Catherine and David Lovatt

The early days of the New Year have seen the first steps in the implementation of the new government's fiscal reform policy. The policy aims to simplify taxation and to promote exports, investment and job creation. Finance Minister Traian Remes said, "I believe the overall [fiscal reform] package will be beneficial for both companies and population." (Reuters - 5 January 2000)

The key elements of the policy are the introduction of global income tax, creating a standard rate of VAT, and a reduction in business profit tax. The government plans to put forward proposals for the reform of excise duties in February. The new income tax system, which takes account of all elements of a person's income, brings Romania into line with the European Union (EU). VAT is now set at 19%. The general rate of VAT has fallen from 22%, however, the VAT rate on milk, bread and medicines goes up by 8%. The utilities will charge VAT at the existing lower level of 11% until April 2000, when the rate on their services will rise to the standard rate.

President Emil Constantinescu said he "hails the determination with which the new government undertook to pass the much-needed program of fiscal reform and the hopes put in it." (Nine o'clock - 4 January 2000)

Trade Unions have criticised the tax reforms that came into effect on 1 January. They believe that the change in VAT will have a disastrous effect on living standards. Cartel Alfa has declared that countrywide protests are to take place from 15 January. The National Trade Union Bloc (BNS) has called for further talks with the government to find ways to increase living standards, as they do not see that either the VAT or income tax reforms will achieve this. The new government is not being given any period of grace by the unions, with the education federation announcing a half hour strike on 17 January, which will be followed by a general strike organised to begin on 24 January.

The telephone company Romtelecom is another service provider that has come in for much criticism - in their case from the Consumer Protection Office (OPC). Their review of the service has revealed that most complaints are made as a result of breakdowns in service, incorrect charging and waiting for a connection to the network. It is reported from some areas of the country that people have been waiting 11 years for a telephone line.

A significant proportion of tenants in Bucharest's state owned buildings are likely to be evicted for non-payment of rent. At least a quarter of the tenants have been sent warning notices. Rents have been increased many times in the last six months, with some estimates suggesting that they have increased by about 1000 times their July 1999 value.

Representatives of the International Monetary Fund (IMF) arrived in Bucharest this week. Their mission is to assess the 2000 budget and to deal with the delay in releasing the second phase of Romania's stand-by loan. Remes reported that both the second and third phase loans will be released simultaneously when the visit ends on 25 January. He went on to suggest that the Romanian government would be seeking agreement for a further, more substantial loan, when the current arrangements are complete.

Romania appears to have had no problems with the Y2K computer bug, even though it was slow in setting systems in place to combat the potential problem. The National Monitoring Centre (NMC) reported that "all activities in the vital sectors of the economy are continuing normally." NMC spokesperson Eugen Valean said, "I don't expect any unpleasant surprises in the coming days. All major systems look fine." (Reuters - 1 January 2000)

The European Commission (EC) has expressed support for the new Romanian government and its programme. EC representative in Bucharest Fokion Fotiadis said, "The European Commission and its chairman, Romano Prodi, fully support the Isărescu Government and the programme presented in Parliament, whose main concern is Romania's accession to the European Union." (Nine o'clock - 6 January 2000) Prodi is to visit Bucharest next week, prior to the commencement of EU accession talks. Isărescu and his new cabinet were sworn in by President Constantinescu on 22 December 1999 (see Catherine Lovatt's article from this week). Creating his own team has taken time, however. On Wednesday, Isărescu dismissed all but one of the advisers attached to Radu Vasile's cabinet. His new advisory group will number about 25 - half the size of Vasile's team.

The new cabinet ministers are busy creating their own teams, and often making major changes to the way their departments operate. Foreign Minister Petre Roman has set targets for the modernisation of his ministry, to increase its efficiency and to bring it into line with foreign ministries in the EU. He has set out the priorities of his Ministry as meeting EU criteria for membership and subsequently integration into the European institutions. Roman plans to reduce staff both in the Romania and abroad.

President Constantinescu has been in Israel on an official state visit this week. A very busy schedule has seen Constantinescu meeting with politicians, businessmen and church leaders. Together with Orthodox Patriarch Teoctist, he laid the foundation stone for the Romanian church, which is to be built in Bethlehem and, on that same day, met with Palestinian leader Yasser Arafat. While in Israel, the President is also to participate in a celebration of 2000 years of Christianity in Bethlehem, along with the leaders of the Orthodox Church from 14 countries and the presidents of Belarus, Greece, Georgia, Moldova, and Ukraine.

Catherine Lovatt and David Lovatt, 7 January 2000

Archive of Catherine Lovatt's articles on Romania and Moldova

Sources:

Evenimentul zilei / EvZ online

Moniturul

RFE/RL

Reuters

Mediafax

Agence France-Presse