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Isărescu's term, Halep's victory, the fiscal amnesty, the budget deficit - all of it eclipsed by Caracal

EMILIA OLESCU (translated by Cosmin Ghidovean)
English Section /

Isărescu's term, Halep's victory, the fiscal amnesty, the budget deficit - all of it eclipsed by Caracal

Not only the weather was hot in July, but the economic, social and political matters as well. Even though it began with the validation of Mugur Isărescu for the sixth time at the helm of the NBR, it went on with Simona Halep winning Wimbledon and leading into an announced budget deficit of almost 2% of the GDP in the first semester, with the passing of the tax amnesty and with the announcement of some austerity measures, for everyone the dominant event was the kidnapping of the Caracal teen, which has held the top spot in the news media, in the last week of the month.

Mugur Isărescu - on his sixth term as NBR governor

In the first months of July, the Parliament has appointed Mugur Isărescu as governor of the NBR for the sixth time. Also validated were the other members of the Board of Directors of the NBR: Florin Georgescu (PSD), Leonardo Badea (PSD), Gheorghe Gherghina (PSD), Dan Radu Ruşanu (ALDE), Cristi Popa (USR), Eugen Nicolaescu (PNL), Virgil Stoenescu (PNL) and Balint Csaba (UDMR).

On the occasion, lawyer Gheorghe Piperea said that "Mugur Isărescu hasn't allowed anyone to grow in his shadow", and said that the elections for the new management of the National Bank of Romania haven't been held properly: "Those weren't elections, everything happened according to the orders of Mr. Isărescu. No one was put on that list without first being approved by Mr. Isărescu, which is very interesting, because that list also includes a former offender. Mr. Ruşanu was part of that «select» category of the big corrupt. It's true that now he has been acquitted, and that should result in no consequences, but it shouldn't be forgotten that for a long time the man had that label".

Former ASF head Dan Radu Ruşanu was placed under preventive custody in 2014, for four months and was on house arrest for another three months in the "Carpatica Asig" case, as he was accused of using the influence of a person holding a public office, aiding and abetting an offender and the creation of an organized crime group. In the initial circuit, the former head of the ASF was acquitted, and in 2017, three years after his arrest, the acquittal was upheld by the supreme court.

NBR governor Mugur Isărescu said, after the Parliament's vote, that the new Board of Directors has the mandate to prepare Romania for joining the Eurozone, and said: "It is a council which merges continuity with new blood, it merges youth with experience and I think that - looking at its format - this new Board of Directors will undertake every effort, will submit its whole professional capacity to carry out the mandate which it has been entrusted with. Our mandate is set by the banking laws, by the law of the National Bank of Romania, but I would add, as I've said yesterday as well (ed. note: Tuesday) in the specialized commissions, that we also have a new mandate, which has been set through the program to join the Eurozone, which the NBR has worked on, together with the Government, the representatives of the political parties and the Romanian Academy, with the help of the Presidency. This new mandate is to prepare the accession of Romania into the Eurozone. We have a very ambitious mandate I would say, with many challenges, but we are going to do everything in our power to see it through".

Also in the beginning of last month, the joint plenum of the Parliament has validated the five new members of the Fiscal Council: Daniel Dăianu, George Georgescu, Bogdan-Octavian Cozmâncă, Georgiana Camelia Creţan and Sebastian Bogdan Căpraru. Daniel Dăianu abandoned the position of non-executive member of the Board of Directors of the NBR.

Far too lenient fiscal measures for rebalancing the budget

On the last evening of July, government sources have announced that the Government is preparing fiscal measures to increase the revenues of the state budget, as the budget deficit has increased to 19.96 billion lei, in the first semester of this year, from 14.97 billion lei - the deficit seen in the first semester of 2018.

The top new regulations which would be approved by the government include earlier adoption of the cigarette excise increase, an excise on sodas with a large sugar dosage, the taxation of special pensions, the halving of the number of secretary of state positions, the hiring freeze in the public system and the abrogation of the bonuses for harmful and difficult labor conditions.

Economists claim that they are not enough to balance the budget. Economic analyst Iancu Guda, president of the Association of Financial Banking Analysts of Romania (AAFBR), says: "In the first six months of 2019, the government has spent more than 20 billion lei than it has collected, which means almost 2% of the GDP (19.96 billion lei), over the first five months, when the deficit stood at 15 billion. Five billion have been added in just one month and if we continue at the same pace, the deficit of 20 billion on the first six months could easily rise to 50 billion at the end of the year. If we also take into account the impact of the law of pensions, of 8 billion lei, we run the risk of a deficit of 50-55 billion lei throughout 2019, following the lack of adjustment measures. It is impossible to accept a deficit of more than 5% din PIB in a growth year, so these measures are necessary, but I think that they are not significant enough, if we compare them to the needs of the budget, and I think that there are going to be far more drastic measures, including tax hikes".

The announced package has measures which target significant areas, but they are far too lenient, says Iancu Guda, who said that "the truly harsh measures will be taken after the elections".

The government has passed the tax amnesty

Also on the last day of July, the Government has passed the Ordinance concerning the tax amnesty, with two alternatives to tax rescheduling being proposed.

