruption is rampant. 1044 The number of authorisations and licences can vary per region and business and an efficient court system is lacking. Like one entrepreneur stated that you “cannot use the state courts; they do not exist for me.” 1045 The legal uncertainty affects SMEs in several ways. Expanding a network of clients and suppliers becomes hard when being able to enforce a contract is uncertain. But this uncertainty, excessive and constantly changing regulation and high levels of corruption have a big impact on the business climate for SMEs. In order to obtain authorisations, permits and licences, bribes have to be paid at every level of government. Especially in the rural areas, entrepreneurs tend to ignore the whole legal process, since they face more barriers. The physical distance they need to overcome for authorisations and licences (since they often need to travel to cities for every single regulation) makes evasion the only option to keep their business running. 1046 This combined with legal uncertainty makes it very difficult to create and execute a long-term business plan. 1047 Often evasion of taxation and ignoring the continuous changing of laws is the only way to keep productive activities profitable. Tax law itself has also been changing rapidly. 1048 Today, the difficulties in taxation for SMEs lay not so much in its high level, but more in the high number of taxes and fees. This is a heavy administrative barrier for SMEs and some might easily end up not knowing about a specific tax. 1049 A large informal sector has developed due to the fact that entrepreneurs are keeping their productive activities out of reach of the taxation system and the law in general. As a result, they do not benefit from contractual protection and other mechanisms of the legal system. Enlarging a business network ranging outside family and friends becomes hard in such a situation. 1050 Like an economic advisor to the Romanian president said: “It is easier to take money from others than by producing.” 1051 By 2005, Brussels was still pressing for the removal of administrative barriers and the creation of a stable and predictable legal framework to support the SME sector and reaffirmed that substantial progress was needed in the judiciary to provide a positive business environment. 1052 Many of the difficulties mentioned above originate from the government itself. The ministries have considerable problems in human resources and therefore policies are often poorly designed, implemented and assessed (this also applies to the local government). SME policy is not absent for instance, but there are too many strategies and policy papers. This leads to many objectives and strong fragmentation in terms of responsible governmental bodies and policy measures. Strategies are designed by up to four ministries without proper budgets and are forgotten in a later stage, when new strategies appear. Although many policies reflect EU policies, as encouraged by the Lisbon strategy, the lack of coordination and budget for these policies is a serious problem. 1053 What is most needed, apart from improvement in human

1042

Coyne and Leeson (2004), p. 240. Coyne and Leeson (2004), p. 241. 1044 Coyne and Leeson (2004), p. 240. 1045 Coyne and Leeson (2004), p. 241. 1046 Coyne and Leeson (2004), p. 245. 1047 Coyne and Leeson (2004), p. 242. 1048 Coyne and Leeson (2004), p. 244. 1049 Interview B37. 1050 Coyne and Leeson (2004), p. 246. 1051 Coyne and Leeson (2004), p. 239. 1052 European Commission official website (2005c), p. 29 and European Commission official website (2005c), p. 59. 1053 Interview B37. 1043

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resources, are strategies that last for longer periods, without being changed every time a new government is formed. 1054

22.4.2 Problems at SME level Troubles for SME do not only originate from governmental action or inaction. First of all, it is essential to bear in mind that the SME sector was non-existed during communism and therefore it is a relatively young sector (not over 19 years). 1055 Management experience is also recent and managerial knowledge is still lacking in the SME sector. Not only does this create problems at all functional levels of an enterprise, but SMEs are also reluctant to obtain credit from banks. This poses a problem when applying for structural funds from the EU since the company has to cofinance an investment in order to qualify for the EU funds. Though the loan is repaid under a structural fund programme, entrepreneurs do not approach banks easily, and do not make full use of funds by that way. 1056 That few companies are benefiting from structural funds is well illustrated by the number of SMEs that applied for and obtained funding in the Bucharest region. Out of the 80,000 micro-enterprises (EC definition) in this region, the summer of 2008 only saw between 60 and 70 applications, of which around 40 were correct in terms of documentation. Only eight of these applications got funding and this illustrates well the under-used potential of the structural funds. Also the number of participating SMEs in research and development programmes of the EC is insignificant. 1057 Though some entrepreneurs have no economic background, many problems in terms of managerial skills and human resources are caused by shortcomings in the universities. In universities as well, human resources are problematic and, in addition, the curricula are not adapted to the companies’ demands. 1058 A bigger focus on management is needed in higher education to improve the SMEs’ economic potential. 1059 This is also confirmed by the situation analysis of the Sectoral Operational Programme Human Resources Development for Romania. As the programme states: “Still labour market is requiring managerial skills within a competences package, including occupational related knowledge, to be delivered by post high school education.” 1060 Besides the shortcomings in education, SMEs themselves lack staff development strategies, a factor which also affects the educational level of their employees. 1061

22.5 Romania’s investment climate When discussing the economy of Romania and the changes and challenges it is being subjected to, one cannot exclude the basic investment climate of the country. The investment climate determines the general attractiveness of a country for national and international entrepreneurs. Besides, the investment climate creates a starting point for a free market economy which is one of the three pillars of the Copenhagen Criteria. As explained in the former section on the macroeconomic situation in Romania, the country is very sensible towards international movements and therefore called a ‘volatile economy’. This also implicates an unstable domestic economic framework. After the fall of communism not one clear path was chosen on which the economical policies are based and this has resulted in disorder of economic policies. An area that has formed the exception on this passive mentality is the investment framework. On the matter of investments there has always been a clear vision: creating a stable investment climate in order to 1054

Interview B10. Interview B37 and interview B10. 1056 Interview B10. 1057 Interview B37. 1058 Interview B37. 1059 Interview B10. 1060 European Social Fund in Romania website (2009), p. 16. 1061 European Social Fund in Romania website (2009), p. 12. 1055

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attract international traders and stimulate economic activities. On the principles of this vision a legal framework was created which implied lower rates of corporate tax in comparison with other EU member states. 1062 Clearly, the low rates of corporate tax imply an influx of Foreign Direct Investments.

