On October 25th, the European Commission presented the draft report regarding the progress made by Romania and Bulgaria which should enter the European Union in January 2007. The European commissioner for enlargement, Olli Rehn stated that Romania's accession to EU could be postponed by one year, unless our country will fasten its reforms. Olli Rehn praised Romania for making significant improvements in: judiciary system, integration of minorities, child protection, property restitution and media freedom. He warned that Romania should intensify its efforts on meeting all the provisions for joining the EU, especially in the high-level corruption, otherwise the accession could be delayed until 2008.

The EC's report shows that Romania continues to meet political criteria, however there were plenty of areas that faced the criticism as: agriculture, border security, public administration and environment protection which should be aligned to the EU standards.

The draft report pointed out the need to intensify the fight against the counterfeiting and the protection of the intellectual and industrial property. The EU commissioner for enlargement, Olli Rehn stated that Romania should improve the way it administrates the European community's funds, as the money should be better absorbed in the system. As regarding the economical criteria, the report classifies Romania as having a functional market, however a vigorous practice of its own structural reforms' program will allow it to cope better with the competitive pressure and the market forces within the EU.

Due to these deficiencies, the foreign trade balance is affected, as the imports prevail and induce the widening of the current account deficit. The Government should fasten the privatization program, which has slowed down lately.

The final assessment will be released in April or May, 2006, so until then Romania should speed up the reforms in the underlined fields. During 2006, Romania is to receive from the EU a substantial state aid amounting to EUR 1,155mln, while Bulgaria will be supported with EUR 545mln.

Melania Hancila
Research Analyst Treasury Division

Finansbank (Romania) S.A.
Phone : +40 21 301 73 42
Fax : +40 21 318 09 61