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Romania's Accession to the European Union

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					            Romania’s Accession to the European Union.
                      Economic Conditions
                                                         Univ. prof. Ioan Horga, Ph.D.
                                                         Lect. Luminiţa Şoproni, Ph.D.
                                                        University of Oradea, Romania


        Romania’s integration to the European Union has to prepare in a way the
acceptance of globalisation. Whether people accept it or not, the phenomenon of
globalisation resembles a torrent that will come over us no matter what.
        In the context of its geopolitical situation in Europe, and of its 22 million
inhabitants, Romania plays the role of an interface between the European Union and the
Balkans, as well as with the regions of the Black Sea.
        People see the integration process as an opportunity for Romania to overcome this
difficult economic situation, as a way out of the decline of an extremely complicated
transition process. If the Romanians look at the Member States of the European Union,
they see their closeness as an opportunity. As far as the costs are concerned, integration
does cost, but non-integration costs even more. Integration processes such as
globalisation do exist; we cannot ignore them, and we have no interest to avoid them.
Whatever the integration costs, it would be more dangerous to stay outside this process.


       Romania’s Relations with the European Union

         Romania has traditional relations with the European Union. It was the first
country in Central and Eastern Europe to have, as early as the 1970s, a well-defined legal
framework in its relations with the EEC. In 1980, it acknowledged this economic group
de facto by signing the Agreement concerning the establishment of the Romania – EEC
Mixed Commission.
         Romania’s Association Agreement to the European Union (the European
Agreement) signed on February 1st, 1993, which entered into force on February 1st, 1995,
stipulates the legal and institutional framework of the Romanian – Community relations,
having as its main objective the preparations for Romania’s accession to the European
Union.
         In 1993, in Copenhagen, the Member States decide that the associated countries in
Central and Eastern Europe may become members of the European Union should they
meet the economic and political requirements. This made Romania apply to become a
Member State in 1995. The negotiations started in February 2000 together with Bulgaria
and other countries that joined the European Union in 2004.
         The accession negotiations ended in December 2004. The objective was to
welcome Romania as a Member State in January 2007. The adhesion Treaty was signed
by the 25 Member States, Romania and Bulgaria on April 25, 2005. Starting with this
date, Romania has acquired the statute of an observer to the activities of the European
institutions. It is involved in the process of elaborating the Community law with no right
to vote.
        The process of ratification of the treaty by the Member States is developing.
        Romania belongs to the fifth wave of enlargement that successfully led ten
countries to the European Union in May 2004. Its accession to the European Union takes
place in a context influenced by the debates upon the Constitution and the future of the
EU. To this debates participate the European institutions, the Member States,
representatives of civil society and of the academic environment at the same time.
        Right from this moment, Romania has an important contribution to the Foreign
and Security Policy of the EU not only through association and implicitly defence of the
joint statements and position of the Union, but also through its involvement in the
European military and police missions and sharing its experience outside the foreign
policy in different relations.
        If at the moment of accession, the northern and eastern border of Romania
becomes an external border of the EU, Romania is getting ready to contribute to the
consolidation of the freedom, security, and justice area by ensuring an efficient
management of its external borders.