22.5.1 The influence of Foreign Direct Investments in Romania The basic concept of Foreign Direct Investments (FDI) can be explained as investments made by other businesses than the existing domestic ones. It is important to note that mergers and acquisitions are also included in the concept of FDI. When a domestic firm is being incorporated in an international firm this is FDI; at the moment Romania is considered to be one of the most attractive countries for international investors. Figure 22.2 demonstrates this favourable position. Next to the corporate tax, the presence of cheap labour resources encourages investors to develop the presence of factory villages in Romania. An example of this phenomenon can be observed in Jucu where the production department of Nokia established a factory in 2007 providing employment for over 6,000 workers. 1063 This example serves to emphasise the positive correlation between international and national advantage. Because of the lack of domestic entrepreneurial skills Romania can only rely on a small scale on national investors. Therefore, foreign investors are regarded as a valuable asset for the Romanian economy since their expertise provides an enormous amount of employment. The incompetence of the Romanian universities to educate students in a manner that encourages them to start their own company or apply for managerial functions indicates the core problem for the future. In universities business skills are not yet being taught in an efficient manner. 1064

0.2 Figure 22.2 The evolution of FDI in Romania between 2000 and 2007 Source: Casapu in Business Digest (September 2008), p. 4.

22.5.2 Legal framework regulating the direct investments In order to boost the business climate in Romania and attract foreign capital, the Romanian government implemented new regulations that aimed to support investments. In this context the authorities issued the Emergency Government Ordinance 85/2008 on stimulation of investments. This ordinance is the result of the need coming from the business climate to establish regulations and to create a framework for investments in accordance with both the European Union and the 1062

Interview B28. Interview C12. 1064 Interview B10. 1063

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national legislation on state aid. 1065 The ordinance supports investments in the development of certain economic areas, taking into account Romania’s development priorities. Therefore, it focuses particularly on those regions that attracted fewer investments in the past in order to assure a balanced territorial development. 1066 Its stipulations set out the basic principles concerning the granting and application of facilities for investments. Examples are equal treatment for the investors, transparency of procedures, efficiency in the use of facilities, confidentiality as regards the investors’ property rights, and eligibility. This eligibility depends on the source of the financing funds, the types of facilities to be granted and the eligibility conditions for both investment and investor and other general provisions. The responsible authorities have initiated laws and administrative norms based on these provisions. This institutional support in the form of state aid refers to individual aid for each priority area. 1067 With this regulation a government agency was established that plays the role of intermediary between investors and central and local authorities: the Romanian Agency for Foreign Investment (ARIS). It also offers technical assistance and guidance as regards the available schemes by means of which investors can apply for funding from the responsible authority. 1068

22.5.3 Dominant sectors When analysing the investment climate one has to consider the different strategic sectors. Looking at agriculture, especially Russian and Middle-East investors are interested in Romania because of the Romanian capacity to produce cheap cereals in a professional manner. Russia and the Middle-East have never invested in domestic cereal production and technology. Especially Russia has neglected its own cereal production over the years and as a result now sees possibilities in Eastern Europe. The Middle-East used to import cereals from China, however, due to increasing prices in that area the region is now forced to shift its interests to Eastern Europe. Besides these two big agricultural investors, the Dutch and the Danish are the main investors in the agricultural sector. Due to this foreign interest in Romania there are possibilities to decrease the fragmentation of the land and establish multinationals which are capable of creating economies of scale. 1069 At the moment the Romanian banking sector is to a large extent subject to foreign ownership. Only two national banks are included in the domestic banking structure. The fact that most banks are foreign owned does not imply a problem for the financial sector. Romania has accepted the fact that after the Washington Consensus had become into force, the rules were set by foreigners. The Romanians still believe that foreigners possess more instruments to understand business and possess more financial means to create strong banks. According to an expert of the National Bank of Romania (NBR), the bank does not see a future for more Romanian owned financial enterprises since there simply is not enough money available to support such a merger or acquisition. 1070 On the matter of fraudulent cases or corruption involving financial mergers, an expert of the NBR states that corruption is more associated with Romania’s public administration and less often with the banking sector. 1071 Other sectors that are dominated particularly by foreign investors are sectors that show the characteristics of labour intensive activities. Examples are the textile, iron, electronics and car industry. Due to the transformation of the Romanian internal market the expectation is that in the next decennia foreign investments in other sectors like telecommunications, energy, the pharmaceutical industry and construction will increase. 1065

Larive Romania official website (1994). Interview B42. 1067 Interview B42. 1068 ARIS official website 2009. 1069 Interview B28. 1070 Interview B28. 1071 Interview B28. 1066

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In the first years after the transition most investments were made by governmental institutions and public funds. However, recently the Romanian government shifted its focus to private investments and therefore established a partnership agreement with governmental organisations and commercial organisations. This partnership agreement translates itself into Public Private Partnerships and operates in Romania. Besides this, the European Bank for Reconstruction and Development (EBRD) is the largest institutional investor in Romania. 1072 The EBRD invests in both the private and public sectors in areas such as energy, transport, municipal infrastructure and financial institutions. Following Romania’s accession to the EU, the EBRD will focus on helping the country maximise the benefits of EU membership, meet EU standards and strengthen its administrative skills. In 2007, the EBRD assisted in 248 projects in Romania, totalling over 3.5 billion Euro. This has helped to generate an additional 6.4 billion Euro from other sources. A total of 70 per cent of all investments is made in the private sector. 1073

22.5.4 Positive spill-over effects on the local Romanian economy Through the influence of indirect spill-over effects, local firms are affected by the presence of FDI too. Clearly, if foreign firms are located in foreign enclaves and operate in isolation from local firms, there will be no or limited spill-over effects. However, if there is interaction between foreign owned and local firms, there are a number of channels through which FDI affects the performance of domestic firms. Two major channels of spill-over effects have been identified: horizontal spill-over effects to local competitors and vertical spill-over effects to local suppliers and customers linked to the foreign firm in the production chain. 1074 The most encapsulated spillover effects occur where the foreign firm is in close collaboration with the Romanian firms. Examples from this equivalent situation are the car industry and clothing manufacturing.

