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U.S. Department of State Background Note RomaniaPOLITICAL CONDITIONSNovember 2004 elections left the Romanian parliament closely divided between the center-right PNL-PD alliance and the PSD, which each hold between 30-40% of the seats in each chamber. The PNL-PD, however, forged a parliamentary majority with the support of the UDMR, PC and (in the lower house) the ethnic minority party representatives. The extreme nationalist PRM won fewer seats than in the 2000 elections, but remained a significant political player. Although the PNL and PD vote as a bloc in the parliament and ran candidates on a common list in the 2004 parliamentary elections, the two parties remain separate. On several occasions in 2005, President Traian Basescu publicly expressed support for snap parliamentary elections. Other elected leaders, both from the governing and opposition parties, expressed opposition to new elections, noting that they are difficult to achieve under the constitution and could detract from government efforts to implement reforms necessary for EU accession. Political parties represent a broad range of views and interests, and elected officials and other public figures freely express their views. Civil society watchdog groups remain relatively small but have grown in influence. The press is free and outspoken, although there have been incidents of politically motivated intimidation and even violence against journalists and media management, particularly prior to 2004 national elections. Independent radio networks have proliferated, and several private television networks now operate nationwide. In addition, a large number of local private television networks have emerged. Through support of or participation in consecutive government coalitions, the UDMR has ensured continuing influence of the ethnic Hungarian minority in national government. In addition, consecutive governments have sought to improve the socio-economic situation of the Roma minority, which continues to suffer from severe poverty in many areas and discrimination. Although according to government statistics Roma officially represent 2.5% of the population, Romani organizations claim the percentage is actually several percentage points higher. The restitution of private and religious property seized under communism or during World War II continues to move slowly. Particularly problematic is the return of Greek-Catholic churches, which were given to the Romanian Orthodox Church by the communist regime. The Romanian Orthodox Church thus far has turned over very few of these churches, many of which had belonged to the Greek Catholic community for hundreds of years. Romania has repealed communist-era legislation criminalizing homosexual acts and banned xenophobic and racist groups and their activities. Romanian law does not prohibit women’s participation in government or politics, but societal attitudes remain a significant barrier. Women hold some high positions in government and roughly 10% of the seats in each chamber in the Parliament. ECONOMY The Romanian Government borrowed heavily from the West in the 1970s to build a substantial state-owned industrial base. Following the 1979 oil price shock and a debt rescheduling in 1981, Ceausescu decreed that Romania would no longer be subject to foreign creditors. By the end of 1989, Romania had paid off a foreign debt of about $10.5 billion through an unprecedented effort that wreaked havoc on the economy and living standards. Vital imports were slashed and food and fuel strictly rationed, while the government exported everything it could to earn hard currency. With investment slashed, Romania’s infrastructure fell behind that of even its historically poorer Balkan neighbors. Since the fall of the Ceausescu regime in 1989, successive governments sought to build a Western-style market economy. The pace of restructuring was slow, but by 1994 the legal basis for a market economy was largely in place. After the 1996 elections, the coalition government attempted to eliminate consumer subsidies, float prices, liberalize exchange rates, and put in place a tight monetary policy. The Parliament enacted laws permitting foreign entities incorporated in Romania to purchase land. Foreign capital investment in Romania has been increasing, but remains significantly less in per capita terms than in most other transition economy countries in East and Central Europe. Romania was the largest U.S. trading partner in Eastern Europe until Ceausescu's 1988 renunciation of most favored nation (MFN or non-discriminatory) trading status resulted in high U.S. tariffs on Romanian products. Congress approved restoration of MFN status effective November 8, 1993, as part of a new Bilateral Trade Agreement. Tariffs on most Romanian products dropped to zero in February 1994, with the inclusion of Romania in the Generalized System of Preferences (GSP). Major Romanian exports to the U.S. include shoes, clothing, steel, and chemicals. Romania signed an Association Agreement with the European Union (EU) in 1992 and a free trade agreement with the European Free Trade Association (EFTA) in 1993, codifying Romania's access to European markets and creating the basic framework for further economic integration. At its Helsinki Summit in December 1999, the European Union invited Romania to formally begin accession negotiations. In December 2004, the EU Commission concluded pre-accession negotiations with Romania. In April 2005, the EU signed an accession treaty