       Progresses in the Economic Integration Process in Time

        In the year 1997, two years after Romania had applied to join the European
Union, the European Commission started to annually monitor the candidate countries to
see the extent to which they complied with the accession criteria as established in
Copenhagen in 1993.
        In the case of Romania, the reports of the European Commission were genuine
guidelines on the path of the reform on a political, economic, and legal level. Through
these instruments, the European Commission tried to support and to stimulate Romania to
strengthen the accession process.
        In 1997, the Commission considered that Romania had made great progress to set
up a market economy. Although the prices were almost completely liberalized, ownership
rights were not yet guaranteed, the legal system was frail, and the economic policies were
not coherent.
        Nevertheless, certain steps were taken to improve economy competition,
particularly by working out the distortions caused by the low prices of electricity, by
accelerating privatisation and closing some large unproductive firms.
        A great part of the Romanian industry used to be unproductive, while agriculture
had to be modernized. The decreased level of research – development and the low quality
of the labour force suggested the fact that economy needed more years of sustained
structural reform.
        Even in 1999 Romania could not be considered as having a functional market
economy and it was not able to cope with competition pressure on a single market on a
long term. Reforms were much too hesitant and slowed by the legal and administrative
uncertainty. The state did not manage to impose the financial discipline to state
enterprises; neither could it work out the issues created by the weakness of the financial
sector. All these delays in the restructuring process led to microeconomic instability and
to the quick deterioration of the external unbalance resulting in difficulties in funding the
payment balance.
        The privatisation of some great companies, the restructuring and privatisation of
the state financial sector cost the state budget a lot. The direct foreign investments were
discouraged by the fragility of the legal system, while exports decreased despite the real
depreciation of the national currency.
        The signature of agreements with the international financial institutions
constituted an important step; however, important endeavours were still necessary in
reaching the aims. Stress had to be laid on adopting and implementing a coherent
economic strategy on a medium term and on setting up a transparent business
environment.
        It was only starting with the year 2000 that the macroeconomic stability
improved; economic growth was taken again and the volume of exports increased.
        In the subsequent years, Romania made progress towards the creation of a
functional market economy. Although it could not cope with the pressure of the EU
market competition on a medium term, steps were taken to allow the future development
of the competition ability. The economic growth continued, exports increased and there
was the political will to follow the reform programme agreed upon with the IMF and to
implement the measures proposed within the Pre-Adhesion Economic Programme.
        Despite all the progresses, the economic unbalance persisted, inflation was high,
the current account deficit was growing, the macroeconomic environment was fragile, the
legal framework was uncertain, and the weak administrative capacity endangered the
development of the private sector. Increased attention had to be granted to stopping
inflation, to reducing inter-enterprise delays and to continuing enterprise privatisation and
restructuring.
        In 2003, the European Commission thought that Romania could be considered to
have a functional market economy once the existing progresses would improve.
Moreover, to continue implementing the structural reforms, it was necessary for Romania
to be able to cope with competitive pressure and market forces within the Union.
        The economic stability had improved particularly due to inflation reduction; the
external position was still steady and there was a cautious fiscal policy. State enterprise
privatisation and restructuring improved. The mechanisms to enter and leave the market
were improved and several initiatives to improve the business environment were
strengthened, too.
        To strengthen the achievements, authorities had to adopt cautious fiscal policies
and continue the reform of budget expenses. More political will was necessary to
eliminate unprofitable enterprises and to continue the reforms in the fields of energy,
mining, and transports.
        In 2004, the year of the latest country report for Romania, the structure and
economic performances of the country improved significantly. Macroeconomic stability
was achieved and deep economic reforms were finished. The Romanian authorities
showed great involvement to fulfil the economic criteria in the accession process.
Therefore, the European Commission decided that Romania met the criterion for a
functional market economy. To firmly put into practice its programme for structural
reforms, it should be able to cope with competition pressures and market force within the
Union.
        Improvements were still needed as far as macroeconomic stability sustainability
and strengthening of the structural reforms were concerned. Priority was to be granted to
preserving the trends recorded in the process of disinflation to ensure the sustainability of
the external position through the use of a cautious combination of policies and then the
reduction of the deficit in the public sector.
        The process of privatisation was to be finished, the post-privatisation debates
closed, and the non-viable enterprises dissolved in a more active manner. In key sectors,
such as the energetic, mining, or transports, perseverance in restructuring should have
been combined with a more obvious orientation towards privatisation.
        At the same time, substantial progresses in the field of the legal system and public
administration were necessary, including the one concerning an equal and predictable
application of the legislation, in order to create a more attractive business environment
providing opportunities to all actors1.
        On October 25th, 2005, the European Commission published the first
Comprehensive Monitoring Report for Romania confirming the important progresses in
internal training and the steps that were to be taken to ensure the accession on January 1st,
2007.
        As far as the economic requirements specific to a Member State are concerned,
Romania continues to meet the requirements of a functional market economy. If it
seriously puts into practice the programme for structural reforms, it will be able to cope
with the competition pressure and the market force within the EU.
        Romania has preserved the macroeconomic stability, although the policy in the
field led to a growth in the macroeconomic unbalance. Besides, progresses concerning
the legal and administrative aspects in the business field are necessary also by enforcing
decisions referring to bankruptcy.