0.3 Figure 22.3 Values of Foreign Direct Investments in Romania Source: Casapu in Business Digest (September 2008), p. 5.

22.5.5 Contribution to GDP and EU There are indications which show an increase to the overall contribution of FDI to Romania’s GDP since its entrance to the European Union. The investments made by foreigners increased 1072

World Bank official website (2007). Interview C12. 1074 Merlevede and Schoors (2005). 1073

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notably and in 2006 and 2007 FDI contributed respectively 11,4 and 9,4 billion Euro to Romania’s external balance. 1075 In 2008 the total volume of FDI reached 9,024,000,000 Euro and increased with 24.4 per cent compared to the balance of the previous year. The importance of foreign investments in the Romanian economy is significant: during the 1990s FDI became the largest source of financing for transition economies. 1076 The most important impact of FDI on the host economy lies in the transfer of technology. Technology should be understood in the broad sense: not only including new production technologies and products, but also organisational and managerial practices and other tacit or codified know-how. 1077 Multinational companies exploit the proprietary technology that constitutes their firmspecific advantage, which allows them to compete successfully with the firms of the host country which have, in turn, superior knowledge of local markets, consumer preferences, and business practices. 1078 Since it is suspected that the conveyed technology may spill over to the host country’s firms’ productivity, many policymakers have geared up their policies to attract FDI in a bid to gain access to technologies and skills not yet available to the domestic economy. 1079

0.4 Figure 22.4 Outflow of FDI’s to the new member states Source: Casapu in Business Digest (September 2008), p. 3.

22.5.6 FDI cash flow as the principle for redeem of Romania’s deficit When a country is to a large extent subject to foreign investors this implicates a negative cash flow leaving the country. Approaching this cash flow in a pragmatic way one can conclude that the Romanian balance sheet will display a negative budget deficit. However, as explained by an expert in the field of financial stability within the National Bank of Romania, there exists a neutral stabiliser which maintains the balance sheet in order. This neutral stabiliser refers to the mechanism in which foreigner investors acquire technology systems produced and developed in Romania itself. By acquiring these domestic technologies and products, Romanian workforce is created, technology is imported and capital development is acquired. Through this, the current account deficit is a self-correcting mechanism in which imports and exports are compatible with each other. As a consequence, the hypothesis which puts forward that Romania is relying too much on foreign investors and is endangering its import and export balance can be questioned. 1080 1075

Eurostat official website (2006). Eurostat official website (2006). 1077 ARIS official website 2008. 1078 Merlevede and Schoors (2005). 1079 Merlevede and Schoors (2005). 1080 Interview C12. 1076

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A total of 53.3 per cent of the cash flow that originates from foreign investments is used to redeem the current account deficit. 1081 However, despite the earlier mentioned neutral stabilisers Romania will be affected by the negative spill-over effects of the financial crisis. The prospects for the investments for the year 2010 are negative as a result of the current economic downturn. This downturn implicates a problematical situation regarding the financing of the Romanian deficit in the upcoming years. 1082 As one of the most attractive European destinations for investment, Romania recorded a considerable growth in investment flows, which increased from 3.1 billion Euro in 2006 to 7.4 billion Euro in 2007. Formally it is claimed that Dutch investors are holding the largest stock in the Romanian investment market. With over 19 per cent of the total foreign investment in Romania, the Netherlands occupies the first place in the list of foreign investors. More than 3,200 companies active on the Romanian market have Dutch capital and large investments are made by for example Unilever, ING (ING Bank, ING Nederland, and ING Securities), ABN AMRO Bank, Frans Maas, Remco, Philips, Damen Shipyards Group, KPMG, Heineken, SPAR, Friesland, Verder Group, TNT, Golden Tulip Hotels, Kuijken Logistics Group (KLG), Centrum Transport, etc. The Dutch companies are mainly investing in production and logistics, information technology, milk processing and banking. 1083 However, it is necessary to note that this high notation is due to a significant amount of large holdings, such as Coca-Cola and Lukoil, which are only formally registered in the Netherlands, but are not active in the Netherlands.

22.5.7 The evolution of FDI in Romania between 2000-2008 In conformity with the data released by the National Prognosis Commission (NPC), the year 2007 was the eighth year of economic growth for Romania. In 2007 a growth of 6.1 per cent was registered, compared to 7.7 per cent in 2006 and 4.1 per cent in 2005. For 2008, the NPC estimated a GDP increase of 6.5 per cent, reaching approximately 442.8 billion RON (120 billion Euro). The increase of GDP is mainly caused by the services sector, industry and constructions. 1084 So far, a large share of FDI was directed to Bucharest, the surrounding areas and the Western part of the country, as these regions have a more extensive infrastructure network, thereby facilitating exports to other EU states. Now, a new trend has developed among foreign investors. Willing to develop Greenfield projects, they move to the other large cities in the country attracted by cheap and qualified labour. 1085

22.5.8 FDI and the current financial crisis 2009 The IMF has launched pessimistic economic figures regarding the future, something which generates concern among foreign investors. The Romanian government therefore seeks to reassure the political stability and legislative climate in the country in order to keep attracting new foreign investors and reach out to those already present. 1086 Although the macro-economic evidence shows that Romania is extremely volatile to international economic fluctuation, the financial crisis has not yet influenced the financial stability of the country to a large extent. On a global scale banks have created risks by lending and borrowing cheap money against high interest rates. Romania however has never been forced to make use of these toxic assets and risky money. Since Romania is not yet that far integrated in the modern international banking sector bankers in Romania were not tempted by access to cheap, but risky money. 1087 Furthermore, the presence of 1081

