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Economy of Romania

Romania is a country of considerable potential: rich agricultural lands, diverse energy sources (coal, oil, natural gas, hydro, and nuclear), a substantial industrial base encompassing almost the full range of manufacturing activities, an educated work force, and opportunities for expanded development in tourism on the Black Sea and in the Carpathian Mountains.

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 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 had been increasing rapidly until 2008, although it remained less in per capita terms than in some other countries of 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 European 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 EU members.

Romania suffered through a deep economic recession beginning with the 2008 global financial crisis, but should return to positive if very modest growth by the end of 2011. Due to rapidly deteriorating economic conditions, a ballooning budget deficit, and large external imbalances, the Romanian Government was forced to conclude a 2-year, $27 billion financial assistance package with the International Monetary Fund (IMF), the European Commission, and the World Bank in March 2009. Under the terms agreed with the IMF, the Romanian Government embarked on a difficult austerity program to reduce the budget deficit, cut public sector employment, and restructure local and national government agencies. Austerity measures included a 25% cut in public sector wages, a hike in the national value added tax (VAT) rate from 19% to 24%, and thousands of layoffs. GDP declined by 7.1% in 2009 and a further 1.3% in 2010, but the government succeeded in meeting IMF-agreed deficit targets despite strong opposition to the austerity measures from labor unions. In late 2010 and early 2011 the government also pushed several important pieces of reform legislation through Parliament, including pension reforms, an overhaul of public sector pay systems, and modernization of the labor code. The final IMF review under the 2009 agreement, conducted in February 2011, declared the agreement a “success” in stabilizing the economy and setting the stage for a return to growth. A new 2-year “precautionary” agreement between Romania and the IMF, effective March 2011, focuses on deepening structural reforms and restructuring or privatizing unprofitable state-owned enterprises.

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 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. Two state-owned banks remain in Romania, Eximbank and the National Savings Bank (CEC), after an attempt to privatize CEC Bank was indefinitely postponed in 2006. Four of the country's eight regional electricity distributors have now been privatized. 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 has been delayed as the government is contemplating the creation of two integrated, state-owned energy producers. However, this “bundling” scheme has been challenged in court and is also under review by the Romanian Competition Council and by competition authorities at the European Commission. Romania has a nuclear power plant at Cernavoda, with one nuclear reactor in operation since 1996 and a second one commissioned in the fall of 2007.

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 remains an obstacle to leasing or selling land to active farmers.

Financial and technical assistance continues to flow from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The IMF, World Bank, European Bank for Reconstruction and Development (EBRD), and European Investment Bank (EIB) all have programs and resident representatives in Romania. U.S. Agency for International Development (USAID) programs were phased out completely in 2008, except for Small Project Assistance Grants, which are still available through the Peace Corps. According to the National Office of the Trade Register, which measures foreign direct capital registered and disbursed to firms, between 1990 and November 2010 Romania attracted a total of $37.91 billion in foreign direct investment, of which the U.S. represented 2.59%. The actual level of U.S. investment, however, is underreported as much of it flows to Romania through European subsidiaries of U.S. companies.

After years of consistently high inflation in the 1990s, Romania's inflation rate steadily decreased through 2004, only to rise again along with high GDP growth rates of 4% to 8% through 2008. The deep recession beginning in late 2008 dramatically reduced inflationary pressures, but the VAT tax hike from 19% to 24% imposed in mid-2010 reversed that trend and pushed prices higher. Stoked also by rising global food and energy prices, inflation hit an annualized rate of 8% at the end of 2010, the highest in the EU. The IMF has been critical of Romania's low rate of tax collection and poor enforcement mechanisms as a medium- to long-term impediment to growth. Tax arrears are slightly decreasing, but Romania still has one of the lowest percentages in the EU of revenues collected, at 33% of GDP in 2010. The current account deficit had been a concern, as it reached 13.6% of GDP in 2007 and 12.4% of GDP in 2008. However, due to the recession, the current account deficit dropped to 4.2% of GDP in 2010. Deteriorating education and health services and aging and inadequate physical infrastructure continue to be seen as threats to future growth.