          Strong points in the economic field:
          o The macroeconomic situation has continued to improve
          o Romania has undergone a robust economic growth, as well as an improvement
             in the labour force, tax collecting and inflation decrease
          o Major reforms have been carried out in the sectors of energy and
             transportation, according to the calendar

          Weak points in the economic field:
          o There is the risk that the economic growth may not be balanced: strong
            growth based on consumption has determined a deteriorating commercial
            balance; in its turn, the latter, associated with the fiscal reform and the growth
            of public expenses, has determined a growth of the public deficit
          o The rhythm of privatisation is still low
          o The legal and administrative business environment, including the application
            of the bankruptcy procedure, still needs considerable improvement
          o The labour market lacks flexibility

        As far as regional policy and structural tools coordination are concerned:
significant endeavours are necessary to strengthen the institutional framework, including
the growth and strengthening the administrative and cooperation capacity between the

1
    European Commission, 2004 Regular Report on Romania’s progress towards accession, Brussels, 2004
structures on regional and central levels. A healthy management of the funding coming
from the European Union has to be guaranteed.
        The monitoring of the Commission continues until the effective accession to the
European Union on the basis of the tools used in the case of the ten states that have joined
the EU – the letter of early warning, the peer-review missions, consulting in specific
fields. The following monitoring report of the Commission before the actual accession on
January 1st, 2007 is expected for May 17th, 2006.


        Current Situation of the Economic Indexes

        As a consequence of the recommendations of the European Commission in the
Comprehensive Monitoring Report published on October 25th, 2005, Romania has
ceaselessly acted towards both increasing the preparations for accession and respecting
the responsibilities stipulated in the Accession Treaty.

         Macroeconomic evolution
         In the year 2005, Romania continued to record a high rhythm in economic
growth. Thus, the GDP in the first 9 months of the year 2005 increased by 3.6% as
compared to the same time span of the year 2004.2 We have to notice the fact that this
growth was achieved at the same time with the growth of the national currency, natural
calamities that had hit Romania, the liberalization of textile trade with China and the
increase of oil price worldwide.
         The strong growth of the national currency became manifest in the first 8 months
of the year 2005, but this process became steady starting with September, thus registering
even a slight depreciation after that span of time. All through the year 2005, the growth of
the national currency was 12%.
         Prolonged rains and floods in 2005 strongly influenced agriculture in certain areas
of the country, both by delaying spring works and by deteriorating some lands already
tilled, as well as the construction and tourism activities.

   Changes as compared to the same span of time of the             2003        2004      2005
                 previous year in percents
GDP growth rate                                                     5.2         8.3        3.61
Industrial production                                               3.1         5.3        2.0
Constructions                                                       9.8         8.9        9.8
Final consumption                                                   6.9        10.3        9.31
Gross fixed capital formation                                       9.1        10.1        9.41
Stock variation2                                                    0.1         0.1       -0.81
Internal consumption                                                7.4        10.2        8.51
Net export2                                                        -2.7        -2.8       -5.71
Inflation rate                                                     15.3        11.9        9.0

2
  Guvernul României, Evoluţii înregistrate în pregătirea pentru aderarea la Uniunea Europeană în
perioada 30 septembrie 2005 – 28 februarie 2006, Raport extins, Bucureşti, 2006
– annual average                                               14.1        9.3       8.6
Exchange rate RON/Euro                                         3.75       4.05      3.62
Unemployment rate – end of period                               7.4        6.3       5.9
General consolidated balance account                           -2.0       -1.2      -0.8
% of the GDP
Exports of goods                                                6.4       21.3      17.5
Imports of goods (CIF)                                         12.3       24.0      23.9
Current balance account
% of the GDP                                                   -6.0       -8.7      -8.9
bill. Euros                                                    -3.1       -5.1      -6.9
Internal credit (exclusively BNR)       % of the GDP           17.4       18.4        -
- non-governmental credit              % of the GDP            15.9       17.5        -
Banking actives                        % of the GDP            32.4       38.3        -
Average rates of interest used by credit institutions in
relation with non-governmental non-banking clients for
RON operations
- active interest rate %                                      26.19       25.81    19.19
- passive interest rate %                                     10.78       11.34     6.22
1
  9 months
2
  contributions to real growth of the GDP (percentage)