Interview B28. Interview B24. 1083 Larive Romania official website (1994). 1084 Eurostat official website (2009b). 1085 Eurostat official website (2009b). 1086 Interview B42. 1087 Interview B28. 1082

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an excessive bonus system is not an issue in Romania. In Romania, bankers, unlike in other Western countries, already receive a high basis salary, thereby discouraging the need to develop a bonus system to complete low salaries. However, Romania should be very careful when developing new policies on investments and social policies. Keeping in mind the obligations Romania has under the Maastricht Treaty, a sense of anxiety regarding the deficits has developed within the Romanian Ministry of Finance. In order not to cause any domestic financial instability, the government has been obligated to obtain a loan by the IMF. This loan has a two year expiry and consists out of twenty billion Euro. The loan is needed to fill the gap on the balance sheet created by the decrease in FDI cash inflow. The IMF obligated Romania to refinance and redistribute their policy channels in order to receive the loan. So far, most reforms have taken place in the field of pensions and taxes. Especially the policies regarding military and police labour needed long term improvement. Besides the reforms necessary to receive the IMF loan, the Ministry of Finance is occupied with developing a policy which solves Romania’s future demographic problem. Due to the aging population, an increasing amount of retired people will rely on social welfare, but Romania has no money available at the moment. The biggest problem related to the needed financial reforms is the absence of a clear strategy within the different ministries and departments. In recent years the government has never been able to choose a clear framework. Moreover, regulations developed at a higher administrative level are not well adjusted to the societal needs. However, concerning the legal framework of FDI, the government is pressured to develop a clear framework if it wants to attract foreign investments.

22.5.9 Romania as a strategic partner in investing The fact that Romania is an attractive country for investors is due to its legal framework. Since Romania does not have any specific regulation for foreign investors, these are free to invest in any sector which is of their interest. A foreign investor is treated similar as a domestic investor, which in general brings along a variety of positive side-effects for the foreign investor because of the differences in economic power. Most foreign investors are from Western origin and this implicates that they have financial advantages due to the nominal value of Western currencies. A first reason for investing in Romania would be the labour mobility regulations and the average wage of the Romanian worker, which is a lot less than the wage of for example a Dutch employee. The labour and employment regulations are laid down in the Labour Code and rules are the same for both Romanians and foreign employees. 1088 This Labour Code states two main categories of visa for foreign investors: short-term and long-term visa, and single or multiple entries. Besides the low wages foreign investments are attracted due to the fact that foreign investments are permitted in every economic sector, which results in a broad scale of possibilities for the investors. Also, there are no limits correlated to the amount of investments, and all the investments are allowed to be financed with foreign liquids. This creates future possibilities for both domestic development and for international investors. Because of the many neglected sectors, there are many possibilities for strategic players to create a profitable business. Especially in the more developed areas around Bucharest the infrastructure supports transport systems and labour mobility. The Romanian government is putting large efforts in attracting foreigners, something which will probably imply a visible increase in FDI after the financial crisis. When analysing the Romanian investment climate one will observe that it is a strategic country to invest in. The low rate of corporate tax and the presence of cheap labour are supporting business development in several areas of the country. The Romanian government has invested a high amount of money, time and expertise in attracting investments and in developing a clear investment framework. Of course such a framework is necessary within the EU, but it is 1088

Interview B42.

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especially of great importance to Romania and its national balance sheet because the country relies on such a large extent on the cash flow coming from FDI. Both the number of SMEs and multinationals rises quickly in Romania. However, the multinationals located in Romania are mostly foreign owned. The same goes for the banking sector which is, with two exceptions, controlled by foreigners. The Romanians themselves do not forecast a future for a market which is merely dominated by national ownership. According to some experts in the field of macroeconomics and finance it is historically determined that Romania relies on foreign owners. 1089 This satisfaction with the system and the lack of national entrepreneurship do not stimulate the cash flows coming in from national activities. A passive national economy does not necessarily have to lead to problems on the budget side, however, when an economy is to a large extent dependent on international trade and foreign investors, it becomes more subjected to global fluctuations. Opinions are divergent on the issue of the recent financial crisis; some are positive about the future and some are negative, and arguments can be made for both sides. The positive sounds come from experts who expect that due to the international crisis and increasing currencies the cheap labour and low production cost will attract foreigners more than ever. Those who are more pessimistic about the future are found in the governmental administrations; they fear a decline in incoming cash flow, which would immediately affect the ways in which the budget deficit will be financed. Despite the difference in opinion, everybody seems to agree on the fact that Romania has transformed itself in the past ten years into a major player within the field of foreign investors. Especially after the accession to the European Union, a notable increase in foreign cash flow together with an increase in the labour force is visible. Yet, the fact that Romania is to such an extent dependent on international economic circumstances goes hand in hand with the passive mentality of the Romanian entrepreneurial climate and one can therefore not forecast a booming domestic economy for the future.

22. 6 Conclusion 22.6.1 Conditionality The EU applies the instrument of conditionality to stimulate both political and economic reform in the applicant countries. Through the use of ‘sticks’ and ‘carrots’ it either punishes or rewards the applicant in the process of obtaining EU membership. The strengths of conditionality and its trump card, the final prospect of EU membership, is its success in inciting countries to embark upon structural reforms. However, a weakness surfaces when the accession date is decided upon. The EU’s leverage for demanding reforms diminishes. By announcing the accession date, the EU shows it is confident that the necessary reforms are introduced and the applicant perceives this as having completed its reforms and therefore winning the prize of EU membership.