Romania's budget deficit dropped steadily from 4% of GDP in 1999 to only 0.8% in 2005, but then skyrocketed, peaking at 7.2% in 2009. The major culprits for the rising deficit were tax evasion and lax enforcement; runaway government procurement spending; and big increases in public sector wages, retirement pensions, and social assistance. Under the IMF agreement the deficit was pared to 6.5% of GDP in 2010 and is on track to reach the target of 4.4% in 2011, though additional austerity measures may be needed to get the deficit under 3% by 2012.

Driven by the recession, official unemployment peaked at 7.8% in December 2009 but then dropped to 6.9% by the end of 2010 despite substantial layoffs in the public sector, and declined further to 6.74% in January 2011. More public sector layoffs are expected in 2011, though a gradual return to growth in the private sector should fuel a correspondingly gradual recovery in job creation.

GDP (2010): $162 billion.
Annual GDP growth rate (2010): -1.3%; latest IMF 2011 growth forecast: +1.5%.
GDP per capita: $7,538.
Natural resources: Oil, timber, natural gas, coal, salt, iron ore.
Agriculture (2010): Percentage of GDP--6.0%. Products--corn, wheat, potatoes, oilseeds, vegetables, livestock, fish, and forestry.
Industry (2010): Percentage of GDP--26.4%. Types--machine building, mining, construction materials, metal production and processing, chemicals, food processing, textiles, clothing. Industrial output increased by 0.9% in 2008, decreased 5.5% in 2009, and rebounded with a 5.5% increase in 2010.
Services (2010): Percentage of GDP--47.6%.
Construction (2010): Percentage of GDP--8.9%.
Trade: Exports--$48.8 billion. Types--textiles, chemicals, light manufactures, wood products, fuels, processed metals, machinery and equipment. Exports to the U.S. (2010)--$734.0 million. Major markets--Germany, Italy, France, Turkey, Hungary. Imports--$61.2 billion. Types--machinery and equipment, textiles, fuel, coking coal, iron ore, machinery and equipment, and mineral products. Imports from the U.S. (2010)--$750.4 million. Major suppliers--Germany, Italy, Hungary, France, China.
Exchange rate (March 2011): 3.01 new Lei=U.S. $1.

Geography of Romania

Extending inland halfway across the Balkan Peninsula and covering a large elliptical area of 237,499 square kilometers (91,699 sq. mi.), Romania occupies the greater part of the lower basin of the Danube River system and the hilly eastern regions of the middle Danube basin. It lies on either side of the mountain systems collectively known as the Carpathians, which form the natural barrier between the two Danube basins. Romania's location gives it a continental climate, particularly in the Old Kingdom (east of the Carpathians and south of the Transylvanian Alps) and to a lesser extent in Transylvania, where the climate is more moderate. A long and at times severe winter (December-March), a hot summer (April-July), and a prolonged autumn (August-November) are the principal seasons, with a rapid transition from spring to summer. In Bucharest, the daily minimum temperature in January averages -7oC (20oF), and the daily maximum temperature in July averages 29oC (85oF). Area: 237,499 sq. km. (91,699 sq. mi.); somewhat smaller than New York and Pennsylvania combined. Cities: Capital--Bucharest (pop. 2.02 million). Other cities--Constanta (344,000), Iasi (350,000), Timisoara (327,000), Cluj-Napoca (334,000), Galati (331,000), Brasov (316,000). Terrain: Consists mainly of rolling, fertile plains; hilly in the eastern regions of the middle Danube basin; and major mountain ranges running north and west in the center of the country, which collectively are known as the Carpathians. Climate: Moderate.

Government of Romania

Romania's 1991 constitution proclaims Romania a democracy and market economy, in which human dignity, civic rights and freedoms, the unhindered development of human personality, justice, and political pluralism are supreme and guaranteed values. The constitution directs the state to implement free trade, protect the principle of competition, and provide a favorable framework for production. The constitution provides for a president, a Parliament, a Constitutional Court, and a separate system of ordinary courts that includes a Supreme Court.

The two-chamber Parliament, consisting of the Chamber of Deputies and the Senate, is the law-making authority. Deputies and senators are elected for 4-year terms by universal suffrage. The president, mayors, and county council presidents are elected individually; members of Parliament are elected under a mixed election system (majority and proportional); and local and county council members are elected on party slates, in proportion to party choices made by the electorate.

