Introduction |
January 1, 2007
On the morning of January 1, 2007, Corin Trandafir, Esq., and his
wife Adina, crossed the border from Austria into the Czech Republic in
their automobile bearing Romanian license plates. When they handed the
border guard their Romanian passport, the guard looked down at the cover
and smiled saying: “Welcome to the European Union.” Those five words are
among the most meaningful words ever spoken to a Romanian. Corin and
Adina had just experienced what all Romanians will undergo in one form
or another over the next days and months – the realization that they and
their nation have entered a new era and become part of a large,
institutionalized, European political and cultural unit that offers them
the prospect of a secure life and a chance at prosperity. Sitting in
their car at the Austrian border, Corin and Adina were unshackled from
the manacles of decades of communist oppression, and a painful seventeen
years of transition. They were for all times onward, not just Romanians,
but Europeans, with a destiny fully open to a world of possibilities. |
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Fear of Accession |
Despite a greatly tangled domestic political scene, Romania’s entry into
the European Union on January 1st marked a rare moment of political and
social unity in the country. All Romanians seem to concur with Prime
Minister Calin Popescu-Tariceanu’s characterization of Romania’s EU
accession as historically comparable with the Great Union of 1918. At
the core, is an understanding that EU accession means increased
investment and economic growth and, most significantly, a security and
stability that Romania has not heretofore known. Domestic expectations
and actual outcomes will undoubtedly differ, and the economic burden of
the transition will undoubtedly be significant but, ultimately, for all
Romanians, January 1, 2007 will be as significant as unification was on
December 1, 1918.
Romania and its neighbor, Bulgaria, who also joined the EU on January
1st, bring 30 million new citizens to the union, and expand the number
of member countries to 27. Romania will have 35 seats in the European
Parliament, but its number is expected to decrease when the number of
seats assigned to each country is reassessed, according to the Treaty of
Nice.
An EU Public opinion poll released on December 18th showed that 65% of
Romanians had a “very positive or fairly positive image” of EU
membership – down from 76% in 2004 (the EU's population has a less
positive view of Romania's accession, with an approval rating of only
45%) – but the numbers reflect the prevalence of unfortunate myths and
rumors on both sides. Die Welt exclaimed on its front page above
a photo of Vlad Tepes: “Dracula ist jetzt ein Europäer” – Dracula is now
a European. Europeans fear a mass exodus from Romania (and Bulgaria) for
jobs in the West.
Although there will undoubtedly be more Eastern job-seekers in Western
Europe, President Basescu may well have been right when he noted that
most Romanians looking for jobs overseas left long ago. More than two
million Romanians, a tenth of the country's population, are already in
Western Europe, mainly in Spain and Italy, and they send home more than
€3 billion per year. Of course, there are still a large number of
Moldovan citizens seeking Romanian passports and Macedonians seeking
Bulgarian citizenship, most apparently with the intention of traveling
west for work. While a number of EU member states have instituted
work-related restrictions on Romanians, this will not stop the flow of
illegal workers any more than it had before accession or any more than
US restrictions have stopped Mexicans from taking the low paid jobs in
America that US citizens shun.
While most Romanians welcome accession, over one third -- 34.5% --
believe that they will live a harder life after the accession to the
European Union; 28.8% estimate that their life will be better after
integration; and 27.5% state that life will remain unchanged after
January 1, 2007. The pessimists may be right in the short-term but the
optimists are without doubt right in the long-term. Just look at
Portugal, Spain, Greece and Ireland – and then recall that Romania’s GDP
before World War II was higher than any of those countries during the
same period. |
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Congratulations |
The credit for EU accession – and previous NATO membership -- goes to
all of the governments and all of the leaders of Romania over the past
seventeen years, every one of whom worked diligently for this result. No
matter whether they were former communists or the dissidents who were
hounded and abused by the communist regime, both young and old, all had
EU membership as their goal. Knowing that EU membership would bring
added pressure on Romania to conform to European norms in changing the
political and economic realities in the country, successive governments
recognized that such pressure was not only beneficial to accelerating
the pace of reform, but actually essential to achieve its ultimate
conclusion. Since Romania submitted its application for accession to the
EU in June 1995, all the governments that were in power, and all the
major political formations in opposition, consistently promoted
accession.
But, as President Traian Basescu aptly stated: “Accession is not the
same thing as integration or Romania’s complete modernization, our final
aim. The true challenge we have to face from this very moment is to
complete the opportunities that integration with the EU offers us. In
order to succeed, integration will need, maybe even more than the
accession process needed the support of the entire Romanian society and
the consensus of our entire political class.” The President cautioned
Romanians to avoid complacency: “Romania did not wish to join the EU
only to become another member state. It is important that we enter the
EU with dignity. It is our duty to convince our European partners that
Romania joining the EU is not only to our advantage but to the Union’s
too. We are part of the EU. Together we have to move forward and to
contribute to the building of a united and powerful Europe.”
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The Best is Yet to Come |
Romania will be hard to ignore. It becomes the 8th largest EU member but
also (according to most economists) the second poorest. National
salaries are just 16% of the EU average, while GDP - although growing
dramatically - is still only 32% of that in the existing 25 members.
Salaries remain low by western European standards. In Bulgaria, the
average monthly wage is $235, while the average Romanian earns about
$400 monthly.
