Romania is a nation of twenty-two million people in eastern Europe that borders the Black Sea to the east. Moldova and Ukraine are north and northeast, Hungary and Serbia are to the west, and Bulgaria is to the south.
Romania is susceptible to earthquakes, most severe in south and southwest. Geologic structure and climate promote landslides.
Environmental issues confrontinmg the country include:
- soil erosion and degradation;
- water pollution;
- air pollution in the south from industrial effluents; and,
- contamination of Danube delta wetlands.
The principalities of Wallachia and Moldavia - for centuries under the suzerainty of the Turkish Ottoman Empire - secured their autonomy in 1856; they were de facto linked in 1859 and formally united in 1862 under the new name of Romania. The country gained recognition of its independence in 1878.
It joined the Allied Powers in World War I and acquired new territories - most notably Transylvania - following the conflict.
In 1940, Romania allied with the Axis powers and participated in the 1941 German invasion of the USSR. Three years later, overrun by the Soviets, Romania signed an armistice. The post-war Soviet occupation led to the formation of a Communist "people's republic" in 1947 and the abdication of the king.
The decades-long rule of dictator Nicolae Ceausescu, who took power in 1965, and his Securitate police state became increasingly oppressive and draconian through the 1980s. Ceausescu was overthrown and executed in late 1989. Former Communists dominated the government until 1996 when they were swept from power. Romania joined NATO in 2004 and the European Union in 2007.
See also: Histria
Extending inland halfway across the northern limits of 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 east of the Carpathians and south of the Transylvanian Alps, respectively) 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).
Location: Southeastern Europe, bordering the Black Sea, between Bulgaria and Ukraine. Romania controls the most easily traversable land route between the Balkans, Moldova, and Ukraine
Geographic Coordinates: 46 00 N, 25 00 E
Area: 238,391 sq km (229,891 sq km of land, 8,500 sq km of water)
Coastline: 225 km km
Maritime Claims: Territorial sea to 12 nautical miles, contiguous zone: 24 nautical miles, exclusive economic zone to 200 nautical miles, continental shelf 200 m depth or to the depth of exploitation.
Natural Hazards: soil erosion and degradation; water pollution; air pollution in south from industrial effluents; contamination of Danube delta wetlands
Terrain: Central Transylvanian Basin is separated from the Moldavian Plateau on the east by the Eastern Carpathian Mountains and separated from the Walachian Plain on the south by the Transylvanian Alps
lowest point: Black Sea 0 m
highest point: Moldoveanu 2,544 m
Climate: temperate; cold, cloudy winters with frequent snow and fog; sunny summers with frequent showers and thunderstorms
Natural Resources: petroleum (reserves declining), timber, natural gas, coal, iron ore, salt, arable land, hydropower
See also: Fortress of Fagaras
Ecology and Biodiversity
Source: World Wildlife Fund
1. Pannonian mixed forests
2. Carpathian montane conifer forests
3. Central European mixed forests
4. East European forest steppe
5. Pontic steppe (including part of the Danube Delta)
6. Balkan mixed forests
In addition, to these large patch ecoregions, the Black Sea coastal region represents a specialized littoral, dunes and marsh system of very narrow extent along the Black Sea coastline.
The only large scale intact habitats of the country of Romania are found in the Carpathian montane conifer forests, where rugged slopes have deterred agricultural conversion, and in the richly braided Danube Delta, where the river mouth area is particularly inaccessible and undisturbed.
The Carpathian montane conifer forests are one of the few regions of Europe where wolves and bears are evident; their remarkable protection is due not only to the rugged terrain that has limited human activity, but also due to the area's pastoral history, where alpine shepherds have integrated their style of flock-tending with compatible existence of mammalian predators, through the use of sheep guard dogs and other protocols.
People and Society
Population: 21,848,504 (July 2012 est.)
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.
0-14 years: 14.8% (male 1,667,894/female 1,579,458)
15-64 years: 70.4% (male 7,684,514/female 7,725,957)
65 years and over: 14.8% (male 1,314,132/female 1,932,596) (2011 est.)