The president is elected by popular vote for a maximum of two terms. The length of the term was extended from 4 to 5 years in an October 2003 constitutional referendum. He is the head of state, charged with safeguarding the constitution, foreign affairs, and the proper functioning of public authorities. He is the commander-in-chief of the armed forces and chairman of the Supreme Defense Council. According to the constitution, he acts as mediator among the power centers within the state, as well as between the state and society. The president nominates the prime minister, who in turn appoints the government, which must be confirmed by a vote of confidence from Parliament.

The Constitutional Court adjudicates the constitutionality of challenged laws and decrees. The court consists of nine judges, appointed for non-concurrent terms of 9 years. Three judges are appointed by the Chamber of Deputies, three by the Senate, and three by the president of Romania.

The Romanian legal system is based on the Napoleonic Code. The judiciary is to be independent, and judges appointed by the president are not removable. The president and other judges of the High Court of Cassation and Justice are appointed for terms of 6 years and may serve consecutive terms. Proceedings are public, except in special circumstances provided for by law.

The Ministry of Justice represents "the general interests of society" and defends the legal order as well as citizens' rights and freedoms. The ministry is to discharge its powers through independent, impartial public prosecutors.

For territorial and administrative purposes, Romania is divided into 41 counties and the city of Bucharest. Each county is governed by an elected county council. Local councils and elected mayors are the public administration authorities in villages and towns. The county council is the public administration authority that coordinates the activities of all village and town councils in a county.

The central government appoints a prefect for each county and the Bucharest municipality. The prefect is the representative of the central government at the local level and directs any public services of the ministries and other central agencies at the county level. A prefect may block the action of a local authority if he deems it unlawful or unconstitutional. The matter is then decided by an administrative court.

Under legislation in effect since January 1999, local councils have control over the spending of their allocations from the central government budget, as well as authority to raise additional revenue locally.

Principal Government Officials
President of Romania--Traian Basescu
Prime Minister--Emil Boc
Minister of Foreign Affairs--Cristian Diaconescu

Other Ministers
Minister of Regional Development and Housing--Vasile Blaga
Minister of Justice and Citizens' Freedoms--Catalin Predoiu
Minister of Defense--Mihai Stanisoara
Minister of Administration and Interior--Dan Nica
Minister of Economy--Adriean Videanu
Minister of Public Finance--Gheorghe Pogea
Minister of Labor, Family and Social Protection--Marian Sarbu
Minister of Agriculture, Forests, and Rural Development--Ilie Sarbu
Minister of Transportation and Infrastructure--Radu Berceanu
Minister of Education, Research and Innovation--Ecaterina Andronescu
Minister of Culture, Religious Denominations and National Heritage--Theodor Paleologu
Minister of Public Health--Ion Bazac
Minister of Communication and Information Technology--Gabriel Sandu
Minister of Environment--Nicolae Nemirschi
Minister of Tourism--Elena Udrea
Minister of Youth and Sports--Monica Iacob Ridzi
Minister of Small and Medium Enterprises, Trade and Business Environment--Constantin Nita
Minister for Liaison with the Parliament--Victor Ponta
Romania maintains an embassy in the United States at 1607 23rd St., NW, Washington, DC 20008 (tel. 202- 232-3694, fax: 202-232-4748).

POLITICAL CONDITIONS
November 2008 parliamentary elections resulted in a virtual tie between the center-right PDL and the center-left PSD, with each holding between 34%-37% of the seats in each chamber. The ruling center-right PNL finished a distant third, and PNL Prime Minister Calin Tariceanu resigned. After intense negotiations among various configurations of the PDL, PSD, and PNL, a majority PDL/PSD coalition government was formed in December 2008 with Emil Boc as new prime minister. Among the new government’s top priorities were addressing the effects of global economic turmoil on Romania’s economic development, and coping with significant fiscal challenges facing the Romanian Government’s budget.