The final monitoring report by the Commission indicates tougher
conditions on Romania's entry. The country will be closely monitored on
the remaining areas of concern. These include further efforts in the
justice system and the fight against the tax systems. If the
requirements are not met, the Commission can invoke certain safeguards.
Under the Accession Treaty, there are three types of safeguard measures:
economic, internal market and JHA safeguards, which can be invoked for
up to three years after accession. These could affect food export bans
and cuts of EU funds, such as agricultural and structural funds, as
foreseen in the report. Romania is to receive €30 billion in subsidies
through 2013.
In addition, there are transitional arrangements, such as the
restriction of free movement of workers from new member states. Also the
Commission can take remedial measures to ensure the functioning of EU
policies. This concerns the areas of food and air safety, agricultural
funds, the judiciary and the fight against corruption. The EU could
refuse to recognize judgments rendered in Romanian courts if it is
dissatisfied with Romania’s efforts at combating official corruption in
its judiciary.
Romania’s economy, however, is looking good. GDP is up by 8.3% compared
to the same period in 2005, exceeding expectations, and economic growth
during the first nine months of 2006 rose to 7.8%. According to the
Financial Times, Romania is undergoing the fastest economic
development in Europe, surpassing Greece (3.2 %), Turkey (5.2 %) and
Bulgaria (5.7 %).
According to Bloomberg market analysts, in 2006, Romania's leu surpassed
all European currencies and became the world's best performer. In 2006,
following the purchase of 60% of the Romanian Commercial Bank by
Austria's Erste Bank, the Romanian leu rose 20% against the dollar,
passing a six year high. Romania expects a record € 8 billion in foreign
capital this year, a significant rise from € 5.2 billion in 2005. The
government projects foreign investment will rise by € 10 billion in
2007. One of Romania’s most important foreign investors, Renault,
France's second largest carmaker, has announced that it will inject €
100m to raise production at its Romanian assembly plant to 350,000
vehicles a year in 2008.
The World Bank and other strong commercial banks have begun issuing
obligations in lei. Analysts see this as reflecting general optimism
based on Romania's strong economic performance. But . . . one in ten
Romanian families lives on money sent by relatives living in a foreign
country. Half of the Bulgarian population lives on €2 a day. |
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Some Background Facts |
Romania
was the first Central and Eastern European country to have established
official relations with the European Community. The bilateral agreement
on Romania's inclusion in the EC's Generalized System of Preferences
dates back to 1974, and another Agreement on Industrial Products was
signed in 1980. Romania established diplomatic ties with the European
Union in 1990, and the following year a Trade and Co-operation Agreement
was also signed. In 1995, the bilateral Europe Agreement entered into
force. Romania submitted its formal application for membership in the EU
on June 22, 1995. However, the decision on the application came only at
the Luxembourg European Council in December 1997. The Romania-EU
intergovernmental conference meeting in Brussels on February 15, 2000
marked the official start of membership negotiations.
At the Copenhagen Summit in December 2002, EU leaders set 2007 as the
target date for Romania to join the Union. "The 2007 entry goal is a
realistic scenario," said former Enlargement Commissioner Günter
Verheugen in June 2004. "Romania is in a decisive phase - it may be hard
but it's possible." In June 2004, the EU decided to set a new "safeguard
clause" for Romania (and Bulgaria), which could have delayed accession
by one year if the countries had failed to meet their targets. In May
2004, Romania became a full member of the North Atlantic Treaty
Organization (NATO). On December 17, 2004, the Brussels Council took
note of Romania's progress in its accession preparations and considered
that the country "will be able to assume all the obligations of
membership at the envisaged time of its accession", i.e., January 2007.
On February 22, 2005, the Commission agreed to the scheduled April 2005
signing of Romania's Accession Treaty. In April 2005, the European
Parliament gave its overwhelming support to Romania's EU bid. The vote
was 497-93, with 71 abstentions. The second such report was issued on 16
May 2006. On April 25, 2005 Romania signed its EU Accession Treaty, and
on October 25, 2005, the Commission published its monitoring report on
the country's level of preparedness. In its final monitoring report on
September 26, 2006, the Commission gave its green light for Romanian
accession in 2007, but insisted on further reforms. If the requirements
are not met, the Commission can invoke safeguard measures, which could
lead to the suspension of funds. |
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Conclusion |
Soon
ordinary citizens of European Union member states will get into their
cars and drive to legendary Transylvania with its medieval castles,
forests, myths and colorful inhabitants for a vacation that they and
their children have thought about for decades. And they won’t be
disappointed. Maybe these visitors will drive to Sibiu, this year’s
European Cultural Capital, or on to the Danube Delta – Europe’s greatest
nature preserve -- or visit swinging Bucharest. More and more investors
from all over the world, secure in the knowledge that Romania has met EU
standards for its laws and customs, will make financial investments in
the country that will alter the economic landscape of the nation and
further Romania’s transition into the European family. The change will
be positive and significant not only for Romania, but for Europe as
well.
As Mrs. Ana Maria Zarnescu, 64, a retiree from the city of Cluj, told
the AP: "Europe is adopting us like poor relatives or orphans, but I
hope they will become fond of us because we are hardworking and
inventive." Ana, be assured that like most foreigners who already know
your country, Europe too will soon become quite fond of Romania and its
people. |
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2007 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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