About the CBI

February 2006
 Background Note: Romania

Flag of Romania is three equal vertical bands of blue (hoist side), yellow,
and red.

PROFILE

OFFICIAL NAME:
Romania

Geography
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.
Climate: Moderate.

People
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).

Government
Type: Republic.
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.

Economy
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).

GEOGRAPHY
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).

PEOPLE
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.

HISTORY
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.

GOVERNMENT
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

Other Ministers
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--Mihail Hardau
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).

POLITICAL CONDITIONS
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.

ECONOMY
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.

FOREIGN RELATIONS
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
Tel. 212-682-3273

Romanian National Tourist Office
573 Third Avenue
New York, NW 10016
Tel. 212-697-6971

Romanian Cultural Center
200 E. 38th Street
New York, NY 10016
Tel. 212-687-0180

DEFENSE
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.

U.S.-ROMANIAN RELATIONS
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
Ambassador--vacant
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).