In October 2009, the PNL, PSD, and the Democratic Union of Hungarians in Romania (UDMR) filed a no-confidence motion after Prime Minister Boc dismissed Deputy Prime Minister/Interior Minister Dan Nica of the PSD. The no-confidence motion carried, ousting Boc’s minority government, and marking the first time since the revolution of 1989 that a no-confidence motion toppled a Romanian government. However, difficulty in nominating and approving a new cabinet allowed Boc to remain in power as a caretaker through both the November and December 2009 rounds of the presidential election.

Concerns over Romania’s economic situation dominated the November 2009 presidential election, contested by incumbent Traian Basescu of the PDL, Mircea Geoana of the PSD, and Crin Antonescu of the PNL. Basescu (32.8%) and Geoana (29.8%) advanced to the second round of elections in December. Despite charges of electoral irregularities, the Constitutional Court certified Basescu the winner over Geoana by 0.7%, or 70,000 votes. Following his victory, Basescu asked acting Prime Minister Boc to again form a new cabinet. The Parliament approved the new government in late December, alleviating 2 months of political instability. Dedicated to modernization, education, and judicial and government reform, the Basescu administration’s main focus remains Romania’s continued recovery from economic recession.

Romania has made great progress in institutionalizing democratic principles, civil liberties, and respect for human rights since the 1989 revolution. 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 the 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 the continuing influence of the ethnic Hungarian minority in national government, and presently serves as part of the ruling coalition government. 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 from discrimination. According to government statistics Roma officially represent 2.5% of the population, although Romani organizations claim the figure may be as high as 10%.

The restitution of private and religious property seized under communism or during World War II continues to move very 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.

Type: Republic.
Constitution: December 8, 1991, amended by referendum October 18-19, 2003.
Branches: Executive--president (head of state), prime minister (head of government), Council of Ministers. Legislative--bicameral Parliament. Judicial--Constitutional Court, High Court of Cassation and Justice, and lower courts.
Subdivisions: 41 counties plus the city of Bucharest.
Political parties: Political parties represented in the Parliament are the Social Democratic Party (PSD); the National Liberal Party (PNL); the Democratic Liberal Party (PD-L); the Hungarian Democratic Union of Romania (UDMR); the Conservative Party (PC); the Greater Romania Party (PRM). Other political parties include National Democratic Christian Peasant Party (PNTCD), the New Generation Party (PNG), National Initiative Party (PIN) as well as political organizations of minorities.
Suffrage: Universal from age 18.
Defense: 1.8% of GDP.