       Table 1. Evolution of the main economic indexes in the past three years
       Source: Romania’s Government, Evoluţii înregistrate în pregătirea pentru
aderarea la Uniunea Europeană în perioada 30 septembrie 2005 – 28 februarie 2006,
Raport extins, Bucureşti, februarie 2006

        The main factor for economic growth remained households market consumption
(goods and services buying capacity), although the gross fixed capital formation kept its
high rhythm growth. Although the households market consumption increased by
approximately 17.5% in the first 9 months of the year 2005, it was reflected to a larger
extent in the increase of internal offer; the main source to cover it were imports. For
instance, the vehicle production increased by 76%, but imports increased by 75.5%. By
the same token, refrigerator production increased by 20%, and import by 8%.
        Thus, the cumulated effect of the unfavourable factors mentioned above consisted
of the lesser growth of the gross value added in industry (+2% in 9 months as compared
to the same span of time in 2004) and respectively of the powerful reduction of the crude
added value in agriculture (-12.6% in 9 months). Nevertheless, the construction activity
increased significantly as a consequence of the works to improve infrastructure and the
houses destroyed by the floods (+7.1%).
        An important feature of the economic growth in 2005 is represented by the trend
to modify the structure of economy in favour of the services sector that recorded a growth
by 7.9% in 9 months.
        If we exclude the activities where the decrease of activity was mainly due to
flooding (agriculture and household industry), the GDP increased by 6.5% in the first 9
months of the year 2005.
                GDP                                2004                       2005
Industry, out of which:                             6.0                        2.0
- household industry                               20.1                        -7.9
Agriculture                                        19.7                       -12.6
Constructions                                       9.5                        7.1
Services                                            6.4                        7.9
Net services                                        8.9                        6.7
GDP – total                                         8.1                        3.6
GDP (excluding agriculture)                         6.6                        5.8
GDP (excluding agriculture and                      6.0                        6.5
household industry)

       Table 2. GDP evolution in 9 months in different conditions – percentage
changes as compared to the corresponding period of the previous year
       Source: Romania’s Government, Evoluţii înregistrate în pregătirea pentru
aderarea la Uniunea Europeană în perioada 30 septembrie 2005 – 28 februarie 2006,
Raport extins, Bucureşti, februarie 2006

