BrexitToRemainia Newsletter #54

For (+/-British) entrepreneurs interested in Romania. Every 2 weeks. Reads in <5 minutes

First month of summer made our politics heated again. This time, parties in power brought their own supporters to the streets in order to protest against all sorts of injustices (such as how cruel National Anticorruption Directorate -DNA- is with Liviu Dragnea’s penal charges) and in front of the Government they themselves have elected. So much so was this a strange situation that some international media actually thought people came to the streets to watch Simona Halep winning the final of Roland Garros. Irony apart, business ran its own course in Romania during past 2 weeks. Nothing noteworthy needs to be reported, but if you’re interested in part time work or how Romania is standing after 12 years of EU membership, read on.

Read the online version of this edition here and the full BrexitToRemainia Newsletter archive here.

Romania after 12 years in EU

A report issued recently by the Romanian Academic Society (SAR) shows (opinion based!) where exactly we are after 12 years in the EU. In a nutshell: twice as better in terms of disposable income, but not very far away when we look at social coherence, rule of law or performance of public sector. 

The report has three sections:

1. Forecasts from a panel of experts in terms of where Romania will likely land at the end of 2018
2. An overview of the poor (public) governance still persisting in Romania, despite generous EU funds made available since accession
3. An opinion on whether the recent attacks on the legislative power did (or did not) affect the rule of law in the country

Few stats and interesting facts we took away from the report (not necessarily in a particular order ... and at times random ;)):

1. Real estate market might see a 6% rise in 2018
2. The RON-EUR exchange rate is expected to continue to weaken for the year 2018, as it has for a while now
3. The current account deficit is expected to grow by 5,4% of GDP this year (it's already negative in the first quarter of 2018 by 0.65% of GDP, while in 2017 same period it showed an increase of 0.16%)
4. The level of political patronage in Romania is the second highest in new European democracies, after Greece (not good!)
5. In Romania, public enterprises account for about 6% of GDP, employ about 4% of the workforce, but 20% of all outstanding payments from the Romanian economy are on their balance sheets
6. Over 60% of public administration employees in Romania are over the age of 50

You can read the executive summary in Englishhere, but for the full report (72 pages) you need to exercise your Romanian or ask a friend :).

Protests against the "parallel state"

On Saturday, 9th of June, anywhere in between 130.000 and 180.000 people dressed in white T-shirts took the Victoriei square to protest against “seizure of the right to vote”. If you followed Romanian politics you will remember this is not uncommon phenomenon, especially in the past few months. So what is different this time:

1. People did not protest against PSD/ALDE coalition, but in support of it. So it was a protest of the parties in power against … ehm … some other powers called “the parallel state” (composed mainly of the justice and secret services). The latter supposedly don’t let PSD/ALDE coalition govern as per the wish of Romanian citizens, who voted for them back in 2016
2. It is unclear how much free will was involved. On Saturday, on the streets of Bucharest one could see (and the author of this newsletter witnessed) hundreds of coaches lined up on Kiseleff boulevard and in other locations which were closed for public transport. They brought people from far away counties, some of them for their first time ever in the capital. And, as some media recounted, many didn’t really know why they were there, or what “parallel state” means (but they enjoyed watching the Roland Garros women's final where Romanian Simona Halep won!)
3. There seems to have been (also) an international scope by design. At the tribune one could head speeches made in English, even if the crows didn't seem to follow well (as expected in a country where national language is not English). Speculation could lead us to think that Liviu Dragnea and other PSD/ALDE leaders wanted to provide to their international partners unfiltered messages about who is actually "the evil" in Romania. It doesn't seem to have worked tough
4. It was planned in advance to happen one day after Dragnea's appeal to the court in the case of his mismanagement of EU funds. Luckily, the appeal was postponed for June 21st. In case Dragnea lost, the crowd could have turned the meeting into a revolt. If he won against justice, it would have been a celebration. Either way, Dragnea would have been scoring political points ... but he was out-maneuvered.

Part time work in Romania

In the EU, 43 million people were working part time in 2017 (making it a fifth of the working population). In The Netherlands the percentage gets to nearly 50%, while in Austria & Germany is around 30%. In Romania 6.8% of people worked part time in 2017, a figure which is in line with CEE average, yet way below the 19.5% EU-wide one. But are these 6.8% Romanian part time workers happy with their arrangement? Well, according to Capital newspaper, a third of them are not, so probably capitalism and loose legislation gave them no choice.

For them, the good news is that the phenomenon started to cool down in 2017 versus 2016. Through subsequent legislative changes, it became less interesting for employers to leverage part time contracts and too confusing for employees to manage them. Why, you wonder? Let’s see the back and forth of Romanian legislation:

1. Through OUG 79/2017 the social contributions moved from employer to employee (in terms of who pays them). That created a big scandal at the time, as employers were reluctant to increase the gross income for fear that Government will change their mind and they will end up with artificially increased contract arrangements. The ordinance also mentioned that all deeds should be paid at minimum national salary level (bad news for people with part time contract below that average, right?)
2. On Jan 1st 2018 the minimum salary increased from 1450 lei to 1900 lei. This meant even more problems for those part time employees who would earn less than 1.900 RON, as they would now have to pay even higher taxes overnight. Luckily this abnormality was sorted out when government issued OUG 3/2018 and clarified that part-time employees pay deeds prorated to their income. The fees associated with the difference between their income and minimum national salary would be paid by their employers.

All in all, if you are in the business of hiring part time employees in Romania, you might want to know that: (a) this is still a niche strategy with loads of grey zones; and (b) you will have to pay anyhow some fees, if your collaborators are earning less than the minimum national salary.

Halep: finally a Grand Slam winner

This is a continuation of last newsletter, and it’s meant to give you the good news: after 3 rounds of missed finals, Simona Halep (WTA #1) is finally winning the Roland Garros. This time she played against Sloane Stephens, number 10 WTA (by now #5) but a very strong and energetic competitor. By winning the Roland Garros 26 years old Simona won something like 2 million EUR and 2.000 WTA points and maintains her worldwide leadership (she would have even if she hadn’t won). Great job Simona: your recent efforts to work on your mental strength (not just the physical one) have paid off.

DiscoverEU: free travel for young adults

The European Commission just launched DiscoverEU, a 12 million EUR program which aims to get the new generation of Europeans closer to the EU values through travel and inter-cultural awareness. During 12-26 June 2018, European youngsters who recently turned 18 can apply to win one of the 15.000 free inter-rail tickets for a 30-day trip around Europe. They need to convince the EC members in their application that they know a little bit of EU’s cultural heritage, parliamentary elections and youth programs … and off they go. This is by the way a great initiative, actively supported by our MEP Siegfried Muresan in his capacity as chief negotiator for EU budget 2018. The future of EU will be brighter if the new generation understands that their neighbours are good people -just like them-, some of which they have met while traveling with DiscoverEU.