Population Growth Rate: -0.26% (2012 est.)
Birthrate: 9.49 births/1,000 population (2012 est.)
Death Rate: 11.84 deaths/1,000 population (July 2012 est.)
Net Migration Rate: -0.26 migrant(s)/1,000 population (2012 est.)
Life Expectancy at Birth: 74.22 years
male: 70.75 years
female: 77.89 years (2012 est.)
Total Fertility Rate: 1.3 children born/woman (2012 est.)
Languages: Romanian (official) 91%, Hungarian 6.7%, Romany (Gypsy) 1.1%, other 1.2%
Literacy: age 15 and over can read and write
total population: 97.3%
female: 96.3% (2002 census)
Urbanization: 57% of total population (2010); growing at a 0.6% annual rate of change (2010-15 est.)
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 2 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, Alexandru Ioan Cuza, in 1859, and had their full independence ratified in the 1878 Treaty of Berlin. A German prince, Carol of Hohenzollern-Sigmaringen, was crowned the 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 Powers 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 virulently anti-Semitic and 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 and pursued pro-Nazi, anti-Semitic policies similar to those advocated by the Iron Guard. 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 Mihai (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 did not leave until 1958.
According to the officially recognized 2004 Wiesel Commission report, Romanian authorities were responsible for the deaths 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 the area of Transylvania that the Nazi government had placed in Hungarian control at the time.
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 Mihai 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 FSN. Presidential and parliamentary elections were held on May 20, 1990. Running against representatives of the pre-war National Peasants' Party (PNTCD) and National Liberal Party (PNL), Iliescu won 85% of the vote. The FSN captured two-thirds of the seats in Parliament (66.31% of the votes), and named a university professor, Petre Roman, as prime minister. The strongest parties in opposition in the election were the Democratic Alliance of Hungarians in Romania (UDMR) with 7.23% of the votes, and the National Liberal Party with 6.41%. The new government began cautious free-market reforms such as opening the economy to consumer imports and establishing the independence of the National Bank.
Over 200 new political parties sprang up after 1989, gravitating around personalities rather than programs. All major parties espoused democracy and market reforms, with the governing National Salvation Front proposing slower, more cautious economic reforms. In contrast, the opposition's main parties--the National Liberal Party and the National Peasant-Christian Democrat Party (PNTCD)--favored quick, sweeping reforms, immediate privatization, and reducing the role of the ex-communist elite. Nevertheless, the legacy of 44 years of communist rule could not be eliminated quickly. Membership in the Romanian Communist Party usually had been the prerequisite for higher education, foreign travel, or a good job, while the extensive internal security apparatus had 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.
Unhappy at the continued political and economic influence of members of the Ceausescu-era elite, anti-communist protesters camped out in University Square in April 1990. When miners from the Jiu Valley descended on Bucharest 2 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. Petre Roman’s 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, one led by Ion Iliescu (FDSN) and the other by Petre Roman (FSN), in March 1992. Roman's party subsequently adopted the name Democratic Party (PD), and the FDSN became the Party of Social Democracy of Romania (PDSR) in July 1993.
National elections in September 1992 returned President Iliescu by a clear majority; he easily won reelection over a field of five other candidates. His party, the FDSN, won a plurality in both chambers of Parliament. 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 of several parties--among which the PNTCD and the PNL were the strongest--and civic organizations) and quicker reform. With the CDR, the second-largest parliamentary group, reluctant to take part in a national unity coalition, the FDSN formed a technocratic government in November 1992 under Prime Minister Nicolae Vacaroiu, an economist, with parliamentary support from the nationalist Party of Romanian National Unity (PUNR) and Greater Romania Party (PRM), and the ex-communist Socialist Labor Party (PSM). PRM and PSM left the government in October and December 1995, respectively, and all three smaller parties had abandoned the coalition by the time elections were held in November 1996.