22.6.2 Acquis Communautaire One of the reasons why the judicial system of Romania needed a great amount of reforms was the process of the implementation of the acquis. The progress reports of the European Commission showed ups and downs in this reform process between 1997 and 2005. It was a struggle for Romania to change into a system with democratic values. The fields of visa policy, border control, immigration policy, corruption and crime needed a lot of attention. Although Romania did not excel in the area of justice and home affairs, the country succeeded in reforming the necessary fields. On 25 April 2005, the Treaty of Accession was signed, which meant that by time of the accession Romania was expected to introduce the acquis in the fields of immigration, asylum, the fight against terrorism, customs cooperation and human rights legal instruments. In 1089

Interview B42.

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order to implement the acquis successfully and effectively, it was and still is necessary for Romania to adjust its legal institutions, organisation and frameworks.

22.6.3 Economy During recent years, the Romanian economy has proven to be able to grow rapidly. From 2002 to 2008 annual growth was reported at 6.2 per cent. Both excessive domestic demand and increased foreign investments have contributed to the rapid growth of the Romanian economy. The inflow of foreign capital was the result of the creation of an attractive investment climate by the government in combination with Romania’s natural resources (energy and cheap labour). The introduction of the sixteen per cent corporate tax rate in 2005 and other tax incentives created an impulse for capital inflow. In addition, the availability of an educated and cheap work force and the large domestic market Romania represents also fuelled investments. Next to contributing to economic growth, these investments helped Romania to stimulate technological development, product innovation and to create employment. Additionally, Romanian employees are able to learn new skills and are introduced to a different work mentality. Therefore, the Romanian government should try to maintain this attractive investment climate and consolidate the possibilities to develop and learn from these investments. The Romanian government has anticipated problems on the labour market with respect to the sustainability of the pension system. These are caused by the considerable demographic challenges, such as the emigration of workers and the ageing of the population. The government has adopted a system based on diversification of the pension obtaining resources: the three pillar system. The introduction of the private pillar generates additional financial safety for elderly people. On the whole Romania’s pension system can be considered a strength. Finally, Romania’s capacity to implement all EU regulations on energy, even before they became member of the EU and its independence regarding the provision of energy, implies an advantage for the country. One of the most important measures regarding this issue has been the full separation of generation and distribution of electricity. Notwithstanding the strengths of the Romanian economy, several weaknesses can be identified. These weaknesses of the economy cluster around the themes of foreign dependency, regulation and law enforcement, absorption capacity, underdevelopment and competitiveness. The large share of FDI and foreign owned enterprises in the Romanian economy displays an increasing foreign dependency. For the financing of the national fiscal budget, Romania is also dependent on foreign money supply. Because of excessive external borrowing during the period of 2002-2008, Romania has build up a large foreign owned dept, which increases the volatility of the exchange rate. The regulatory burden in Romania is very high. This can be observed from the fact that Romania has got the most complex tax system of the European Union. Companies in Romania both need to deal with a multitude of taxes, next to a huge number of tax payments. Despite the adopted policies to decrease the complexity of the tax system and other regulatory and administrative barriers, entrepreneurs continue to face these obstacles regarding the regulatory burden. Firstly, a lack of capacity and qualified personnel causes problems with the implementation and enforcement of policies reducing the regulatory burden. Secondly, many small and medium sized enterprises have insufficient capacity to fully comprehend the laws and rules to which they have to comply. The situation is aggravated by the new strategies including new objectives the government introduces with every new government mandate. A long term master plan to tackle this problem is needed. Laws and rules are plenty, but the incapacity to enforce them causes uncertainty. The malfunctioning of the judicial system worsens this state of affairs. The government also has capacity problems regarding the absorption of EU funds. Many structural funds remain unused, since strategies necessary to obtain them are not developed or

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cannot be implemented. Moreover, small and medium sized enterprises and farmers lack capacity and knowledge to apply for EU funds in the first place. In the absence of sufficient government and EU funds, infrastructure (roads, railways) remains underdeveloped and poorly maintained. Especially in rural areas, basic infrastructure like electricity and running water is sometimes lacking, forming an obstacle for competitiveness and development. It is questionable if, as a result of these circumstances, farmers can comply with the high EU standards for production. Also the social security system seems underdeveloped. The expenditures of the Romanian government on social protection are remarkably low compared to the average spending of the EU25. This has led to problems of poverty and social exclusion in Romania. Additionally, it is also certainly affecting the level of pensions and health care facilities. Besides these problems that Romania faces, there are, however, also definitely opportunities for the country. At the level of the government there is quite some potential to improve the collection of taxes and increase the degree of taxation, which would enable the Romanian state to run a smaller budget deficit. In order to increase the collection of taxes, the capacity of the state to collect them should be improved. Other measures in order to increase the degree of taxation should focus at the elimination of redundant taxes, as well as a better provision of information to the population of Romania with respect to paying taxes. Increased tax revenues could help to solve the income differentiation problem. In spite of the high economic growth of the recent years, living standards of many Romanians have not improved. The Romanian government has released several programmes in order to reduce poverty and to improve the relation between average and minimum wages. Social services are further developed by investment of the World Bank, the International Bank for Reconstruction and Development and the PHARE programme of the EU. The previous government (2004-2008) of Romania pursued a pro-cyclical policy with respect to the economy, which was merely focused on achieving economic growth and resulted in short-term convergence and created unsustainable imbalances. A priority for the new government should be to develop a long-term macro-economic policy mix, focused at long-term convergence with the EU, while maintaining macro-economic stability. This is also a requirement for Romania to join ERM II in 2012 and to introduce the euro in 2015. As far as investments are concerned, there are opportunities for the private and public sector. Firstly, the government should create a clear strategy for SMEs, which lasts longer than one government term. Moreover, it should reach more entrepreneurs, especially the ones in the rural areas. Improving human resources, starting with universities, could also solve many problems. By adapting the curriculum to the demands of the labour market, a better connection with this market could be established. Secondly, there are many strategic sectors with high potential and opportunities for domestic and foreign investors. For example, in the energy and agricultural sector there are many possibilities for obtaining a greater market share within the European Union. This could be achieved by using EU subsidies more efficiently. CAP-related funds for rural development, for example, form a huge financial resource to improve livingconditions and economic viability on the countryside. Also rehabilitating the infrastructure in those areas could contribute to an increased economic growth. Lastly, Romania faces serious environmental pollution caused by the many old and inefficient power plants that are still in service. Conformity to EU standards could relieve the pressure pollution is putting on the environment. Despite these opportunities to grasp for Romania, several important threats need to be borne in mind as well. Firstly, there is the current investment strategy of Romania. The largest threat is related to Romania’s dependence in terms of international economic fluctuations. The national economy is impregnated by foreign influences, especially through its vast amount of FDI. This implies a direct economic weakness that could endanger the whole economy in case of an international recession. One of the major dangers for Romania’s energy sector is the potential