The tax amnesty proposed at the end of June by the Minister of Public Finance, Eugen Teodorovici, will be applied indiscriminately, to individuals, private and state owned companies, to NGOs, public institutions and territorial administrative units, as announced by PM Viorica Dăncilă.

"Private, state-public or state owned companies, which have accrued overdue liabilities of more than 1 million lei, can qualify, based on a restructuring plan, for a series of tax facilities, which would preserve their viability and their rejoining of the economic circuit. In the case of companies which have accrued debts of less than 1 million lei by the end of last year, the penalties and interest payments will be erased, if the principal debts are paid by November 30, 2019. As far as the individuals and entities without a legal personality, the erasure of the interests and penalties will apply regardless of the amount of the debts accrued to the state budget, if they pay their principal by November 30, 2019. The measure can also be applied by other authorities or public institutions which are in charge of collecting taxes, as well as by the administrative entities for the taxpayers they are in charge of. The administrative divisions which have debts to the state budget will receive similar tax breaks if they pay off their principal debts by November 30, 2019".

The PM has mentioned that the Government would subsequently pass, upon the proposal of the Ministry of Finance, a number of measures to compensate and stimulate fair taxpayers, which have paid off their debts on time.

Eugen Teodorovici recently reiterated that the measure was the result of the problems which approximately 2700 companies are faced with, which have over 255,000 jobs and 1800 public institutions, including administrative units.

Simona Halep - won the Wimbledon tournament

In July, Simona Halep won the Wimbledon tournament, her second grand slam, after defeating American Serena Williams with 6-2, 6-2. Simona will be awarded 2.35 million British pounds (2.6 million Euros) and 2,000 WTA points. After her victory in the Wimbledon finals, Simona Halep has entered the honorary members of the All England Lawn Tennis and Croquet Club, one of the most high-end clubs in the world.

For Simona, that represents the ramp to help her resume her climb towards the top spot in the WTA, as Simona rose from the 7th to the 4th spot, with 5,933 points, in the WTA ranking. She has also ranked 2nd in the Champions' Tour, with 4,427 points.

The public figures seized the opportunity to once again use an athlete's notoriety. Upon her return, she was welcomed on the Otopeni airport by ministers, officials, politicians, sports personalities and fans.

President Klaus Iohannis decorated Halep with the highest distinction of the Romanian government, the National Order «Star of Romania» as Knight.

Patriarch Daniel of the Romanian Orthodox Church has granted the tennis player the highest award of the Romanian Patriarchate, in a ceremony which was held in the Room of Romanian Saints of the Patriarchal Residence.

Romfilatelia has launched an issue of stamps "Simona Halep, Ambassador of Romanian Tennis", to honor her achievements and in particular her winning of the title in Wimbledon On July13th, 2019.

The Caracal case

With summer in full swing, during the month when most people are on holiday, particularly on July 24th, the case in Caracal blew up, and it eclipsed everything else. Alexandra Măceşanu, aged 15, of the commune of Dobrosloveni, disappeared on her way to Caracal, allegedly kidnapped by Gheorghe Dincă, who picked her up during hitch hiking.

Even though on July 25th, the girl made three calls to the 112 emergency line from the location where she had been taken to, the police only arrived on location after 19 hours, by which time she was no longer there. That drew the attention of the mass-media and the authorities nationwide, which exploded into pandemonium.

While Gheorghe Dincă allegedly claimed that he was the author of two murders - that of Alexandra Măceşanu, and of Luiza Melencu, an 18-year old girl who disappeared from Caracal four months ago -, three dismissals have occurred (Ioan Buda, the head of the Romanian Police, Silviu Neacşu, the prefect of the county of Olt and Cristian Voiculescu, the head of IPJ Olt) and two resignations (Nicolae Moga, internal affairs minister and Ionel Vasilca, the head of the Special Telecommunications Service - STS).

On July 30, the meeting of the Supreme Defense Council (CSAT) was held, in which the Caracal case was discussed extensively. In the end, president Klaus Iohannis asked the government to draw up a number of measures, rules and regulations for quick intervention, criticizing the intervention of the authorities in the Caracal case.

The BET index of the BSE closed the month of July at 9,204.15 points, which it hadn't been at since January 2008, when the international and local market were affected by the global financial crisis.

There has been a new stage of the rising trend which the index has developed since spring this year, as it posted a 389.88 rise in July (4.42%).

With a rise of 7.93% and a weight of approximately 21% (the biggest of all the stocks that make up the BET index), shares of Banca Transilvania (TLV), the best ranked company listed on the BSE in the MSCI Frontier Markets index, had the biggest contribution to the rise of the index in the month of July.


The Swiss Franc (CHF) has reached new multi-year highs in July, peaking at 4.2992 lei/CHF on July 24th. Last month's low was seen on July 2nd (4.2411 lei).

On July 1st, the USDRON exchange reached the lowest level for the month (4.1804 lei/USD), while reaching the peak on July 29th , (4.2493 lei/USD).

The Euro reached the peak on June 3rd, when the NBR announced an exchange rate of 4.7356 lei/Euro. On July 24th, the EURRON exchange rate hit the month's low (4.7194 lei/euro).

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