        Household individual consumption strongly increased (9.7%) as a consequence of
the wage growth and consumption credits. The great demand of consumption goods –
which were over the possibilities of the internal offer – brought about a strong growth of
imports. The gross fixed capital formation also recorded a significant increase (9.4%);
this increase was mainly due to the works of rebuilding as the flooding had operated
major destructions, as well as to major investments in the private sector with great impact
upon the import of capital goods.
        In the year 2005, goods imports practically kept the high level of the previous
year (24%), and they were stimulated by the continuation of the phenomenon of
appreciation of the national currency and the growth of the consumption credits, by the
reduction of the income and profit tax (that led to the growth of population and economic
agents availability), as well as the continuation of the process of fix capital
modernization.
        From the group analysis of the goods from the point of view of their contribution
to the import growth in 2005 as compared to 2004, more than 60% of most of the imports
was located in two groups, that is: vehicle construction industry products and mineral
products. The imports of the vehicle construction industry products that had a weigh of
35% of the import value increased by 25.9% as compared to the values of the year 2004.
The second group, mineral products, participated to the growth of the total imports with
43.8% as compared to the level of the year 2004. Most of this growth was due to the
increase of the external prices by 40.7%; they were according to the trends of the oil
estimates on the international markets. The main products that contributed to the growth
of the import of this group were as follows: oil, natural gas and iron ore.
        Consumption goods, which represented about 16% of the import value, increased
by 25.8% as compared to the similar period in 2004, the increase being of 1.2%.
        In the year 2005, goods exports were 17.5% higher than the ones recorded at the
same time of the previous year. This growth was largely due to the growth of mineral
products export by 81%, vehicle construction industry products by 26.4%, chemical
industry products by 25.5%, food products by 14.6%, as well as metallurgical products
by 12.8%.
        The evolution of the Romanian exports may be explained due to the
complementarity relation between external trade and direct foreign investments (DFI).
The simultaneity of these two phenomena was determined by trade liberalization and the
national policies concerning DFI. From this point of view, it is important to mention the
fact that the DFI volume knew a substantial growth both in 2004 and 2005, thus allowing
the strengthening of the Romanian commercial relations and favouring exports.
        Romania’s export performance was special, as inhibiting factors acted upon
exports, as well as the strengthening of the national currency, the strong reduction of the
external request for light industry products, the accentuated slow-down of EU imports, as
well as the economic growth in the EU countries.
        If so far the first place in product group exports was taken by light industry
products, in the year 2005 this place was taken by the vehicle construction industry
dominated by high complexity exports.
        The structure of the exported products recorded a qualitative improvement by
diminishing raw wood exports by approximately 25%, considering the fact that the price
was maintained on the level of 139 euros/ton, as well as the iron waste by approximately
26%, although their price increased by 7% as compared to the year 2004.
        The expansion of the imports at a higher rate by 6.4% as compared to exports led
to the increase of the commercial deficit by 3.0 bill. Euros as compared to the commercial
deficit recorded in 2004. This brought about an increase of the goods and services
balance deficit by 53%.
        The data published by the BNR indicated that for the year 2005, a current account
deficit of the payment balance grew by 35% as compared to the same time of the year
2004 representing 8.9% of the GDP. In the year 2005, approximately 80% of the current
account deficit estimated was covered by direct investments and capital transfers, and the
difference by medium and long term loans and credits.
        The medium and long term external debt recorded the level of 24,408 mill. Euros
on December 31st, 2005, an increase by 33.4% as compared to December 31st, 2004.3
        All through the year 2005, the inflation rate was on a descendent trend, although
it was not steady. As compared to December 2004, the consumption prices increased by
8.6%, that is, 0.7% below the level recorded the previous year.

Growth in percent                                          2004                    2005
Inflation (Dec./Dec. of the previous year)                  9.3                     8.6
- food                                                      7.4                     5.7
- non-food                                                 11.4                     9.8
- services                                                  8.7                    13.1

                          Table 3. Evolution of the inflation rate


3
  Guvernul României, Evoluţii înregistrate în pregătirea pentru aderarea la Uniunea Europeană în
perioada 30 septembrie 2005 – 28 februarie 2006, Raport extins, Bucureşti, 2006
Source: Romania’s Government, Evoluţii înregistrate în pregătirea pentru aderarea la
Uniunea Europeană în perioada 30 septembrie 2005 – 28 februarie 2006, Raport extins,
Bucureşti, februarie 2006


