For the most current version of this Note, see Background Notes A-Z.
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--Iasi (350,000), Constanta (344,000), 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.
Nationality: Noun and adjective--Romanian(s).
Population: 21.7 million (March 2004).
Annual population growth rate: -0.3
Ethnic groups: Romanians 89%, Hungarians 7.1%, Germans 0.5%, Ukrainians, Serbs, Croats, Russians, Turks, 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--10. Attendance--98%. Literacy--98%.
Health: Infant mortality rate--18.7/1000 (2001); 18.6/1,000 (2002). Life expectancy--men 67.61 yrs., women 74.9 yrs.
Work force: 9.1 million (December 2004). Agriculture--2.75 million (December 2004); industry and commerce--3.34 million (December 2004); services--2.89 million (December 2004).
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 Party (PD); the Hungarian Democratic Union of Romania (UDMR); the Romanian Conservative Party (PC); the Greater Romania Party (PRM). Other political parties include National Democratic Christian Peasant Party (PNTCD), the Party of the Romanian National Unity (PUNR), as well as political organizations of minorities.
Suffrage: Universal from age 18.
Defense: 2.4% of GDP.
GDP: $34.0 billion (1999); $36.7 billion (2000); $45.76 billion (2002); $56.9 billion (2003); $73.2 billion (2004).
Annual GDP growth rate: -3.2% (1999); 1.8% (2000); 5.3% (2001); 4.9% (2002); 4.9% (2003); 8.3% (2004).
Per capita GDP: $1,585 (1999); $1,645 (2000); $1,772.90 (2001); $2,120 (2002); $2,623 (2003); $3,389 (2004).
Natural resources: Oil, timber, natural gas, coal, salt, iron ore.
Agriculture: Percent of GDP--11.4% (2000); 13.2% (2001); 11.3% (2002); 11.7% (2003); 13.0% (2004). Products--corn, wheat, potatoes, oilseeds, vegetables, livestock, fish, and forestry.
Industry: Percent of GDP--27.6% (2000); 28.2% (2001); 28.3% (2002); 28.4% (2003); 27.0% (2004). Types--machine building, mining, construction materials, metal production and processing, chemicals, food processing, textiles, clothing. Industrial output increased by 3.2% from 2002 to 2003 and 5.3% in 2004 over 2003.
Services: Percent of GDP--60.9% (2000); 44% (2001); 44.7% (2002); 43.7% (2003); 44.1% (2004).
Construction: Percent of GDP--4.9% (2001); 5.6% (2002); 5.7% (2003); 6.1% (2004).
Trade: Exports--$10.4 billion (2000); $11.46 billion (2001); $13.87 billion (2002); $17.61 billion (2003); $23.48 billion (2004). Types--textiles, chemicals, light manufactures, wood products, fuels, processed metals, machinery and equipment. Major markets--Italy, Germany, France, Turkey, U.K., Hungary, Netherlands, Austria, U.S. (2.8%). Exports to the U.S.--$490.7 million (2001); $535.3 million (2002); $689.4 million (2003); $668.5 million (2004). Imports--$15.5 billion (2001); $17.96 billion (2002); $24 billion (2003); $32.58 billion (2004). Types--machinery and equipment, textiles, fuel, coking coal, iron ore, machinery and equipment, and mineral products. Major suppliers--Italy, Germany, France, Russia, Turkey, Austria, U.K., China, Hungary, U.S. (2.8%). Imports from the U.S.--$357.1 million (2001); $597.8 million (2002); $616.3 million (2003); $933 million (2004).
Exchange rate: 33,500 lei=US$1 (December 2002); 33,016 lei=US$1 (June 2003); 32,595 lei=US$1 (December 2003); 32,076 lei=US$1 (October 2004); 29,067 lei=US$1 (end-December 2004); 29,278 lei=US$1 (end-May 2005).
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 Moldavia and Wallachia (geographic areas respectively east of the Carpathians and south of the Transylvanian Alps) and to a lesser extent in centrally located 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).
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 south-west Ukraine) and southern Dobrudja (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 Bukovina (now part of Ukraine). Although subjected to harsh persecution, including government-sanctioned pogroms and killings, most Jews from the territory now comprising Romania survived 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 less than 1% 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 rich 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 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 of the smaller cities.
Since about 200 B.C., when it was settled by the Dacians, a Thracian tribe, Romania has been in 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-Sigmaringen, was crowned first King of Romania in 1881.
