XPRIMM News No. 159, July 1st, 2010

MTPL in times of crisis

by alexandru.ciuncan@mxp.ro

up

Interview with Shashi GOKARN
President
INTERLINK Insurance & Reinsurance Brokers

by oana.radu@mxp.ro

up

Shashi GOKARN
President
INTERLINK Insurance & Reinsurance Brokers

up

up

Romania's Austerity Laws Published In Official Journal
Romania's two austerity laws cutting state employees' salaries by 25% and recalculating certain categories of pensions were published Wednesday, on the 30th of June, 2010, in the Official Journal, after they had been promulgated by the head of state on Tuesday.
The two austerity laws were forwarded to President Traian BASESCU for promulgation, after the Parliament eliminated the articles that stipulated pension cuts, recently declared unconstitutional by the country's Constitutional Court.
Monday evening, the joint committee for legal matters in Romania's Parliament unanimously adopted favorable reports on the austerity law package and eliminated the articles slashing or recalculating public pensions.
The committee eliminated the provisions which reduced pensions and remuneration for caretakers of disabled pensioners by 15%, those which set the pension point at RON 622.9 (EUR 1= RON 4.3688), those which involved the recalculation of magistrates' pensions and other articles which made reference to the unconstitutional provisions.
The Parliament adopted on the 29th of June, 2010, the report on the law aimed at reestablishing the budgetary balance, with 321 votes to two, as well as the report on the pension recalculation law, with 323 votes to 24 and three abstentions.
Romania's Constitutional Court ruled last Friday that some of the austerity measures for which the Government received a confidence vote in Parliament are unconstitutional, namely those referring to pension reductions.
by Mediafax, 30.06.2010

BNR maintains monetary policy interest rate at 6.25 pc
The Board of Administration of the National Bank of Romania (BNR) decided, on the 29th of June, 2010, to maintain the monetary policy interest rate at the historical minimum of 6.25 per cent, the rates of reserve requirements applied to RON deposits, at 15 per cent, and, in the case of foreign currency deposits, at 25 per cent, Mediafax informs.
Moreover, the Central Bank announced that it proposes to encourage a "firm" management of liquidity in the banking system, a much stronger message than the one promoted in the preceding May meeting, when BNR's BA was speaking of an "adequate" management of liquidity. "BNR keeps a close watch on trends in the internal and international business environment, so that, by the adequate use of the instruments in its power, it may ensure the stable level of prices in the medium run and financial stability", is stated in a BNR release.
Economic analysts had anticipated such a move from BNR, given that further maintaining a relaxed monetary policy is out of the question due to the inflationary pressures generated by the raising of VAT to 24 per cent. Moreover, floods occurring in the past days could contribute to the rise of inflation and the drop of GDP, ING Bank analysts argue.
It is the first time this year that BNR hasn't reduced the interest rate during the monetary policy session. The Central Bank has repeatedly reduced, since the beginning of this year, the interest, in each of the four preceding monetary policy sessions, from 8 per cent to the historical minimum level of 6.25 per cent, but maintained the rates of reserve requirements applied to RON and foreign currency deposits, at 15, and, respectively, 25 per cent.
On the other hand, BNR announced, on the 29th of June, 2010, a new historical minimum for the RON, against the EUR. Thus, the reference exchange rate reported by BNR was of RON 4.3688/ EUR, rising by 1.65 ban compared to the Tuesday level, of RON 4.3523/ EUR, although the RON appreciated in the first half of Wednesday's inter-banking session, compared to the rate reported at the close of the preceding session.
The national currency appreciated due to sales made by foreign players, against the background of optimism on currency markets in the region, after the rate rose, on Tuesday evening, at RON 4.4010/ EUR, a historical threshold.
The dollar started its day on the inter-banking market at RON 3.5913, to ebb, subsequently, at RON 3.5716. On Tuesday, RON's drop against the American currency had been even steeper than its depreciation against the EUR. The dollar had soared to the record level of RON 3.5697, rising by 7.01 ban compared to the level reported on Monday by BNR. "A depreciation of the RON by 10-15 per cent would not affect the banking system stability, but, at a rate of RON 5/ EUR, each financial institution would react according to the type of credits in its portfolio. We will not witness a steep depreciation of the national currency against the euro, as BNR has all the instruments needed to ensure stability", Steven van GRONINGEN, President of RAIFFEISEN Bank, stated, quoted by The Money Channel.
Moreover, according to analysts of French bank SOCIETE Generale, investors should buy RON, considered an appealing investment, Hotnews informs. Analysts recommend the buying of RON, anticipating that the currency would appreciate to RON 4.2/ EUR. The National Association of Romanian Exporters and Importers (ANEIR) considers the depreciation of the RON is a temporary trend, estimating that the exchange rate would reach RON 4.1-4.3/ EUR in the near future.
by nineoclock, 30.06.2010

