Transatlantic Politics

Again, it is Kiev that gets all the headlines. But the similarities to Bucharest are there. Just like in November-December 2004, when both countries held elections and the orange opposition candidate won the presidency. It was weeks of protests in the cold winter streets of Ukraine for Viktor Yushchenko who managed to reverse the framed first result and topple Viktor Yanukovich, Kremlin's protegee. It was a massive turnout, media reports on fraud and the look at the neighboring Ukraine that got Traian Basescu into power, although the parliamentary elections were won by the post-communist Socialist Party (former president Iliescu being a Kremlin-fan trained in Moscow when he was young). Like in Ukraine, Basescu's allience was orange and formed of 2 parties - the Democrats (Basescu's party) and the Liberals (Premier Calin Popescu Tariceanu's party). Like in Ukraine, where the Premier Julia Timoshenko didn't play the same game with the President, the Romanian Premier demonized the President and preferred deals with the post-communist and corrupt Opposition, sabotaging and ultimately kicking out the Democrats from the governing coalition. Unlike Ukraine, the Romanian president has neither the right to dissolve Parliament and call for early elections nor to fire the Premier. Even if Tariceanu is not a Kremlin protegee like the current Ukrainian Premier Yanukovich who organized the counterrevolution in Kiev, ignoring Yushchenko's constitutional right, the Romanian Premier and his new cabinet formed just of Liberals and members of the tiny Hungarian Party plays now exclusively by the book of the Socialist opposition who voted unanimously in favor of this new "ultra-minority" government. The numbers prove it: representing just 20% of the current Parliament, the current cabinet has yet obtained almost 80% of the votes. Corruption, Romania's nr.1 problem before accession to the EU and the reason for the unprecedented "post-accession monitoring" from the EU Commission, is no longer a priority for the current government. After sacking the only true reformist and dedicated minister in the cabinet, Monica Macovei, the Premier stated that Romania's main objectives are promoting a better image abroad and withdrawing the troops from Iraq. The new Justice Minister, a young lawyer with the appropriate "political friends" has already made clear that "my concern lies in the needs of the citizen, not in getting a good report from the EU". What he seems to ignore is the fact that a bad report from the EU will affect precisely the citizen, as the Romanian verdicts would no longer be recognized in the EU, with a huge negative impact on the economy and on property rights.

Like in Ukraine, everything evolves around energy. The Premier, the new Defense Minister and the new Transport Minister are all close friends of the main financing patron of the Liberals, the CEO of a Romanian oil company called Rompetrol. He's charged for money laundry, insider trading, fraud, tax evasion and manipulating the stock exchange. The Premier tried several times to intervene in favor of his friend - by calling the Attorney General, by arranging a meeting with Patriciu and Justice Minister Macovei, even by writing a memo to the President asking him to talk to the prosecutors about his case. The former Energy Minister is being investigated for giving insider information on strategic privatizations. The new Communication minister appointed by the Premier on Monday is also under investigation in this case. The President himself has been accused, on the other hand, of trying to influence the energy distributors in dropping the price for certain industry sectors. Just like in Ukraine, where former premier Julia Timoshenko accused the President of cutting a bad deal with Gazprom after the natural gas crisis in the winter of 2005.

The current situation in Ukraine looks like a gordian node. The Economist sums it up perfectly. "Early elections? Maybe." The following analysis fits perfectly to Romania as well:

The coalition's leaders are now openly bent on amassing a majority big enough to override the presidential veto and strip Mr Yushchenko of his residual powers. It sounds like the sort of constitutional fine-tuning to be expected in a young democracy. In Ukraine, alas, disputes that may seem like issues of principle are often disguised struggles for wealth. Politicians' attitudes to any given office depend on their prospects of occupying it. Beyond the Rada, the country is worryingly divided between Yanukovich supporters in the east and south, and those mostly in Kiev and the west who want a more enlightened government.

 It seems like the EU membership has changed only the surface and the language of the Romanian politicians. Deep down, the same post-Soviet deals are still being made. And with the EU focusing on climate change and the famous Constitution, what is happening in Romania doesn't seem to bother too many. Ukraine even less.

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There’s a witty editorial in the yesterday’s Wall Street Journal (requires subscription) about Angela Merkel’s totally softened policy-making. The title "Angela Schroeder" says it all, the current holder of the EU-presidency has actually more resemblance to her predecessor than to what she initially was supposed to stand for: closer US-German relations, stronger NATO involvement, "less government", cutting taxes, economic reform.