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, when the opposition dominated the cities and made deep inroads into rural areas up until then 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 with 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 Democratic Union of Hungarians in Romania (UDMR) and its Hungarian ethnic backers into government. The coalition government retained power for 4 years despite constant internal frictions and going through 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 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 PDSR was renamed PSD--Social Democratic Party--at a June 16, 2001 congress after it merged with the tiny yet historical Romanian Social Democratic Party.
The PSD government, led by Prime Minister Adrian Nastase, forged a de facto governing coalition with the ethnic Hungarian UDMR, ushering in 4 years of relatively stable government. The PSD guided Romania toward greater macroeconomic 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 the 2004 local and national elections, and Romania moved closer to 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 by April 2007 due to enmity between the president and prime minister. From 2007 until December 2008, former Prime Minister Tariceanu's PNL ran an ultra-minority government in coalition with the UDMR and tacit support of the PSD. Following parliamentary elections on November 30, 2008, in which the Democratic Liberal Party (PDL) and PSD virtually tied, a majority PDL/PSD coalition led by PDL Prime Minister Emil Boc governed until October 2009, when it disbanded. The PDL ruled as a caretaker government until a new coalition government was formed in December 2009, made up of the PDL, UDMR, and some National Union for the Advancement of Romania (UNPR) members and independents.
Presidential elections were held in November 2009. Since no candidate garnered a majority of the votes of eligible voters, the top two vote getters--incumbent President Traian Basescu and Senate President Mircea Geoana (PSD)--went on to a second-round runoff. The December 2009 runoff election resulted in a narrow victory for Basescu, who was inaugurated later that month for a second 5-year term.
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.
Government Type: Republic with a bicameral Parliament (Parlament) consisting of a 137 seat Senate (members elected by popular vote in a mixed electoral system to serve four-year terms) and a 334 seat Chamber of Deputies (Camera Deputatilor members elected by popular vote in a mixed electoral system to serve four-year terms)
Admistrative Districts: 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.
The 41 counties (judete, singular - judet) and 1 municipality* (municipiu) are: Alba, Arad, Arges, Bacau, Bihor, Bistrita-Nasaud, Botosani, Braila, Brasov, Bucuresti (Bucharest)*, Buzau, Calarasi, Caras-Severin, Cluj, Constanta, Covasna, Dimbovita, Dolj, Galati, Gorj, Giurgiu, Harghita, Hunedoara, Ialomita, Iasi, Ilfov, Maramures, Mehedinti, Mures, Neamt, Olt, Prahova, Salaj, Satu Mare, Sibiu, Suceava, Teleorman, Timis, Tulcea, Vaslui, Vilcea, Vrancea
Capital: Bucharest - popuation: 1.933 million (2009)
Independence Date: 9 May 1877 (independence proclaimed from the Ottoman Empire; independence recognized on 13 July 1878 by the Treaty of Berlin); 26 March 1881 (kingdom proclaimed); 30 December 1947 (republic proclaimed). However Unification Day (of Romania and Transylvania), 1 December (1918) is celebrated as a national holiday.
Legal System: Civil law system. Romania has not submitted an International Court of Justice (ICJ) jurisdiction declaration; however, it accepts International Council on Clean Transportation (ICCt) jurisdiction.
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.
International Environmental Agreements
Romania is party to international agreements on Air Pollution, Air Pollution-Persistent Organic Pollutants, Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Ozone Layer Protection, Ship Pollution, and Wetlands.
Total Renewable Water Resources: 42.3 cu km (2003)
Freshwater Withdrawal 6.5 cu km/yr (9% domestic, 34% industrial, 57% agricultural):
Per capita Freshwater Withdrawal: 299 cu m/yr (2003)
Agricultural products: wheat, corn, barley, sugar beets, sunflower seed, potatoes, grapes; eggs, sheep
Irrigated Land: 31,570 sq km (2008)
Natural Resources: petroleum (reserves declining), timber, natural gas, coal, iron ore, salt, arable land, hydropower
arable land: 39.49%
permanent crops: 1.92%
other: 58.59% (2005)
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.
After the fall of the Ceausescu regime in 1989, 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 Central and East 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 chemicals, steel and metallic items, plastics and rubber items, and clothing.