with Romania and its neighbor, Bulgaria, and in January 2007, they were both welcomed as new members. Privatization of industry was first pursued with the transfer in 1992 of 30% of the shares of some 6,000 state-owned enterprises to five private ownership funds, in which each adult citizen received certificates of ownership. The remaining 70% ownership of the enterprises was transferred to a state ownership fund. With the assistance of the World Bank, European Union, and International Monetary Fund (IMF), Romania succeeded in privatizing most industrial state-owned enterprises, including some large state-owned energy companies. Romania completed the privatization of the largest commercial bank (BCR) in 2006 with the transfer of the majority stock to foreign ownership. The privatization of the last state-owned bank--the National Savings Bank (CEC)--was stopped in 2006 and has been indefinitely postponed. The country made substantial progress in the energy sector in 2005, completing or launching numerous privatization projects, including privatization of two additional regional electricity distributors. Four of the country's eight regional electricity distributors have now been privatized, and the government is continuing the process. Privatization of natural gas distribution companies also progressed with the sale of Romania's two regional gas distributors, Distrigaz Nord (to E.ON Ruhrgas of Germany) and Distrigaz Sud (to Gaz de France). Further progress in energy sector privatization, however, has been delayed as the government reconsiders its strategy on the Rovinari, Turceni, and Craiova energy complexes. The return of collectivized farmland to its cultivators, one of the first initiatives of the post-December 1989 revolution government, resulted in a short-term decrease in agricultural production. Some four million small parcels representing 80% of the arable surface were returned to original owners or their heirs. Many of the recipients were elderly or city dwellers, and the slow progress of granting formal land titles is an obstacle to leasing or selling land to active farmers. Financial and technical assistance continue to flow from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The International Monetary Fund, World Bank (IBRD), the European Bank for Reconstruction and Development (EBRD), and the U.S. Agency for International Development (USAID) all have programs and resident representatives in Romania. As of February 2007, Romania had attracted $20.2 billion in foreign direct investment. Of this total, U.S. direct investment accounted for $869.1 million (4.3%), ranking sixth among country investors. After years of IMF-guided economic reforms, Romania' stand-by agreement with the IMF expired on July 7, 2006. Romania's inflation rate has steadily decreased, while growth rates have been between 4% and 8% since 2001. However, the IMF has been critical of Romania's 2005 adoption of a 16% flat tax, pointing to the country's low rate of tax collection as a medium- to long-term impediment to growth. The IMF has also criticized Romania's public sector wage policy as inflationary. Public sector wages increased 36% through 2006 and the Government of Romania has approved public sector wage increases of 14%-19% over three rounds in 2007. Analysts have warned that increasing macroeconomic imbalances, such as the growing current account deficit (at 10.3% of GDP in 2006), deteriorating education and health services, and outdated and limited physical infrastructure may harm future growth. Romania's budget deficits also dropped under IMF guidance, though the trend is reversing. Actual deficits decreased from 4% of GDP in 1999 to only 0.8% in 2005 and 1.7% in 2006. However, deficits are expected to increase as Romania strives to absorb Structural Fund Assistance from the EU, as illustrated by a projected 2.8% budget deficit for 2007. The country made progress in combating domestic tax arrears and expanding the tax base in 2005, though Romania has one of the lowest collection rates in Europe, at 31.0% of GDP in 2006. Unemployment was officially 5.2% in February 2007, although these figures do not capture high levels of temporary emigration, grey-market employment, or under-employment. In the 1990s, inflation was one of Romania’s most serious economic problems. Retail price inflation averaged 12.1% monthly in 1993 (the equivalent of 256% annually). Inflation rates gradually declined through the 1990s, reaching single digits in 2004. Inflation in 2006 stood at an historical low of 4.9%. The Central Bank has set an ambitious annual target of 4% plus/minus 1% for 2007. FOREIGN RELATIONS Romania was the first country to enroll in the NATO Partnership for Peace program. NATO member states invited Romania to join the Alliance in 2002, based on Romania's rapid progress in modernizing its armed forces and its contributions to allied peacekeeping and other military operations. Romania officially became a member of the North Atlantic Treaty Organization on March 29, 2004 after depositing its instruments of treaty ratification in Washington, DC. In 1996, Romania signed and ratified a basic bilateral treaty with Hungary that settled outstanding issues and laid the foundation for closer, more cooperative relations. In June 1997, Romania signed a bilateral treaty with Ukraine that resolved certain territorial and minority issues, among others. Romania also signed a basic bilateral treaty with Russia in July 2003. Romania has been actively involved in regional organizations, such as the Southeast Europe Cooperation Initiative (SECI) and the Stability Pact for Southeast Europe, and has been a positive force in supporting stability and cooperation in the area. Romania maintains good diplomatic relations with Israel and was supportive of the Middle East peace negotiations initiated after the Gulf conflict in 1991. Romania also is a founding member of the Black Sea Consortium for Economic Development. It joined the International Monetary Fund and the World Bank in 1972, and is a member of the World Trade Organization. Romanian Missions in the United States Romanian Mission to the UN Romanian National Tourist Office Romanian Cultural Center DEFENSE U.S.