Upon assuming the presidency of the bloc in January, Ms. Merkel decided to use this rare opportunity to shape the Brussels agenda for six months to advance the softest of all soft policies: to revive the European Constitution.
(…)The EU’s real challenges are elsewhere: enlargement to the Balkans and Turkey, economic reform, the incomplete single market, terrorism, immigration, energy security to name only a few. Any of those would have proved more challenging for Ms. Merkel — and so much more beneficial for the EU.

Instead of immigration or energy security, Ms. Merkel has given in to the green obsession (despite her center-right orientation) currently so trendy in the EU: gas emission targets that are merely "PR gimmicks" - 20% by 2020 - when just 2 of the 15 old EU member states are on track to meet the Kyoto protocol. On issues like Iran, Merkel has also visibly given in to her Social-Democrat predecessors and members of cabinet. If one year ago, she was comparing Iran’s rhetoric to the Nazis, now she softened the tone and let her Foreign Minister and Schroeder’s former chief of staff do the talking. In Afghanistan, NATO is "fighting uphill" because of her refusal to move the 2700 troops out of the stable north to the more dangerous south.

The latest Merkel disappointment involves American plans to expand its missile defense shield. Poland and the Czech Republic are in talks with Washington to install radar and missile sites to better protect the U.S. and Europe against an Iranian missile attack. To stir up nationalist furies at home and pressure the Poles and Czechs, Vladimir Putin lashed out against the missile plan, knowing full well this limited system could never put a dent in Russia’s own nuclear threat. Germany’s foreign minister immediately rushed to the defense — of the Kremlin. Mr. Steinmeier accused the U.S. of supposedly failing to inform Russia about the missile plans.
Ms. Merkel could have set her foreign minister straight for resuscitating the Schröder-style coddling of Moscow. But she, who grew up in East Germany, only seconded him. Ahead of a trip to Warsaw last week, the chancellor said, "We, and I will say it in Poland, prefer a solution within NATO and also an open discussion with Russia about it." The Germans aren’t so concerned with NATO cohesion in Afghanistan. In this case, the countries directly involved are the ones to decide.

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EU-freshman Romania has a great record on  corrupt politics, oligarch-style governing and no respect for the rule of law. As if the 45 years of communism hadn’t been bad enough, 12 years of post-communist ruling under apparatchik Ion Iliescu hampered reforms, perpetuated an oligarch-style ruling and maintained a justice system functioning as an enforcer of political commandos, with no perspective whatsoever to become a truly independent one.

Up until 1999, Romania didn’t even have a clear European perspective. The Helsinki Summit in December 1999 which  granted Romania the status of a candidate country was merely due to pressure from the US after the Romanian President Emil Constantinescu (elected 1996 and facing serious sabotage-attempts by Iliescu, who came back to power in 2000) granted overflight rights to NATO aircrafts in the Kosovo war,

2004 marked a change of government many had already given up hope for. Although the parliamentary elections were won by the same post-communist party (PSD) by a narrow margin, the presidential ones shifted completly. Instead of Iliescu’s Prime Minister and heir, Adrian Nastase and in spite of some fraud attempts, the opposition leader Traian Basescu became the first "orange" president, with a clear anti-corruption agenda, promising to get Romania into the EU by 2007. By then, this was seen as an optimist view, the new Enlargement commissioner Olli Rehn being very tough on corruption and stating clearly that he "would not hesitate" to postpone Romania’s accession by one year. He was exactly the opposite of  his predecessor, Gunther Verheugen, whose ties to the PM  and presidential wannabe Nastase even made him step over his attributions as an impartial EU commissioner: just days before election day, Verheugen predicted that Geoana (by then Foreign Minister) will be the next Prime Minister, thus suggesting that Nastase will win the presidential elections. He even announced an earlier than expected closing of accession negotiations, despite lingering problems in the field of Justice and Home Affairs (high level corruption, lack of independence and accountability), as well as Competition (with state aides being attributed by party loyalty).