July 1 - "D-Day" for price rises following VAT hike
The main effects the value-added tax's (VAT) raise by five per cent after the entry into force of the amended Fiscal Code today is expected to have are chain price rises, a weaker local currency and augmenting unemployment. Romanians will buy fewer goods with 100 RON.
The private sector is not the only victim of the VAT rise, but also low and average-income Romanians who will have to pay more for their shopping. Bread, milk, meat, vegetables, vegetal oil, sugar, garments and drugs will be 10 per cent more expensive on the average - industry representatives say - and small and medium-sized companies will be pushed towards bankruptcy and lay-offs. The main effect of increasing the value-added tax is the slumping purchasing power, namely the income-price ratio.
ROMPETROL announced yesterday that gasoline and diesel fuel prices will go up by 25 to 28 bani, after the VAT hike. Other companies in the fuel field are expected to operate similar changes that analysts fear might inflame the inflation rate.
All dietary supplements sold in pharmacies will be more expensive starting July 1. The bigger VAT will apply to vitamins, calcium, magnesium, vitamin C, spirulin and lecithin, all of which are subject to 19 per cent VAT at present. The tea that is used in diets or as remedy will also suffer the price mark-up. On the other hand, drugs used in therapies for cardiac and lung medical conditions, hypertension or infectious diseases will not be affected by the new, higher VAT.
Smokers are also in for bad news, for the price of cigarettes will go up by an average of one leu a pack following the increase in VAT and of the guarantees paid for fiscal warehousing, JTI Romania's Corporate Affairs Director, Gilda LAZAR, said. The cheapest cigarette brand sold in Romania will cost RON 9.9 a pack.
In addition, tills also need to be reprogrammed in order to calculate and display the new VAT rate of 24 per cent, according to Money.ro.
The president of the Association of Employers operating in the Pork Industry, Gheorghe CARUZ, thinks tax hikes may cause 25 per cent of operations in his field to close down.
The announcement about the VAT increase seems to have resurrected Romanians' shopping appetite, even if for a couple of days. Large retailers registered increases of customer flows in the last few days and basic food sales exploded, with Romanians stocking up on food and fast-moving consumer goods before the higher VAT entered into force. Retailers report 20 to 30 per cent sales increase in the last two to three days compared to average sales figures before the VAT rise announcement.
by nineoclock.ro, 30.06.2010

EC: LIDL-PLUS deal, a competition threat
European Commission found that the proposed acquisition of PLUS Bulgaria and Romania by the German-based retail group LIDL would affect the competition in the local consumer-goods market, the institution said in a press release.
These markets will be examined by the antitrust authorities in Romania and Bulgaria, so as to decide whether the transaction meets internal regulations.
EC sent to competition authorities in Bulgaria and Romania the review of the proposed acquisition of TENGELMANN'S PLUS operations in Romania and Bulgaria by the German retailer LIDL.
The inquiry carried out by the Commission revealed that the deal would affect the competition in the consumer-goods markets in Romania and Bulgaria. The transaction that was notified to the Commission on May 5 hasn't raised any antitrust issues as far as competition with other EU countries is concerned.
Bulgaria and Romania have requested the Commission to resend to internal competition regulators, the items referring to the economic concentration in Bulgaria and Romania saying the transaction affects the competition in their local markets.
LIDL is a German discount store chain held by SCHWARZ group that runs over 9,000 stores in 23 countries across Europe, including Romania and Bulgaria.
by Wallstreet, 1.07.2010

Only 5% Of Romanians In Urban Areas To Seek A Loan This Year - Survey
One in three Romanians in the urban environment has a bank loan to repay and only 5% of urban residents plant to take out a bank loan this year, according to a study compiled by Research 360insights for MEDIAFAX.
34% of Romanians in urban areas have at least one form of loan, most of the credit coming from bank loans.
Regarding loan intentions, 89% of Romanians do not intend to take out a loan this year, and only 6% plan such an action. Bank loans are targeted by 5% of individuals, while 2% of Romanians plan a leasing loan and 2% seek in-store credit.
Most loans will be contracted from banks, for five to six-year intervals and monthly payments of some RON 600 (EUR 1= RON 4.3537).
The bank loans will mostly target the redecoration (23%) or purchase of a home (15%), while other goals include refinancing, coverage of expenses, buying a car or education.
by Mediafax, 30.06.2010

up

THE EDITORIAL STAFF:

President: Sergiu COSTACHE CEO: Adriana PANCIU
Business Development Director: Alexandru D. CIUNCAN

Editor in Chief: Mihaela CIRCU
Scientific Advisor: Daniela GHETU
International Column Coordinator: Andreea IONETE
Senior Editors: Vlad PANCIU, Oleg DORONCEANU
Editors: Vlad BOLDIJAR, Oana RADU, Mihai CRACEA, Andreea STATE
General Secretary: Lidia POP

Accounts Manager: Georgiana OPREA
IT Department: Octavian GRIGOR, Dorin PALADE, Cosmin ARMASESCU

e-mail: xprimm@primm.ro

PUBLISHED BY: Media XPRIMM

Reproduction or use without permission of editorial or graphic content, in any manner, is prohibited. The Editorial Staff is not responsible for the truthfulness or the accuracy of the presented data. The Editorial Staff has the right to present the data in it's own manner. In what concerns the use, in any manner, of the information contained in this e-mail, Romanian laws apply.

Copyright©2010 MEDIA XPRIMM