        The evolution of the consumption prices was supported by the alimentary goods
that recorded the most consistent decrease in the price growth level. In December 2005,
the alimentary goods prices were 1.7% lower than the ones recorded during the same
span of time of the previous year. The evolution was due to the increase of the bid of
animal products, but also to the competition environment created by the strengthening of
the great operators’ position in some market sectors (meat, milk). To these was added the
pressure caused by external prices growth and the tendency to increase the unit costs with
labour force in industry. They were partly attenuated by the competition of imports of
goods price against the background of the trend of the national currency as compared to
the Euro to increase and the positive effects of the high cereal production of the previous
year.
        The price of the non-food goods increased by 9.8%, that is, 1.6% below the level
recorded a year before, although the prices for the electricity, gas and heating group
increased by 19.9%. A supplementary pressure for this category of goods was recorded in
the increase of the price of fuel by 8.8% mainly as a consequence of the influences
coming from the evolution of the international oil markets.
        In the case of the services, the disinflation process is not obvious; the increase of
the rates was superior to the one of the same period in the previous year, but its evolution
should be associated to the increase of the prices for utilities and fuel.
        As far as the degree of labour force occupation is concerned, in the first 9 months
of the year 2005, the number of working people decreased by 0.2% as compared to the
corresponding period of the previous year. The number of unemployed people decreased
by 10.1% in the first 9 months of the year 2005, while the unemployment rate was of
7.3% as compared to 8% in the first 9 months of the year 2004.
        From the point of view of the working population structure by walks of life, there
still were positive trends, such as the following:
        - constructions; it increased by 4.5% as compared to the corresponding period of
          the previous year;
        - services; there was a slight growth (0.6%) as compared to the same period of the
          previous year.
        In the year 2005, according to the data resulting from the survey of the National
Institute of Statistics, the gross average income grew by 17.0% and the net average
income by 23.7%. Thus, it results a real income growth of 13.5% provided the average
inflation of 9.0%.

       Evaluation on the Basis of the Copenhagen Criteria

       Monetary and exchange rate policy and the support to the disinflation process
       In the past few months of the year 2005, the challenges of the monetary policy
continued to be important. Considering that the risk to enhance macroeconomic
unbalance became major from the perspective of its fundamental objective, the BNR
decided to increase the degree of restriction of the mix of the measures implemented
before by all means, including the interest rate policy, with a view to mitigate credit
expansion. Thus, on the one hand, there were corrections of the prices (thermal energy in
November 2005, natural gas and electricity in January 2006). The increase of the pressure
exerted by this group was favoured by the increase trend of the leu – Euro rates. On the
other hand, an unfavourable impact upon the general level of the prices was still the
alimentary products with volatile prices (vegetables, fruit, eggs), the annual dynamics
recorded by them was 4 – 5% above the average steadily, as a consequence of the action
of context factors. Further pressure was exerted by the high rate increase of the
consumption demand. It facilitated the propagation of the unfavourable influences
mentioned above upon the other consumption prices, as well as the relative worsening of
the inflationist estimates.
         Under these circumstances, the annual inflation rate was of 8.6% at the end of the
year. Thus, it overcame the superior edge of the fluctuation interval of ±1% around the
target of 7.5%.4 However, the annual average inflation rate significantly decreased as
compared to the year 2004 (-2.9%), thus reaching – for the first time in the past 15 years
– a level expressed through one figure only (9%).
         At the beginning of the month of November 2005, the BNR decided to stop the
process of a lax interest rate policy to counter-balance the risk of attracting speculation
capital. The Central Bank resettled on an ascendant trajectory the average capability of
bank investments to BNR. As a consequence, the appeal of the banks to facilitate deposits
was systematically reduced.
         The increasing firmness of the monetary control had as an effect the circumcision
of the average rate of placement interest operated by the credit institutions at the BNR on
an ascendant trend; in December, it reached the level of 6.1%.
         The need to quickly strengthen the ascending trend of the interest rate, on the one
hand, and to increase the monetary policy efficiency, on the other hand, led to the
adoption of the decisions to keep strengthening the control of liquidities and respectively
to increase to 35% the rate of compulsory minimal reserves attached to the credit
institutions’ passives in foreign exchange.
         The unfavourable perspective of the short term inflation determined the debate
upon the opportunity, or need, to resort to the revision of the inflation objective for the
year 2006. The assessment carried out by the BNR of the favourable arguments and of
the ones against the revision had as a result the option of not altering the existing targets
of inflation on a short and average term. They were maintained to the level of 5% +/-1%
in 2006 and, respectively, of 4% +/-1% in 2007. By adopting this solution, the BNR
wished, on the one hand, to manifest its commitment to the inflation target and, on the
other hand, to reconfirm the focus upon the target for a longer time, which could be
envisaged through the instruments of the monetary policy.