The reform of the Justice system and the fight against corruption, especially first cases of high-level corruption, became the main focus of Basescu’s mandate and subsequently of his government, led by  PM Calin Popescu Tariceanu. A bold reformist Justice Minister, Monica Macovei, not politically affiliated, soon became the champion of the reforms,  broadly acclaimed by the European Commission and member states. Justice Commissioner Franco Frattini even stated that "A big part of the success of Romanian accession will have been achieved thanks to Ms. Macovei". The first "big cases" started with former PM Adrian Nastase and his wife, both on trial for corruption, but continued with members of the current government, such as former vice-PM George Copos or former Economy Minister Codrut Seres.

Even if Romania is a EU member since Jan 1st, it still has to carry out the judicial reforms and has a set of "benchmarks" in this regard. The first deadline is soon coming up, March 31st, when Romania must submit to the European Commission a report on its progress. But despite Mrs. Macovei’s commitment, the Parliament has subsequently tried to water down her projects and even voted a motion against her, asking for her resignation. Macovei warned as early as the beginning of January that after EU-accession, Romania’s clampdown on corruption is slowing down, her own PM showing "the wish of non-involvement". A key-agency for investigating conflicts of interests, one of the 4 benchmarks due this year, is being constantly delayed in the Romanian Parliament, whose main occupation right now is to find ways to impeach the President. With very low approval rates in the polls and in a constant open war with the President,  the PM has decided to postpone until autumn the elections for the European Parliament scheduled for May 13. The President himself makes no secret out of his non-approval towards the Premier, engaging in a true media-war in this respect.

For investors and businessmen, this looks rather grim: after the European elections in autumn follow the parliamentary ones in spring 2008 and then the presidential ones in 2009. Time for reforms and clampdown on corruption and red tape? Rather unlikely.

When visiting Bucharest yesterday, US deputy assistant secretary of Commerce Paul Dyck encouraged the Romanian government to continue the reforms. Here are the US’ recommendations:

• First, Romania must continue to exert significant efforts to eradicate corruption’s influence in the economy. This means corrupt officials, at all levels, must be held accountable for their actions.

• Second, intellectual property rights must be enforced and protected. Not only should counterfeit goods be seized, but their producers and distributors must be prosecuted to the full extent of the law. Only then, will there be a real deterrent to further IPR infringements.

• Third, Romania’s judicial system must be modernized so that judges and prosecutors understand not only the necessity of protecting intellectual property rights, but also of enforcing contracts and operating in a timely and efficient manner. Court decisions must be made in a transparently and in a reasonable amount of time.

• Finally, government decisions, including procurements, should be made in a transparent manner. Laws and regulations should be drafted so that companies and effected parties have adequate opportunity to comment and provide input. 

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There is a good analysis on Eastern Europe in the current Economist edition. Bottom line:

"Overheating economies, slow reform and messy politics make a grim mixture"

Common problems: Governments and politicians totally  lack accountability, there is no real desire to further reform the countries now that they joined the EU, they have no strategy for clever economic and social development (similar to Ireland, for instance). And yet, all 10 former communist countries that joined the EU in 2004 and 2007 have "surprising" GDP growth: the Baltics even over 10%. But politics seem to get in the way of the economic boom:

"The underlying failing is weak and indecisive government across the region, which needs years of good government if it is to catch up. Romania, the second-largest east European EU member, is paralysed by a political feud between the prime minister and president. As a by-product, the upper house of parliament has voted to dismiss the justice minister, Monica Macovei. In sunny economic weather, such political shenanigans would be mere details. In a chillier climate, they make east Europe’s future more worrying."

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The small Baltic country Lithuania is teaming up with Poland in veto-ing an EU-Russia agreement that needs to be signed by the end of this year. Their request - to include tougher clauses on energy relations, so that politicized interruptions in gas and oil supplying are excluded in the future.
Russia refuses to sign an EU Energy Charta which would allow its energy market to open up to foreign investors. More so, Russian foreign minister Serghei Lavrov said EU’s new energy policy (developed by another Balte - the Latvian Energy Commissioner Andris Piebalgs) imposes “unacceptable” mechanisms for transit and investment. The key to the stalemate is of course Germany, who heads the EU presidency for this first half of 2007 and who has to keep the thin line between its own national interest (the direct pipeline being built from Russia under the Baltic Sea) and the EU interest - less dependency on Gazprom and the oil-pipeline Druzhba. The Poles and Lithuanians already have been imposed sanctions by the Kremlin, so Germany has to use its bigger negotiating power to obtain some compromise from Mr. Putin.

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