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 (EC) 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, both countries were 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. The Romanian Government concluded a 2-year, $27 billion financial assistance package with the International Monetary Fund (IMF), the European Commission, and the World Bank in March 2009. 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. 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 of Romania’s compliance with the 2009 package, conducted in February 2011, declared the agreement a “success” in stabilizing the economy. A new 2-year “precautionary” agreement between Romania and the IMF, effective March 2011, focuses on deepening structural reforms, restructuring or privatizing unprofitable state-owned enterprises (SOEs), clearing arrears, improving quality of public spending and strengthening tax collection, further liberalizing electric energy and natural gas pricing, and preserving the financial-banking sector’s stability.
Restructuring and privatization of the state-owned enterprises and curbing SOE arrears that currently are estimated to make up approximately 3.6% of GDP are among the most difficult challenges identified in mid-2011 by a joint IMF/EC technical mission. The initial goal of reducing total SOE arrears to RON 19.7 billion (or Euro 4.46 billion, approx. $6 billion), by the end of June 2011 was not met. It remains unclear whether further arrears targets will be met either. SOEs experiencing these problems are concentrated in transportation, mining, and the energy sector.
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). 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 by the planned creation of two integrated, state-owned energy producers combining hydro, nuclear, and thermal power producers. After the courts ruled against the bundling, the government dropped the initial plan and is now contemplating two smaller-scale regional bundling projects that would result in the vertical integration of lignite mines with lignite-fired power plants, and of pit coal mines with pit coal-fired power plants. The project has to receive clearance from the Romanian Competition Council before proceeding. 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 largely due to agricultural land fragmentation. 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, due to large-scale rural emigration abroad, and the slow process of granting formal land titles remains an obstacle to leasing or selling land to active farmers.
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 July 2011 Romania attracted a total of $41.97 billion in foreign direct investment, of which the U.S. represented 2.22%. 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. Assisted by depressed domestic demand, good harvests, and decreasing food prices, inflation gradually fell in the first 9 months of 2011, reaching a September-annualized low rate of 3.45%, within the central bank’s 2011 targeted band. 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, since 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 health and education services and aging and inadequate physical infrastructure continue to be seen as threats to future growth.
Romania's budget deficit dropped steadily to only 0.8% of GDP in 2005, but then skyrocketed again, peaking at 7.2% in 2009. The major culprits for the rising deficit were serious tax evasion, runaway government procurement spending, and unsustainable increases in public sector wages, public pensions, and social assistance. Under the 2009 IMF agreement the deficit was pared to 6.5% of GDP in 2010 and was 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, a more ambitious budget deficit target for a multiple-election year.
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 4.8% in June 2011. More public sector layoffs might be carried out, though a gradual return to growth in the private sector should fuel a correspondingly gradual recovery in job creation.
The economy returned to positive growth in 2011 due to a strong export performance, but in a deflationary environment caused by bountiful crops and weak domestic demand. In March 2011, Romania and the IMF/EC/World Bank signed a 24-month precautionary stand-by agreement, worth $4.9 billion, to promote compliance with fiscal targets, progress on structural reforms, and financial sector stability. The Romanian authorities have announced that they do not intend to draw funds from the facility.
GDP: (Purchasing Power Parity): $263.9 billion (2011 est.)
GDP: (Official Exchange Rate): $185.3 billion (2011 est.)
GDP- per capita (PPP): $12,300 (2011 est.)
GDP- composition by sector:
services: 59.2% (2011 est.)
Industries: electric machinery and equipment, textiles and footwear, light machinery and auto assembly, mining, timber, construction materials, metallurgy, chemicals, food processing, petroleum refining
Export partners: Germany 18.4%, Italy 14.1%, France 8.5%, Turkey 6.9%, Hungary 4.9% (2010)
Import Partners: Germany 16.8%, Italy 11.6%, Hungary 8.7%, France 6%, China 5.5%, Russia 4.4%, Austria 4.1% (2010)
Currency: Romanian leu