The new state, squeezed between the Ottoman, Austro-Hungarian, and Russian empires, 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 always the substance, of a liberal constitutional monarchy. The fascist Iron Guard movement, exploiting a quasi-mystical nationalism, fear of communism, and resentment of alleged foreign and Jewish domination of the economy, was a key destabilizing factor, which led to the creation of a royal dictatorship in 1938 under King Carol II. In 1940, 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 alongside the Soviet Union against the Germans in Transylvania, Hungary, and Czechoslovakia.
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.
By the late 1950s, 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 economic autarchy accompanied by 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 an ethnic Hungarian pastor 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 dissolved and its assets transferred to the state. Ceausescu's most unpopular measures, such as bans on private commercial entities and independent political activity, 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.
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 lower 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. Elected officials at all levels of government, with the exception of the president and mayors, are selected on the basis of party lists, with parliamentary seats, city and county council representation, all allocated 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 four to five years in an October 2003 constitutional referendum. He is the Chief of State, charged with safeguarding the constitution, foreign affairs, and the proper functioning of public authorities. He is supreme commander 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 force since January 1999, local councils have control over 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--Calin Popescu Tariceanu
Minister of Foreign Affairs--Mihai Razvan Ungureanu
Ministers of State--Gheorghe Copos, Bela Marko and Gheorghe Pogea
Minister of European Integration--Anca Boagiu
Minister of Public Finance--Sebastian Vladescu
Minister of Justice--Monica Macovei
Minister of National Defense--Teodor Atanasiu
Minister of Interior and Public Administration--Vasile Blaga
Minister of Economy and Commerce--Ioan-Codrut Seres
Minister of Labor, Social Solidarity, and Family--Gheorghe Barbu
Minister of Agriculture, Forests, and Rural Development--Gheorghe Flutur
Minister of Transportation, Housing and Tourism--Ghoerghe Dobre
Minister of Education and Research--Mircea Miclea
Minister of Culture and Religious Cults--Adrian Iorgulescu
Minister of Health--Eugen Nicolaescu
Minister of Communication and Information Technology--Zsolt Nagy
Minister Coordinator of the General Secretariat of the Government--Mihai Voicu
Minister of Environment and Water Management--Sulfina Barbu
Delegate Minister to Control the Implementation of Internationally-Funded Programs and to Follow the Implementation of the Acquis Communitaire--Cristian David
Delegate Minister for Liaison with the Romanian Parliament--Bogdan Olteanu
Delegate Minister for Coordinating Control Activities--Sorin Vicol
Delegate Minister for Commerce--Iuliu Winkler
Delegate Minister for the Coordination for Public Works and Territory Management--Laszlo Borbely
Romania maintains an embassy in the United States at 1607 23rd St., NW, Washington, DC 20008 (tel. 202- 232-3694, fax: 202-232-4748).
November 2004 elections left the Romanian parliament closely divided between the center-right PNL-PD alliance and the PSD, which each hold between 30-40% of the seats in each chamber. The PNL-PD, however, forged a parliamentary majority with the support of the UDMR, PC and (in the lower house) the ethnic minority party representatives. The extreme nationalist PRM won fewer seats than in the 2000 elections, but remained a significant political player. Although the PNL and PD vote as a bloc in the parliament and ran candidates on a common list in the 2004 parliamentary elections, the two parties remain separate. On several occasions in 2005, President Traian Basescu publicly expressed support for snap parliamentary elections. Other elected leaders, both from the governing and opposition parties, expressed opposition to new elections, noting that they are difficult to achieve under the constitution and could detract from government efforts to implement reforms necessary for EU accession.
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 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 continuing influence of the ethnic Hungarian minority in national government. In addition, 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 discrimination. Although according to government statistics Roma officially represent 2.5% of the population, Romani organizations claim the percentage is actually several percentage points higher.
The restitution of private and religious property seized under communism or during World War II continues to move 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.
Romania is a country of considerable potential: rich agricultural lands; diverse energy sources (coal, oil, natural gas, hydro, and nuclear); a substantial, if aging, industrial base encompassing almost the full range of manufacturing activities; an educated, well-trained work force; and opportunities for expanded development in tourism on the Black Sea and in the 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 that of even its historically poorer Balkan neighbors.
