Internal Affairs

The Romanian prime minister found a technical solution to allow the normal functioning of the Government meetings after the president refused to appoint interim or full ministers in the vacant positions. Thus, by a government decision, it was transferred from the Ministry for Relations with the Parliament to the General Secretariat of the Government, the competence to give a note for the draft laws and emergency ordinances considered by the Government. In the absence of a holder in the Ministry for Relations with Parliament, the Government could no longer adopt before this week’s decision ordinances and emergency bills. The promotion of this solution allowed the resumption in normal conditions of the activity as of this week.

The absence of full or interim ministers in important portfolios (such as the Environment), even if it no longer affects the functioning of the government meetings, impacts the activity of the respective ministries, being expected to cause delays in promoting different regulatory initiatives by them (e.g. at the Environment, Energy and Home Affairs ministries).
In an attempt to quickly restore the full government formula, the Prime Minister sent new nominations for vacant portfolios to President Klaus Iohannis this week. For the minister positions vacant due to the resignation of ALDE members, the prime minister nominated members of this political group (to emphasize that the political component of the government will not change and, as such, that it is not necessary for them to be endorsed by the Parliament) (EN). The president rejected the new proposals, stressing once again that he expects the Government to follow the procedure of a support vote in parliament (EN).

In this context, a first solution to the institutional deadlock between the President and the Prime Minister is expected to occur along with the decision of the Constitutional Court of Romania. Its ruling should be expected to take place at the earliest on September 16-22. The government will likely await the Constitutional Court ruling and postpone the moment of asking the parliament for an endorsement vote of the new ministers. It is worth pointing out that the PSD Government is using this period to attract the support of different MPs, mainly from ALDE. The former minor government party is going through strong internal convulsions after several leading leaders (at the same time also MPs) agreed to collaborate with PSD and were excluded from the party (former Minister of Foreign Affairs and ALDE Vice President Teodor Melescanu was elected this week President of the Romanian Senate, with PSD support) (EN). The PSD does not hold however presently the number of votes necessary to ensure its majority in the Parliament’s plenum.
At the other pole, the opposition forces continue to be divided on future developments that should occur after the adoption of a no confidence motion against the Dancila government. Political negotiations will continue in the new week, and the submission and debate of the censorship motion will continue to be postponed.

International Affairs

The designated President of the European Commission, Ursula von der Leyen announced the list of Commissioners to be part of the future formula of the European Executive. The Social Democrat MEP Rovana Plumb is nominated to take over the Transport portfolio. The list was approved this week by the Council of the European Union (EN). In the next period will take place the hearing of each designate-Commissioner in the Special Committees of the European Parliament, following which the plenary of the European Parliament will give a vote on the entire proposed formula of the new Commission. The European Council will have to approve then with majority of votes the new Commission.

Dacian Ciolos, president of PLUS Romania but also of the political group RENEW Europe in the European Parliament, announced that the group MPs will not vote in favor of Rovana Plumb in her hearing by the Transport and Tourism Committee, due to the suspicions regarding her moral integrity. For the same reason, the RENEW Group has adopted a similar position towards other candidates nominated for the position of European Commissioners (EN). There is a possibility that the vote in the Committee on Transport and Tourism could be one of rejecting the Rovana Plumb, in which case Ursula von der Leyen will most likely ask Romania government to nominate a new candidate.

It is worth underlining that this week the European Central Bank (ECB) announced a cut in its main deposit rate by 10 basis points, to -0.50%, a record low. ECB also announced that a new bond-buying program will start on November 1st. The program will entail 20 billion euros per month of net assets purchases for as long as it is necessary (EN).

ECB decisions came in line with the economists’ expectations. They are aimed at revigorated to stimulate and reinvigorate the euro zone economy, given the negative trends registered this year.

Economic & Fiscal Updates

Given the political tensions and the absence of a formal majority in parliament, the economic agenda of the government has been rather poorly represented in the last period. In this context, it is worth noting the latest recorded macroeconomic developments, namely the confirmation of the economic growth of 4.7% in H1 2019 compared to H1 2018, respectively 1% in Q2 2019 compared to Q1 2018 (EN), as well as the slight reduction of inflation from 4.1% in June to 3.9% in July (EN). Economic growth continues to be sustained mainly by consumption, and the trade deficit continues to grow. Thus, Romania’s trade deficit grew to 9.48 billion euros in the first seven months of the year, 1.89 billion euros more than recorded in the similar period last year (EN). The industrial production fell with 3% in July compared to the same month of 2018. It is the second month in a row that the industrial output contracts (EN).