-ROMANIAN RELATIONS Responding to Ceausescu's calculated distancing of Romania from Soviet foreign policy, particularly Romania's continued diplomatic relations with Israel and denunciation of the 1968 Soviet intervention in Czechoslovakia, President Nixon paid an official visit to Romania in August 1969. Despite political differences, high-level contacts continued between U.S. and Romanian leaders throughout the decade of the 1970s, culminating in the 1978 state visit to Washington by President and Mrs. Ceausescu. In 1972, a consular convention to facilitate protection of citizens and their property in both countries was signed. Overseas Private Investment Corporation (OPIC) facilities were granted, and Romania became eligible for U.S. Export-Import Bank credits. A trade agreement signed in April 1975 accorded most favored nation (MFN) status to Romania under section 402 of the Trade Reform Act of 1974 (the Jackson-Vanik amendment that links MFN to a country's performance on emigration). This status was renewed yearly after congressional review of a presidential determination that Romania was making progress toward freedom of emigration. In the mid-1980s, criticism of Romania's deteriorating human rights record, particularly regarding mistreatment of religious and ethnic minorities, spurred attempts by Congress to withdraw MFN status. In 1988, to preempt congressional action, Ceausescu renounced MFN treatment, calling Jackson-Vanik and other human rights requirements unacceptable interference in Romanian sovereignty. After welcoming the revolution of December 1989 with a visit by Secretary of State Baker in February 1990, the U.S. Government expressed concern that opposition parties had faced discriminatory treatment in the May 1990 elections, when the National Salvation Front won a sweeping victory. The slow progress of subsequent political and economic reform increased that concern, and relations with Romania cooled sharply after the June 1990 intervention of the miners in University Square. Anxious to cultivate better relations with the U.S. and Europe, and disappointed at the poor results from its gradualist economic reform strategy, the Stolojan government undertook some economic reforms and conducted free and fair parliamentary and presidential elections in September 1992. Encouraged by the conduct of local elections in February 1992, Deputy Secretary of State Eagleburger paid a visit in May 1992. Congress restored MFN in November 1993 in recognition of Romania's progress in instituting political and economic reform. In 1996, the U.S. Congress voted to extend permanent MFN graduation to Romania. As Romania's policies became unequivocally pro-Western, the United States moved to deepen relations. President Clinton visited Bucharest in 1997. The two countries initiated cooperation on shared goals, including economic and political development, defense reform, and non-traditional threats (such as trans-border crime and non-proliferation). Following the tragic events of September 11, 2001, Romania has been fully supportive of the U.S. in the Global War on Terror. Romania was invited to join the North Atlantic Treaty Organization (NATO) in November 2002 and formally joined NATO on March 29, 2004 after depositing its instruments of treaty ratification in Washington, DC. President Bush helped commemorate Romania’s NATO accession when he visited Bucharest in November 2002. On that occasion he congratulated the Romanian people on building democratic institutions and a market economy following the fall of communism. In March 2005, President Traian Basescu made his first official visit Washington to meet with President Bush, Secretary of State Rice, Secretary of Defense Rumsfeld, and other senior U.S. officials. In December 2005, Secretary Rice visited Bucharest to meet with President Basescu and to sign a bilateral defense cooperation agreement that will allow for the joint use of Romanian military facilities by U.S. troops. Principal U.S. Officials The U.S. Embassy in Romania is located at Strada Tudor Arghezi 7-9, Bucharest (tel. 40-21 200-3300, fax 40-21 200-3442, consular fax 40-21 200-3381). A U.S. embassy Branch Office was opened in Cluj-Napoca in January 1994 (tel. 40-264 439-118, fax 40-264-593-868). TRAVEL AND BUSINESS INFORMATION For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Public Announcements, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml. The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions. Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada. The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays. Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800. Further Electronic Information Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more. STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.Revised: Apr. 2007 |
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