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drawback of investments. If investment in energy will not take place, this could lead to serious problems for the country: becoming a net importer of energy; an old polluting plant will remain in service, which has consequences for the environment; and potential dependency on Russia. On top of this, the Romanian government should bear in mind the employability of its employees at the Romanian labour market. Taxes on labour represent the heaviest burden for SME’s and do not encourage the creation of employment. Moreover, a heavy tax on labour can encourage employees to find work in the informal sector. Secondly, certain demographic developments pose a threat to Romania’s economy, namely aging and (internal) migration. Due to negative natural increment and external migration, Romania has become the most aging society in Europe. This not only creates problems on the Romanian labour market, but also for the sustainability of the pension system. In addition, with the current financial and economic crisis, an increase of the unemployment rate to eight or nine per cent of the population is feared. It is expected that many illegal labour migrants in countries like Italy and Spain return to Romania and apply for unemployment benefits. This will be a threat for the social security system of Romania. Internal migration is causing a rapid ageing of the rural areas due to its deficit attractiveness: living conditions in rural areas are lower than living conditions in urban areas. Young people are leaving the countryside and migrate to the city, where they have better chances related to employment and education. Thirdly, some important changes are needed in order to not endanger future economic growth. Since a lot of problems stem from a lack of (qualitative) human resources, ignoring the human resource problem (by not improving university education e.g.) could obstruct future growth. In addition, delays in implementation of reforms and modernisation of the transport sector and sub sectors could undermine Romania’s development. In agriculture, the incapacity to invest in modernisation poses a threat, since an old and uneducated agricultural workforce is unlikely to invest in the modernisation of their farms, which become increasingly uncompetitive in the European Union. Besides that, many farmers lack conformity with the high European standards, which are set for food production. Farmers will need to cope with these standards, in order to be able to sell on the European market. Regarding health care, Romania experiences problems regarding its accessibility. In many cases, accessibility and good quality of health care are dependent on the ability of paying an extra fee to the medical staff. As a result, the private sector of health care keeps growing, indicating the population’s lack of thrust in the public health care system.

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Final Conclusion Changes Romania entered the European Union on the first of January 2007. In order to access the Union, a country must meet the Copenhagen Criteria. The accession of Romania implies the country has met these criteria. During its transition period Romania indeed changed towards these requirements. As the Copenhagen Criteria state, an accession country should develop a judicial system in line with European values. These values consist of stable institutions that guarantee the rule of law, human rights and the protection of minorities. Besides, the acquis communautaire should be adopted completely. To a certain level, Romania has been successful in reshaping the judicial system after the collapse of communism. The former judicial system served the communist society. Therefore, laws on the development of market economy, commercial law and new property law were shaped, and the courts were restructured in the 1990s. The new constitution of 1991, changed again in 2003, was one of the results of the process of democratisation. The period after communism run into the pre-accession period: the ten years of preparing the accession contained of assimilating and transposing the acquis and Copenhagen Criteria, in which controlling the independency of judges and transparency in judicial field were the main issues. This relatively short amount of time has to be taken into account when referring to the changes Romania has made. The country succeeded in the establishment of a judicial frame in line with European values: on a large scale the acquis was adopted; new institutions that maintain the independency of judges and fight corruption were set up; European law was implemented by the amendment of new national laws. It is an enormous achievement of Romania to establish a new judicial frame during the twenty years after the fall of communism. Nevertheless, the new judicial system may only be called successful if it is practised in society. For that reason, Romania still faces a lot of challenges in the judicial field. With regard to the situation of the minorities, Romania has made an effort in including minorities in society. Legislation has been adopted in order to ensure the rights and protection of minorities. Minorities even have their own seats in the parliament, which is a particular and unique construction. Many new policies have been implemented particularly with regard to the Roma minority. However, their position in society is not comparable to the largest minority, the Hungarians. The Hungarian minority has established a clear position in Romanian society, by even having its own party. It must be kept in mind, however, that the Hungarian effort started without the incentive provided by the accession. This minority was mostly motivated to be an integral part of society in order to have access to its rights. Hungarians live peacefully with the Romanians. Moreover, nowadays the only conflict between the two is a political one. At political level Romania has changed from a one-party system to a multiple party democracy. The democratic reforms were necessary in order to cope with the conditions for a future EU-accession. Although reforms initiated slowly and the quality remains weak, democratic procedures are respected. Romania introduced a new electoral system in which individual candidates can be elected and can therefore be held better responsible for their performances. Furthermore freedom of speech is guaranteed, though the media is often used as a political or economical instrument. In addition, the media landscape is centralised and under political control. Nevertheless, changes are visible in this field as well, as political control and centralisation of media occurred in a much larger extent five years ago. At the economical level, Romania made a transition from a centrally planned economy towards a free market economy. Romania underwent a period of economic liberalisation (letting market forces set prices and lowering trade barriers), macroeconomic stabilisation (controlling inflation), restructuring (in order to create a financial sector) and privatisation (move from public

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to private ownership of resources). Furthermore, Romania’s accession into the EU in 2007 resulted in the complete liberalisation of international trade. However, the question remains whether Romania’s economy has the capacity to cope with the competitive pressures and market forces within the EU, as the Copenhagen Criteria subscribe.

