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December 21, 2018 www.intellinews.com I Page 5
“Threat" to the economy
Romania’s President Klaus Iohannis, who is locked in a lengthy political battle with the PSD- led government, described the developments as “a very serious and very worrying matter”.
“This emergency ordinance was not discussed with partners ... This project does not have a substantive analysis. This project comes with unheard-of ideas so far. This project threatens the economy!” the president said, according to a statement from the presidency.
As well as the new tax on energy companies, Iohannis said the presidency had “received assur- ances from telecoms that this issue will also af- fect them”, and talked of an increase in prices for consumers. “This is just the beginning, because all companies also use energy, and fuel, obviously, and telecommunications, so, in short, we expect all to be expensive,” he claimed.
Employers associations also slammed the pro- posals. The American Chamber of Commerce (AmCham) in Romania appealed to the govern- ment to "Stop the assault on the economy!” “We consider that the proposed measures as well as their adoption manner to be irresponsible and reckless, throwing the market into a complete chaos, as confirmed by the first responses on the capital markets which indicate a steep erosion of investors’ confidence within hours from the an- nouncement,” its statement said.
Romanian property restitution fund Fondul Proprietatea also talked of the “dire consequenc- es” of the proposed measures, in a statement emailed to bne IntelliNews. It claims the 3% tax on energy companies’ turnover risks leading to insolvencies, while capping gas prices at RON68 per MWh “blatantly contradicts already approved Romanian legislation, as well as Romania’s obli- gations as European Union member state”.
“If adopted, the proposed measures will have sig- nificant negative effects that will cascade over the entire Romanian economy, will jeopardise future
growth and will isolate Romania from the interna- tional business environment,” said Johan Meyer, CEO of Franklin Templeton Investments Limited and portfolio manager of Fondul Proprietatea.
“Moreover, many of the proposed measures will be borne by end consumers, due to increased en- ergy prices and costs of credit. For measures that have so far-reaching effects, the predictability and transparency of the legislative process is vital, as well as considering very carefully their financial and economic impact. We are practically sitting on a ticking bomb and we urge the Government
to defuse it urgently by withdrawing the draft of [Government Emergency Ordinance].”
Banking laws passed
The banks’ shares were separately hit by the December 19 parliament vote on a package of laws that restrict the value of the loan interest rate, restrict banks’ rights in relation to their customers in default and allow recipients of leasing contracts to terminate the agreements with no financial fine.
Under the first law endorsed by lawmakers, loan interest rates are capped. Thus, the banks will
be allowed to charge interest rates for mortgage loans at a value of at most the monetary policy interest rate plus 3 percentage points. The maxi- mum interest rate for consumer loans was set
at 50% for loans of up to the equivalent of €3,000 and 18% for the larger loans. The provisions do not apply to outstanding loans at the moment the law is enforced, except when unpredictable situa- tions result in abnormally constrictive conditions for the debtor.
A second law regulates the regime for non-per- forming loans (NPLs): the buyer of such loans can only request from the debtor at most twice as much as it paid to the initial creditor (this is rel- evant for consumer loans sold by banks at deep discounts of up to 95%). Furthermore, the debtor is entitled to pay double the market price of the NPL to the new owner of the receivable, after which they are not required to make any further payment.