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History of Romania

From about 200 B.C., when it was settled by the Dacians, a Thracian tribe, Romania has been on the path of a series of migrations and conquests. Under the emperor Trajan early in the second century A.D., Dacia was incorporated into the Roman Empire, but was abandoned by a declining Rome less than two centuries later. Romania disappeared from recorded history for hundreds of years, to reemerge in the medieval period as the Principalities of Moldavia and Wallachia. Heavily taxed and badly administered under the Ottoman Empire, the two Principalities were unified under a single native prince in 1859, and had their full independence ratified in the 1878 Treaty of Berlin. A German prince, Carol of Hohenzollern, was crowned first King of Romania in 1881. The new state, squeezed between the Ottoman, Austro-Hungarian, and Russian empires, with Slav neighbors on three sides, looked to the West, particularly France, for its cultural, educational, and administrative models. Romania was an ally of the Entente and the U.S. in World War I, and was granted substantial territories with Romanian populations, notably Transylvania, Bessarabia, and Bukovina, after the war. Most of Romania's pre-World War II governments maintained the forms, but not the substance, of a liberal constitutional monarchy. The quasi-mystical fascist Iron Guard movement, exploiting nationalism, fear of communism, and resentment of alleged foreign and Jewish domination of the economy, was a key factor in the creation of a dictatorship in 1938. In 1940-41, the authoritarian General Antonescu took control. Romania entered World War II on the side of the Axis Powers in June 1941, invading the Soviet Union to recover Bessarabia and Bukovina, which had been annexed in 1940. In August 1944, a coup led by King Michael, with support from opposition politicians and the army, deposed the Antonescu dictatorship and put Romania's battered armies on the side of the Allies. Romania incurred additional heavy casualties fighting the Germans in Transylvania, Hungary, and Czechoslovakia. According to the officially recognized 2004 Wiesel Commission report, Romanian authorities were responsible for the death of between 280,000 and 380,000 Romanian and Ukrainian Jews in the territories under Romanian jurisdiction (including Bessarabia, Bukovina, and Transnistria) out of a population of approximately 760,000. In addition, 132,000 Romanian Jews were killed by the pro-Nazi Hungarian authorities in Transylvania. A peace treaty, signed in Paris on February 10, 1947, confirmed the Soviet annexation of Bessarabia and northern Bukovina, but restored the part of northern Transylvania granted to Hungary in 1940 by Hitler. The treaty also required massive war reparations by Romania to the Soviet Union, whose occupying forces left in 1958. The Soviets pressed for inclusion of Romania's heretofore negligible Communist Party in the post-war government, while non-communist political leaders were steadily eliminated from political life. King Michael abdicated under pressure in December 1947, when the Romanian People's Republic was declared, and went into exile. In the early 1960s, Romania's communist government began to assert some independence from the Soviet Union. Nicolae Ceausescu became head of the Communist Party in 1965 and head of state in 1967. Ceausescu's denunciation of the 1968 Soviet invasion of Czechoslovakia and a brief relaxation in internal repression helped give him a positive image both at home and in the West. Seduced by Ceausescu's "independent" foreign policy, Western leaders were slow to turn against a regime that, by the late 1970s, had become increasingly harsh, arbitrary, and capricious. Rapid economic growth fueled by foreign credits gradually gave way to wrenching austerity and severe political repression. After the collapse of communism in the rest of Eastern Europe in the late summer and fall of 1989, a mid-December protest in Timisoara against the forced relocation of a Hungarian minister grew into a country-wide protest against the Ceausescu regime, sweeping the dictator from power. Ceausescu and his wife were executed on December 25, 1989, after a cursory military trial. About 1,500 people were killed in confused street fighting. An impromptu governing coalition, the National Salvation Front (FSN), installed itself and proclaimed the restoration of democracy and freedom. The Communist Party was outlawed, and Ceausescu's most unpopular measures, such as bans on abortion and contraception, were repealed. Ion Iliescu, a former Communist Party official demoted by Ceausescu in the 1970s, emerged as the leader of the NSF. Presidential and parliamentary elections were held on May 20, 1990. Running against representatives of the pre-war National Peasants' Party and National Liberal Party, Iliescu won 85% of the vote. The NSF captured two-thirds of the seats in Parliament, and named a university professor, Petre Roman, as Prime Minister. The new government began cautious free market reforms such as opening the economy to consumer imports and establishing the independence of the National Bank. Romania has made great progress in institutionalizing democratic principles, civil liberties, and respect for human rights since the revolution. Nevertheless, the legacy of 44 years of communist rule cannot quickly be eliminated. Membership in the Romanian Communist Party was usually the prerequisite for higher education, foreign travel, or a good job, while the extensive internal security apparatus subverted normal social and political relations. To the few active dissidents, who suffered gravely under Ceausescu and his predecessors, many of those who came forward as politicians after the revolution seemed tainted by association with the previous regime. Over 200 new political parties sprang up after 1989, gravitating around personalities rather than programs. All major parties espoused democracy and market reforms, but the governing