Challenges Romania has changed enormously after the collapse of communism. Although this transformation made it possible for the country to enter the European Union, Romania is still facing several challenges. One of the most important issues is the mentality problem, caused by decennia of communism. This issue is visible throughout the whole society. In combination with the lack of political will to create a true ideology, the mentality problem is also noticeable with regard to politics. Citizens are disappointed by the populist behaviour of political parties, whereas the parties seem to think that this manner will help them to gain votes. This vicious circle will not be interrupted as long as political parties remain unaware and unwilling to conceive an ideology and citizens lack the active participation to enforce a change. As a consequence of their passivity, citizens are also not aware of their rights. At the same time, the state is not able to inform their citizens properly. The civil society tries to increase the awareness among citizens, but this is difficult to realise since there is a lack of active participation of the population. In addition, NGOs struggle with their position in society, as they are not supported sufficiently by the government. In order to establish a participatory democracy, the government and civil society need to cooperate. Moreover, this cooperation will improve the level of expertise of the government. This is desirable since the lack of expertise causes difficulties in several sectors of society. Remarkable, however, is the lack of political will, as this essential cooperation is counteracted at political level. Apparently, politicians rather avoid the possibility of criticism which may be induced by the collaboration with civil society. Another problem is the regulatory burden, caused by the excess of rules. This makes the implementation of law difficult, for instance in the tax system. SME’s lack the capacity to fully comprehend the laws and rules to which they have to comply. This is the result of the relatively short amount of time to reform the judicial apparatus, which has hindered the practice of law. As have been shown in this report, the lack of law practice is evident all through the Romanian community and causes legal uncertainty. Moreover, the regulatory burden has been aggravated by the inconsistency of the government. Long-term planning is needed, for instance, in order to establish a consistent macro-economic policy. The consequence for SMEs is that they do not have a strong position within Romanian economy as a result of this regulatory burden. In general, a strong SME sector is required in order to establish a strong economy. Thus, the regulatory burden in Romania, taken together with the absence of a long-term macro-economic policy, is obstructing the foundation of a strong and competitive economy. This regulatory burden may be resolved by increasing the capacity of the Romanian workforce. The quantity as well as the quality of the labour force needs to be improved. Regarding the judicial system, a more capable judicial staff is required to cope with the amount of work. Judges have to cope with a high amount of work which endangers the guarantee of unified jurisprudence, while consistency in law practice is required to resolve the regulatory burden. The staff shortages cause a struggling implementation of new national and European law. Besides, the required independency causes difficulties in filling in the vacancies in the judicial field. Also the economical field is suffering from the capacity problem. Consequently, the infrastructural and agricultural sector, lack the proficiency to absorb EU funds. The absence of EU funds has direct consequences for the agricultural sector. Romanian agriculture is characterised by an old, uneducated and self-sufficient workforce, which prevents modernisation. An implication of this is that Romania’s agricultural sector is not able to compete at EU level.

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The quality of the labour force should be improved through education. At the moment, there is a lack of congruence between university programs and labour demand. There is a high demand for highly-educated people with business skills and technology specialisations. However, the Romanian government has not been capable to change the content of the curriculum after the fall of communism. Additionally, Romania is facing a so called ‘outflow of human capital’. Higher educated people are not satisfied within the Romanian labour market, as wages are poor compared to other European countries. This is contributing to an unfavourable economic position. Another issue of Romanian society is the position of minorities, especially the Roma minority. In communist Romania, the expression of culture other than the Romanian was prohibited. Ceausescu’s regime glorified Romanian nationality. This has an impact on the position of minorities nowadays. As said before, however, many policies have been created in order to protect the rights of minorities. One exception could be made. The Roma are often excluded from the community due to different reasons. Firstly, a large part of the Roma hangs on to old traditions which make inclusion in modern society difficult. On the other hand Romanians themselves tend to discriminate the Roma. The 1990s as well as the first years of the new millennium were characterised by the rise of extreme nationalism. Several parties with a highly nationalistic and often xenophobic agenda mushroomed. These years were also characterised by violent actions against the Roma. Politically, the year 2000 proved to be a peak, when the leader of the PRM runned second at the presidential elections, securing the support of a considerable part of the electorate. Afterwards, support for extreme nationalistic parties started to decline, and not one nationalistic party was able to gain enough support to be represented in the parliament after the most recent elections. This might be considered remarkable due to the sense of disillusionment felt by the Romanian voters nowadays: in times of disappointment it has often proved tempting to protest against the ruling parties by voting for the extreme ones. Nonetheless, the position of the Roma has not significantly improved. Policies are applied which are not effective enough for the whole Roma community. As well the way in which Romanians perceive the Roma has not dramatically changed. Once again, a change of mentality is needed in order to include all minorities equally in society, in particular the Roma. The most striking threat for the Romanian society is corruption. Besides the already mentioned pressure on judges, caused by a lack of capacity, corruption is threatening the judiciary as well. Due to a continuing lack of accountability, transparency and efficiency of the judiciary, it is hard to fully eliminate all problems as regards corruption. Public confidence can only be contained by showing true results in high level cases. Corruption is also a threat for the Romanian educational system. The fact that one can exchange money for permission to university is threatening the quality of human capital in general. The fight against corruption can only be realised by a political consensus that strives for the complete disappearance of corruption in all levels of society.