Since the fall of the Ceausescu regime in 1989, successive governments have sought to build a Western-style market economy. The pace of restructuring has been 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 has been increasing, but remains significantly less in per capita terms than in most other transition economy countries in East and Central Europe.
In November 2001, the government negotiated an 18-month standby agreement with the International Monetary Fund (IMF) for a total amount of $431 million. The IMF board approved Romania's completion of the standby agreement in October 2003, Romania's first successfully concluded agreement since the 1989 revolution. The IMF acknowledged that sound macro-economic policies and progress in structural reform contributed to continuing disinflation and economic growth, and credited the government with implementing prudent budgetary measures toward reaching IMF directed targets. High tax arrears, largely on the part of state owned firms, hinder government programming. However, significant levels of public and private sector corruption also impede economic growth and undercut public trust in new democratic institutions.
The IMF Executive Board approved in July 2004 a 24-month Stand-By Precautionary Arrangement for an amount equivalent to $367 million. The new program aims at strengthening the external current account balance, further reducing inflation, sustaining continued GDP growth, and preparing the economy for EU accession. The current program emphasizes continued prudent macroeconomic policies and progress with wide-ranging structural reforms. Key stabilization policies include a reduction in the general government budget deficit, a strengthening of the finances of state-owned enterprises through energy price adjustments and wage restraint, and measures to contain credit growth. Prioritization of expenditure will help finance investment in infrastructure. With the passage of a number of new and amended laws, the authorities have started an overhaul of the judicial system, which will contribute to improving the business climate, strengthening the judicial system's independence, and improve the capacity to address the problem of corruption. In September 2004, the IMF completed the first review under the standby agreement. The review confirmed that macroeconomic developments were in line with the program. In June 2005, the IMF conducted a review of the Romanian economy, focusing on the need for a tight, consolidated budget deficit for 2005, given the government's January 1 introduction of a flat income tax and a profit tax cut. Other top priorities of this IMF review were ensuring control of inflation and managing the current account deficit.
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 (EU), and IMF, Romania succeeded in privatizing most industrial state-owned enterprises, including some large state-owned energy companies. Among the most important privatizations of 2004 were: national oil company Petrom to Austrian OMV; electric energy distribution companies Electrica Banat and Dobrogea to Italian Enel. Energy privatization helped Romania receive the "functioning market economy" stamp from the EU in October 2004.
Despite delays in privatizing certain companies, the overall balance of the economy has shifted decisively. Even in 2002, the private sector produced about 69% of GDP, accounted for approximately 55% of assets, and employed approximately 55% of the work force. The private sector accounted for 69.1% of Romania's GDP in 2003, of which were 68.7% in services, 79.0% in industry, 93.2% in construction, and 98.7% in agriculture. 70.4% of banking capital is now in private hands; this will rise over 90% after the BCR and CEC privatization is completed. By 2004, Romania's private sector employed over 72% of Romania's total workforce.
Under the IMF's guidance, the consolidated budget deficit has dropped significantly from earlier levels. In 1999, the budget deficit represented 4.0% of GDP; 3.7% in 2000; 3.5% in 2001; 2.6% in 2002; 2.4% in 2003; and 1.2% in 2004. At the end of the first three months of 2005, the consolidated budget posted a surplus of 0.13% of GDP. Domestic arrears--resulting mostly from state-owned enterprises not paying pension and health insurance contributions and utility bills--rose to around 40% of GDP in 2002, but after some large scale debt forgiveness, currently stand at about 28% of GDP. Public sector expenditures have been more tightly controlled and limited.
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 was an obstacle to leasing or selling land to active farmers.
Unemployment was officially 6.2% of the active labor force at the end of December 2004 and 5.7% at the end of April 2005, although these figures do not capture high levels of under-employment or temporary emigration.
In the 1990s, inflation was one of Romania's most serious economic problems. Retail price inflation, which monthly averaged 12.1% in 1993 (the equivalent of 256% annually), declined to 28% annually in 1995. However, inflation picked up again in 1996 and 1997 due to excessive government spending in late 1996, and price and exchange rate liberalization in early 1997. Inflation in 1999 hovered around 54%, but dropped in 2000 to 40.7%, and 33.7% by the end of 2001. After a diminished 2002 inflation rate of 17.8%, the inflation rate further dropped to 14.1% in 2003 and 9.3% in 2004. The government target for 2004 was 9%, and Romanian authorities consider they met it. Romania's first time single-digit annual inflation rate was largely assisted by the Romanian lei's appreciation. The official target for 2005 is 7%.