National Salvation Front proposed slower, more cautious economic reforms. In contrast, the opposition's main parties, the National Liberal Party (PNL), and the National Peasant-Christian Democrat Party (PNTCD) favored quick, sweeping reforms, immediate privatization, and reducing the role of the ex-communist elite. In the 1990 general elections, the FSN and its candidate for presidency, Ion Iliescu, won with a large majority of the votes (66.31% and 85.07%, respectively). The strongest parties in opposition were the Democratic Alliance of Hungarians in Romania (UDMR), with 7.23%, and the PNL, with 6.41%. Unhappy at the continued political and economic influence of members of the Ceausescu-era elite, anti-communist protesters camped in University Square in April 1990. When miners from the Jiu Valley descended on Bucharest two months later and brutally dispersed the remaining "hooligans," President Iliescu expressed public thanks, thus convincing many that the government had sponsored the miners' actions. The miners also attacked the headquarters and houses of opposition leaders. The Roman government fell in late September 1991, when the miners returned to Bucharest to demand higher salaries and better living conditions. Theodor Stolojan was appointed to head an interim government until new elections could be held. Parliament drafted a new democratic constitution, approved by popular referendum in December 1991. The FSN split into two groups, led by Ion Iliescu (FDSN) and Petre Roman (FSN) in March 1992; Roman's party subsequently adopted the name Democratic Party (PD). National elections in September 1992 returned President Iliescu by a clear majority, and gave his party, the FDSN, a plurality. With parliamentary support from the nationalist PUNR and PRM parties, and the ex-communist PSM party, a technocratic government was formed in November 1992 under Prime Minister Nicolae Vacaroiu, an economist. The FDSN became the Party of Social Democracy of Romania (PDSR) in July 1993. The Vacaroiu government ruled in coalition with three smaller parties, all of which abandoned the coalition by the time of the November 1996 elections. The 1992 elections revealed a continuing political cleavage between major urban centers and the countryside. Rural voters, who were grateful for the restoration of most agricultural land to farmers but fearful of change, strongly favored President Ion Iliescu and the FDSN, while the urban electorate favored the CDR (a coalition made up by several parties -- among which the PNTCD and the PNL were the strongest -- and civic organizations) and quicker reform. Iliescu easily won reelection over a field of five other candidates. The FDSN won a plurality in both chambers of Parliament. With the CDR, the second-largest parliamentary group, reluctant to take part in a national unity coalition, the FDSN (now PDSR) formed a government under Prime Minister Nicolae Vacaroiu, with parliamentary support from the PUNR, PRM, and PSM. PRM and PSM left the government in October and December 1995, respectively. The 1996 local elections demonstrated a major shift in the political orientation of the Romanian electorate. Opposition parties swept Bucharest and many of the larger cities. This trend continued in the national elections that same year, where the opposition dominated the cities and made steep inroads into rural areas theretofore dominated by President Iliescu and the PDSR, which lost many voters in their traditional strongholds outside Transylvania. The campaign of the opposition hammered away on the twin themes of the need to squelch corruption and to launch economic reform. The message resonated with the electorate, which swept Emil Constantinescu and parties allied to him to power in free and fair presidential and parliamentary elections. The coalition government formed in December 1996 took the historic step of inviting the UDMR and its Hungarian ethnic backers into government. The coalition government retained power for four years despite constant internal frictions and three prime ministers, the last being the Governor of the National Bank, Mugur Isarescu. In elections in November 2000, the electorate punished the coalition parties for their corruption and failure to improve the standard of living. The PDSR (renamed PSD - Social Democratic Party at June 16, 2001 Congress) came back into power, albeit as a minority government. In the concurrent presidential elections, former President Ion Iliescu decisively defeated the extreme nationalist Greater Romania Party (PRM) leader Corneliu Vadim Tudor. The PSD government, led by Prime Minister Adrian Nastase, forged a de facto governing coalition with the ethnic Hungarian UDMR, ushering in four years of relatively stable government. The PSD guided Romania toward greater macro-economic stability, although endemic corruption remained a major problem. In September 2003, the center-right National Liberal Party (PNL) and centrist Democratic Party (PD) formed an alliance at a national and local level, in anticipation of 2004 local and national elections. Romania then moved closer toward a political system dominated by two large political blocs. In October 2003 citizens voted in favor of major amendments to the constitution in a nationwide referendum to bring Romania's organic law into compliance with European Union standards. On November 28, 2004, Romania again held parliamentary and the first round of presidential elections. In the December 12 presidential run-off election, former Bucharest Mayor Traian Basescu, representing the center-right PNL-PD alliance, delivered a surprise defeat to PSD candidate Nastase. Basescu appointed PNL leader Calin Popescu-Tariceanu as Prime Minister, whose government was approved by the Parliament on December 28, 2004. This coalition unraveled due to enmity between the President and Prime Minister by April 2007. Since April 3, 2007, Prime Minister Tariceanu's PNL party has run an ultra-minority government in coalition with the UDMR and tacit support of the PSD.