        Budget policy
        Implemented in the context of the economy on an ascending trend, the fiscal
policy for the year 2005 had as its main objectives:


4
    European Commission, Romania 2005 Comprehensive Monitoring Report, Brussels, 2005
         - stimulating private initiative and supporting the process of economic growth by
           a stronger fiscal relaxation, carried out through the introduction of the unique
           quota of 16% of income and profit taxation;
         - increasing the capacity of fiscal administration;
         - sizing the budget deficit to a level correlated with the macroeconomic
           objectives, particularly with the reduction of inflation and limiting the increase
           of current account deficit;
         - increasing transparency of budgetary expenses.
         The budget execution in 2005 was influenced by the measures for fiscal
relaxation. However, there still was the objective to contribute to maintaining the
descendent trend of the inflation rate and of the evolution of the current account deficit
within sustainable limits. According to this objective, the budget deficit target initially
settled to 1.5% of the GDP, reduced to 1.0%, thus having a deficit of 0.8%.

        Measures taken with a view to counter-balance external unbalance
        Ensuring a high and sustainable rate of economic growth was thus conditioned by
maintaining external unbalance within reasonable limits. From an economic point of
view, the reduction of the current account deficit supposed first of all a mitigation of the
population consumption growth and accordingly a re-launch of savings and investments.
        In order to do that, the economic policies of the Government – fiscal and income
policy – as well as the monetary policy of the BNR remained the main points of the
policies to reduce external deficit.
        In this framework, we have to notice the new structure of the budget for the year
2006, oriented towards the increase of capital expenses, to maintain the weigh of staff
expenses and the reduction of the expenses corresponding to goods and services.
        To maximize the efficiency of the BNR action upon the consumption behaviour,
they would have to resort to strengthening the interest rate policy. This step had in view
to simultaneously balance the credit request of the population and the stimulation of the
population to save to the disadvantage of the consumption.

        Public debt management
        There was a confirmation of the descendent trend of the public debt degree of
Romania as recorded in the past two years, against the economic growth, so that, at the
end of the year 2005, the public debt degree was of 21% of the GDP, which was inferior
to the 60% limit as settled by the Treaty of Maastricht.
        In the year 2004, the payment balance confirmed the deepening of the negative
balance account of the current account to the level of 5.1% bill. Euros, two thirds bigger
than the one recorded in the previous year. The weigh of the deficit of the current account
in the GDP grew to 2.7% as compared to the year 2003. The determining influence upon
the current account was that of the commercial balance deficit.
        In the year 2005, approximately 80% of the current account deficit estimated was
covered by direct investments and capital transfers, while the difference was covered by
medium and long term loans and credits.


       Conclusions
         “Romania and its people have achieved a lot in the past few years in their
endeavours to prepare for the accession to the European Union. This target is now
reachable. I congratulate the Romanians for their work so far and encourage them to go
on with the same determination.” – said Jonathan Scheele, Head of the Delegation of the
European Commission in Romania in October 2004.
         This message is one of the important signs of the fact that Romania starts to
become credible on the international market. Nevertheless, in no case do the state
institutions have to relax and celebrate the victory. They have to continue adopting the
measures to correct the sectors that still have problems, keeping in mind the fact that the
European civil servants assess in detail the progresses achieved and sanction all diversion
from meeting the criteria to join the European Union.


       References

   1. European Commission, 2004 Regular Report on Romania’s progress towards
      accession, Brussels, 2004
   2. Commission of the European Communities, Comprehensive monitoring report on
      the state of preparedness for EU membership of Bulgaria and Romania, Brussels,
      2005
   3. European Commission, Romania 2005 Comprehensive Monitoring Report,
      Brussels, 2005
   4. Guvernul României, Evoluţii înregistrate în pregătirea pentru aderarea la Uniunea
      Europeană în perioada 30 septembrie 2005 – 28 februarie 2006, Raport extins,
      Bucureşti, 2006
   5. Infoeuropa Center: www.infoeuropa.ro
   6. Web site: http://europa.eu.int/comm/enlargement/index.htm
   7. Web site: http://europa.eu.int/estatref/info/sdds/en/coop_eur/coop_eur_base.htm
   8. Website of Romanian Ministry of European Integration : www.mie.ro

				
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