Financial and technical assistance continue to flow in from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The International Monetary Fund (IMF), World Bank (IBRD), the European Bank for Reconstruction and Development (EBRD), and the U.S. Agency for International Development (USAID) all have programs and resident representatives in Romania. Romania's foreign direct investment (FDI) is domestically tracked by the National Trade Registry, which at the end of 2004 pegged FDI at $13.57 billion, of which an estimated 6.8% was U.S. direct investment (1.21% of 2004 GDP). U.S. direct investment was 7.8% in 2001 and 8.9% in 2002 (2.4% of 2002 GDP). As of the end of December 2004, Romania had attracted $13.7 billion in foreign direct investment, of which $888.4 million (6.5%) was U.S. direct investment.
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 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 (EU) invited Romania to formally begin accession negotiations. In December 2004, the EU Commission concluded pre-accession negotiations with Romania. In April 2005, the EU signed an accession treaty with Romania and its neighbor, Bulgaria, with the goal of welcoming them as new members in January 2007. However, the EU has warned that Romania's accession by that date is not guaranteed; the EU has imposed a "super safeguard clause," enabling it to postpone Romania's accession to 2008, should Romania be unable to make substantial progress on corruption, competition, and judiciary issues.
Since December 1989, Romania has actively pursued a policy of strengthening relations with the West in general, more specifically with the U.S. and the European Union. Romania was a helpful partner to the allied forces during the first Gulf War, particularly during its service as president of the UN Security Council. Romania has been active in peacekeeping operations in Afghanistan, UNAVEM in Angola, IFOR/SFOR in Bosnia, KFOR in Kosovo, and in Albania. Romania also offered important logistical support to allied military operations in Iraq in 2003 and, after the cessation of organized hostilities, has been participating in security and reconstruction activities. Romania is a member of the Organization for Security and Cooperation in Europe (OSCE), which it chaired in 2001.
Romania was the first country to enroll in the NATO Partnership for Peace program. NATO member states invited Romania to join the Alliance in 2002, based on Romania's rapid progress in modernizing its armed forces and its contributions to allied peacekeeping and other military operations. Romania officially became a member of the North Atlantic Treaty Organization on March 29, 2004 after depositing its instruments of treaty ratification in Washington, DC. In 1996, Romania signed and ratified a basic bilateral treaty with Hungary that settled outstanding issues and laid the foundation for closer, more cooperative relations. In June 1997, Romania signed a bilateral treaty with Ukraine that resolved certain territorial and minority issues, among others. Romania also signed a basic bilateral treaty with Russia in July 2003.
Romania has been actively involved in regional organizations, such as the Southeast Europe Cooperation Initiative (SECI) and the Stability Pact for Southeast Europe, and has been a positive force in supporting stability and cooperation in the area.
Romania maintains good diplomatic relations with Israel and was supportive of the Middle East peace negotiations initiated after the Gulf conflict in 1991. Romania also is a founding member of the Black Sea Consortium for Economic Development. It joined the International Monetary Fund and the World Bank in 1972, and is a member of the World Trade Organization.
In January 2004, Romania commenced a two-year term as an elected member of the UN Security Council.
Romanian Missions in the United States
Embassy of Romania
1607 23rd Street, NW
Washington, DC 20008
Tel. 202-232-3694, fax: 202-232-4748
Romanian Mission to the UN
573 Third Avenue
New York, NY 10016
Romanian National Tourist Office
573 Third Avenue
New York, NW 10016
Romanian Cultural Center
200 E. 38th Street
New York, NY 10016
In accordance with the December 1991 Romanian constitution, the Romanian armed forces have the defensive mission of ensuring the territorial integrity of the country. The military enjoys popular support, partly because of its role in supporting the December 1989 revolution. The army is the largest service. Total armed forces strength is currently about 100,000, and is maintained through conscription, although only volunteers are assigned to combat zones. There is an ongoing strategic review that is intended to lead to a NATO interoperable force of 60,000 by 2007. Romania plans to phase out conscription in the armed forces by 2007. In 1993, the U.S. military began training of Romanian military and civilian officials through IMET and other exchange programs, emphasizing civilian democratic control over the military.