People of Romania

About 89% of the people are ethnic Romanians, a group that--in contrast to its Slav or Hungarian neighbors--traces itself to Latin-speaking Romans, who in the second and third centuries A.D. conquered and settled among the ancient Dacians, a Thracian people. As a result, the Romanian language, although containing elements of Slavic, Turkish, and other languages, is a Romance language related to French and Italian. Hungarians and Roma are the principal minorities, with a declining German population and smaller numbers of Serbs, Croats, Ukrainians, Greeks, Turks, Armenians, Great Russians, and others. Minority populations are greatest in Transylvania and the Banat, areas in the north and west, which belonged to the Austro-Hungarian Empire until World War I. Even before union with Romania, ethnic Romanians comprised the overall majority in Transylvania. However, ethnic Hungarians and Germans were the dominant urban population until relatively recently, and ethnic Hungarians still are the majority in a few districts. Before World War II, minorities represented more than 28% of the total population. During the war that percentage was halved, largely by the loss of the border areas of Bessarabia and northern Bukovina (to the former Soviet Union--now Moldova and a portion of southwest Ukraine) and southern Dobruja (to Bulgaria), as well as by the postwar flight or deportation of ethnic Germans. In the last several decades, more than two-thirds of the remaining ethnic Germans in Romania emigrated to Germany. Romanian troops during World War II participated in the destruction of the Jewish communities of Bessarabia and Transnistria (both now comprising the independent Republic of Moldova) and northern Bukovina (now part of Ukraine). Jews in areas now comprising Romania also were subject to harsh persecution, including government-sanctioned pogroms and killings, and about 30% did not survive the Holocaust. Mass emigration, mostly to Israel, has reduced the surviving Jewish community from over 300,000 to less than 10,000. Religious affiliation tends to follow ethnic lines, with most ethnic Romanians identifying with the Romanian Orthodox Church. Also ethnically Romanian is the Greek Catholic or Uniate Church, reunified with the Orthodox Church by fiat in 1948, and restored after the 1989 revolution. The 2002 census indicates that 1%-3% of the population is Greek Catholic, as opposed to about 10% prior to 1948. Roman Catholics, largely ethnic Hungarians and Germans, constitute about 5% of the population; Calvinists, Baptists, Pentecostals, and Lutherans make up another 5%. There are smaller numbers of Unitarians, Muslims, and other religions. Romania's cultural traditions have been nourished by many sources, some of which predate the Roman occupation. The traditional folk arts, including dance, music, wood-carving, ceramics, weaving and embroidery of costumes and household decorations still flourish in many parts of the country. Despite strong Austrian, German, and especially French influence, many of Romania's great artists, such as the painter Nicolae Grigorescu, the poet Mihai Eminescu, the composer George Enescu, and the sculptor Constantin Brancusi, drew their inspiration from Romanian folk traditions. The country's many Orthodox monasteries, as well as the Transylvanian Catholic and Evangelical Churches, some of which date back to the 13th century, are repositories of artistic treasures. The famous painted monasteries of southern (Romanian) Bukovina make an important contribution to European architecture. Poetry and the theater play an important role in contemporary Romanian life. Classic Romanian plays, such as those of Ion Luca Caragiale, as well as works by modern or avant-garde Romanian and international playwrights, find sophisticated and enthusiastic audiences in the many theaters of the capital and smaller cities. Nationality: Noun and adjective --Romanian(s). Population (2010): 21.49 million. Annual population growth rate: -0.247%. Ethnic groups: Romanians 89.5%, Hungarians 6.6%, Germans 0.3%, Ukrainians 0.3%, Serbs, Croats, Russians 0.2%, Turks 0.2%, and Roma 2.5%. Religions: Orthodox 86.8%; Roman Catholic 5%; Reformed Protestant, Baptist, and Pentecostal 5%; Greek Catholic (Uniate) 1% to 3%; Muslim 0.2%; Jewish less than 0.1%. Languages: Romanian (official). Other languages --Hungarian, German. Education: Years compulsory --9. Attendance --98%. Literacy --97.3%. Health: Infant mortality rate (2010)--11.32/1,000. Life expectancy --men 70.26 yrs., women 77.42 yrs. Work force (2010): 9.72 million. Agriculture --3.0 million, industry and construction --2.8 million, services --3.3 million, other --0.3 million.
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