Recommendations All these aforementioned challenges to the Romanian society could also be observed within the educational system. It could be stated that the Romanian government has no long-term planning regarding education. After the fall of communism the Romanian government has not been able to change the content of the curriculum, which is threatening the quality of human capital in general. As mentioned before, also corruption is threatening the quality of human capital, since money can be exchanged for permission to university. In addition, the educational system experiences a lack of expertise and a capacity problem. The quality of education in rural areas is much lower than in urban areas. This is due to the fact that rural areas experience problems of absence and unqualified teachers. At university level, there are increasing shortages of qualified teachers for areas highly demanded and better paid by employers in the labour market in particular, for

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example ICT, foreign languages and judicial staff. Furthermore, the general aging trend of the population will also contribute to the overall decrease of teaching personnel. As has been shown, many of the challenges Romania has to face are in the educational system. The educational system could therefore be seen as an important key for the solution of these problems. Through education, a change could be made in the mentality of the Romanians, since they should realise that they have to accomplish a more active attitude in order to reap all the benefits of EU integration. In addition, the government should establish a long-term view on the content of the curriculum. This will lead to more congruence between university programs and labour demand. Furthermore, the level of the wages that teachers obtain is posing problems to the educational system. The wages of teachers are in such a degree dissatisfactory, that they often feel the need to acquire other vacancies after office hours. Many university teachers eventually switch jobs or emigrate to another country because of the bad congruency between their human capital and their income. Thus, higher wages could help to solve the shortage of qualified teachers and their lack of expertise. The low wages also stimulate corruption within the educational system. For example, with the selling of diplomas, teachers are able to survive financially. Not only wages should be increased in order to combat corruption, but also the political will to fight this challenge should be changed.

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Appendix 1: Romania’s public sector1090

1090

World Bank official website (2007), p 20.

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Appendix 2: List of interviews (geographically categorised in chronological order)

A: All interviews outside of Romania B: Bucharest interviews C: Cluj interviews No.

Date

No.

Date

No.

A01 A02 A03

5-3-2009 25-3-2009 26-3-2009

B01 B02 B03 B04 B05 B06 B07 B08 B09 B10 B11 B12 B13 B14 B15 B16 B17 B18

8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 8-4-2009 9-4-2009 9-4-2009 9-4-2009

B19 B20 B21 B22 B23 B24 B25 B26 B27 B28 B29 B30 B31 B32 B33 B34 B35 B36 B37 B38 B39 B40

9-4-2009 9-4-2009 9-4-2009 9-4-2009 9-4-2009 9-4-2009 9-4-2009 9-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009 10-4-2009

B41 B42 B43 B44 B45

Date 10-42009 8-4-2009 9-4-2009 9-4-2009 -

C01 C02 C03 C04 C05 C06 C07 C08 C09 C10 C11 C12 C13 C14 C15 C16

6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 6-4-2009 7-4-2009 7-4-2009 7-4-2009 7-4-2009 7-4-2009

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Appendix 3: List of interviewees (Alphabetical order) Alstom Transport, ARIS, M. Andriescu & A. Marko & R. Precupetu (Department of Interethnic Relations), M. Aurel & R.S. Mara (Social Security and Fiscal Inspector), N. Baciu (Jucu school Secretary), F. Badea (Bucharest Business Week), G. Badescu (Babes-Bolyai University Cluj– Faculty of Political Science), M. Bakk (Babes-Bolyai University Cluj– Faculty of Political Science), A. Bereschi (Sports teacher), M. Bird (The Diplomat), N. Bitu (Romani CRISS), L. Borbely (UMDR), H. Brebeneanu & A. Caravasile & A. Popp (Ministry of Culture and Religious affairs), Bucharest Police & Jucu Police, L. Chira (Bus driver), A. Ciuca (Foundation for Democratic change), A. Conta (Chamber of Commerce and Industry), I.V. Coroi (Mecanica), L. Croituru (Advisor to the governor of the NBR), C. Curt (Constitutional expert of Babes-Bolyai University Cluj), M. Danga (Centre for Independent Journalism), M. Deac (Librarian of Jucu), O. Diaconu (Energy sector specialist), A. Dijmarescu (Department of European Affairs), C. Ducaru & A. Tarnea (Romanian Information Centre Brussels), D. Eleador & G. Gavriloiu (Romanian Competition Council), M. A. Enache (Ratza & Ratza), B. Floarea (Consultancy Centre), A. Fugaru (Advisor to the deputy governor of the NBR), C. Galos & M. Passamani (Netherlands Business Support Office), A. Georgescu & C. van der Schaaf (Law Firm Georgescu), C. Ghicolescu & R. Petrea (MDW Law Firm), A. Glavce (TNT), F.R. Gradeanu (Gradeanu & Partners), C. Guseth (Freedom House), L. Husti-Radulet (Soros Foundation), R. Ilie (Romanian Academy), INPPA (National Institute for Training & Improvement of Lawyers), G. Van Iperen (Stichting Steun Roma), O. Jurca (BNS Trade Union), A. Jurma (National Anti-Corruption Directorate), D. Mantescu (Ministry of Finance), M. Maroiu (Transparency International), Mr. B. Mazuru (Secretary of European Affairs of Romania), M. Medrea (Tetarom), V. Micescu (Centras), A. Milcev (Ernst & Young), C. Mindrila (Law Firm Mindrila), A. Mocanu (CNRR Refugees), S. Moldovan (Student Organisation PD-L), F. Muresan (Janitor), V. Nicolae & I. Rutjens (Dutch Embassy Bucharest, department Economic Affairs), M. Nona Chilian & Elena Pelinescu (Journal for Economic Forecasting), C. Ormindean (Centre for Small and Mediumsized Enterprises), L. Pagu (AFR - Women’s Association of Romania), I.D. Pojar (Mayor Jucu), L. Radu (Babes-Bolyai University Cluj – Faculty of Public Administration), M.V. Serban (student), G. Spatear (Headmaster), L. Stefan (Romanian Academic Society), A. Tamas (Ministry of Justice, directorate European Affairs), D.O. Zenda (National Agency for Roma).

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