Cold during the early post-war period, U.S. bilateral relations with Romania began to improve in the early 1960s with the signing of an agreement providing for partial settlement of American property claims. Cultural, scientific, and educational exchanges were initiated, and in 1964 the legations of both nations were promoted to full embassies.
Responding to Ceausescu's calculated distancing of Romania from Soviet foreign policy, particularly Romania's continued diplomatic relations with Israel and denunciation of the 1968 Soviet intervention in Czechoslovakia, President Nixon paid an official visit to Romania in August 1969. Despite political differences, high-level contacts continued between U.S. and Romanian leaders throughout the decade of the 1970s, culminating in the 1978 state visit to Washington by President and Mrs. Ceausescu.
In 1972, a consular convention to facilitate protection of citizens and their property in both countries was signed. Overseas Private Investment Corporation (OPIC) facilities were granted, and Romania became eligible for U.S. Export-Import Bank credits.
A trade agreement signed in April 1975 accorded Most Favored Nation (MFN) status to Romania under section 402 of the Trade Reform Act of 1974 (the Jackson-Vanik amendment that links MFN to a country's performance on emigration). This status was renewed yearly after Congressional review of a presidential determination that Romania was making progress toward freedom of emigration.
In the mid-1980s, criticism of Romania's deteriorating human rights record, particularly regarding mistreatment of religious and ethnic minorities, spurred attempts by Congress to withdraw MFN status. In 1988, to preempt Congressional action, Ceausescu renounced MFN treatment, calling Jackson-Vanik and other human rights requirements unacceptable interference in Romanian sovereignty.
After welcoming the revolution of December 1989 with a visit by Secretary of State Baker in February 1990, the U.S. Government expressed concern that opposition parties had faced discriminatory treatment in the May 1990 elections, when the National Salvation Front won a sweeping victory. The slow progress of subsequent political and economic reform increased that concern, and relations with Romania cooled sharply after the June 1990 intervention of the miners in University Square. Anxious to cultivate better relations with the U.S. and Europe, and disappointed at the poor results from its gradualist economic reform strategy, the Stolojan government undertook some economic reforms and conducted free and fair parliamentary and presidential elections in September 1992. Encouraged by the conduct of local elections in February 1992, Deputy Secretary of State Eagleburger paid a visit in May 1992. Congress restored MFN in November 1993 in recognition of Romania's progress in instituting political and economic reform. In 1996, the U.S. Congress voted to extend permanent MFN graduation to Romania.
As Romania's policies became unequivocally pro-Western, the United States moved to deepen relations. President Clinton visited Bucharest in 1997. The two countries initiated cooperation on shared goals, including economic and political development, defense reform, and non-traditional threats (such as trans-border crime and non-proliferation).
Following the tragic events of September 11, 2001, Romania has been fully supportive of the U.S. in the Global War on Terror. Romania was invited to join the North Atlantic Treaty Organization (NATO) in November 2002 and formally joined NATO on March 29, 2004 after depositing its instruments of treaty ratification in Washington, DC. President Bush helped commemorate Romania's NATO accession when he visited Bucharest in November 2002. On that occasion he congratulated the Romanian people on building democratic institutions and a market economy following the fall of communism.
In March 2005, President Traian Basescu made his first official visit Washington to meet with President Bush, Secretary of State Rice, Secretary of Defense Rumsfeld, and other senior U.S. officials. The same month, Deputy Secretary of State Zoellick traveled to Bucharest for meetings with Prime Minister Popescu-Tariceanu and Foreign Minister Ungureanu.
Principal U.S. Officials
Charge d'Affaires--Mark A. Taplin
Public Affairs Officer--Mark Wentworth
Consul General--Bryan Dalton
Political Section Chief--Robert Gilchrist
Economic Affairs Section Head--John R. Rodgers
Defense Attache--Colonel Barbara Kuennecke
Commercial Section Head--Cynthia Biggs
Management Counselor--Joyce Currie
USAID Mission Director--Rodger Garner
Peace Corps Director--Jim Ekstrom
Principal Officer, U.S. Embassy Branch Office, Cluj-Napoca--Lisa Heilbronn
The U.S. Embassy in Romania is located at Strada Tudor Arghezi 7-9, Bucharest (tel. 40-21 210-4042, fax 40-21 210-0395, consular fax 211-3360).
A U.S. embassy Branch Office was opened in Cluj-Napoca in January 1994 (tel. 40-264 19-38-15, fax 40-264-19-38-68).