IMF agrees to higher budget deficit

International Monetary Fund has agreed to a higher budget deficit for 2005, but recommends an increase in the flat tax from 16 per cent and also a higher level of VAT from the current 19 per cent. The IMF accepted a budget deficit of 0.7 percent of GDP for 2005. The international financial experts say that increasing the VAT by two to three percent would boost the state budget and help keep a low deficit, but this would come into conflict with levels agreed with the European Union.

 

Massive million-Euro banking fraud revealed

A 2,700 billion lei (74 million Euro) hole in the banking system has emerged between 2002 and 2003, according to an evaluation by National Prosecutor's Office (PNA), the central bank and managers of commercial banks. This was partway due to a consortium, made up of workers from banks and from more than 50 firms, who set up a fictitious operation to illegally obtain credits. These credits are alleged to have included 45 billion lei from Banca Romaneasca, 1,200 billion lei from BCR and 510 billion lei from Romanian International Bank.

UK Vodafone buys out Canada’s Connex share

British mobile phone giant Vodafone is buying out Romanian MobiFon (Connex) and Czech Oskar mobile companies from Canadian Telesystem International Wireless in what could ammount to a 4.4 billion USD deal. Vodafone will increase its stake in Connex from 20 to 99.1 per cent. The remaining 0.9 percent is owned by state minister for SMEs and PUR-member Gheorghe Copos, who is not currently selling. MobiFon's market value is estimated at 1.5 to 2.3 billion Euro

 

Now BCR could be up for sale before CEC

Signs from the Government reveal that they are looking to offload the largest Romanian bank, BCR, before national savings bank CEC in the biggest privatization yet to occur. President of the Authority for State Assets' Recovery (AVAS), Gabriel Zbircea, said there should be a four-month time delay between the sale of BCR and CEC to allow investors who lost the bid for one of the banks to compete for purchasing the other. He added that BCR's privatisation is one of the government's priorities, so this process will be accelerated. This means the bank could be sold first. Interested banks had, on the whole, preferred to look into buying CEC first and then, if they had failed in this purchase, to examine the BCR sale.

 

Fight against cartels begins

Four fifths of Romanian firms are violating the competition law, according to the Competition Council, the most serious of which are secret agreements between competitors to influence and control the market in cartels. “Romania has to fight against cartels, because in a country where anti-competition laws are imposed, investors will come,” said Ulf Boege, the president of Federation of Unions from Germany on a recent visit in Romania. Keen to show its effectiveness, Mircea Berinde, president of the Competition Council said the department was continuing to apply penalties for up to ten per cent of companies' turnover for such violations.

Trigranit in final talks for billion-Euro deal

Hungarian-Canadian firm Trigranit says it is in the final stages of signing an agreement for a private-partnership project for Bucharest city worth between 800,000 and one billion Euro. The Esplanade project, over 700,000 sqm between the derelict national library and the headquarters of Banca Tiriac, consists of a museum, concert hall, office space and what aims to be the tallest office building in Romania. British banking dynasty, the Rothschild family, is also a shareholder in the project.

CEC boss replaced by national bank man

After only eight months in the job, savings bank CEC president Enache Jiru will be out of a job, following the Ministry of Finance's proposal to Prime Minister Tariceanu. A counsellor in the national bank (BNR), Eugen Radulescu will be the replacement, who is set to oversee the bank's privatisation. CEC's administration council is also set to change, with some seats taken by state secretaries from the Ministry of Finance.

GE in nuclear electric revamp deal

Local electrical transport network administrator Transelectrica and global firm General Electric have signed a contract worth 9.6 million Euro to modernise the electric station of 400 kV at Cernavoda, set to start at the same time as Unit 2 of Cernavoda Nuclear Electric Plant. The financing will be supported by Transelectrica's own budget.

 

Wine exports fall as imports rise

Local wine exports have decreased by 8.6 per cent according to the National Master of Vineyards and Wines (PNVV), while last year wine imports increased by 54 per cent on the previous year. The Ministry of Agriculture has come under criticism for granting domestic wine producers only a 4,500 lei incentive for each bottle exported outside the EU. The PNVV has asked for a 15,771 lei grant, although such payments may come into conflict with existing EU competition laws.

 

Holland and IBRD grant for civil and business reform

Netherlands foreign ministry and International Bank of Reconstruction and Development have agreed on a two million Euro grant to support Romania's Second Programmatic Adjustment Loan. Activities financed by this grant will occur before the 2007 accession date in the areas of judicial, financial, political and democratic reform, including restructuring of state owned enterprises and capital market development.