Weekly Financial Focus - November 25

25 Noiembrie 2011

BANCA COMERCIALĂ ROMÂNĂ S.A.

• Parliament passes law on social assistance
• MinFin sold less at the latest T-bills auction
• BSE: BET-FI down 9.5% in the last week

 

News & real economy

Parliament passes law on social assistance

In an attempt to refresh its public image after recent drops in polls, the Social-Liberal Alliance (USL) has started again wielding the sword of suspending the president for alleged breach of the constitution, although they all admit there is little chance for that to happen, at least for now (or perhaps until elections next year). We would not have taken the trouble to comment on that, but keeping this issue constantly on the boil is starting to become worrisome and may give us a hint of what is to come soon after the elections have ended (December 2012). Trundling out – over and over again – the same old obsolete question of suspending a president without providing the rationale behind it will finally fray public nerves and certainly drag politics into the gutter.

After forcing him out of the Social Democrat Party (PSD), ex-presidential candidate Mircea Geoana was also discharged by the Social-Democrats from his position as a leader of the Senate. Ethnic Hungarians, a key member of the ruling coalition, have clearly expressed interest in the chair of the Upper Chamber of the Parliament and this could spark conflict with the Liberal Democrat Party (PDL), which is also eyeing this top position. All of this rigmarole could bring the thin majority of the center-right coalition under pressure and some political analysts do not rule out the ethnic Hungarians crossing over. Yesterday, Prime Minister Boc poured oil on the troubled waters by saying that the coalition is to nominate a candidate for the Senate presidency.

Romania has made considerable progress in terms of restoring macro imbalances and this has been acknowledged by the IMF, European Commission and World Bank. Unlike other countries in Europe, Romania took earlier action to redress its public finances and managed to slash the budget deficit by more than 4pp in just two years. Political instability is what Romania needs least, as foreign investors’ confidence is so difficult to rebuild these days, when the sovereign debt crisis is raging throughout Europe. Romania has yet to deliver on public reforms and fiscal consolidation, while constant bickering and cheap rhetoric bodes ill for the future of the country.

MinFin sold less at latest T-bill auction

The unfavorable market conditions, which led to a postponement of the issue of USD-denominated bonds, also weighed on the results of the most recent auction for T-bills. The MinFin sold 9-month T-bills worth RON 502mn, only half the amount initially planned, at an average yield of 6.72%, virtually unchanged compared with a similar tender in September. This shows that investors are becoming wary about shorter maturities too and the recent cut in the key rate to 6% no longer seems of any help. 5-year yields on the secondary market could drift down to 7.2% in March 2012, but the persistence of fears over the sovereign debt woes across Europe may pose upside risks to our baseline scenario.

 

FX, money market and FI

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The tricky lag LUCIAN CROITORU Adviser to the Governor - BANCA NAŢIONALĂ A ROMÂNIEI Lucian Croitoru, Adviser on monetary policy issues to the National Bank of Romania Governor, talks about the NBR’s next moves and explains why the decrease ofthe policy rate hasn’t been reflected into lower interest rates on bank loans. mai mult... The turnaround CRISTIAN SPORIS Secretar de Stat - MINISTERUL ECONOMIEI ŞI FINANŢELOR Cristian Sporis, Secretary of State at the Ministry of Public Finance, in charge with the national treasury and public debt, explains how the state managed to borrow money at the lowest costs in the last seven years and how it turned from a clear market taker into a player with a strong position on the market. mai mult...