Red-line, then Costea and now Fondul Naţional de Investiţii (FNI) - a third major crisis with potential international repercussions has hit Romania. FNI is a unit trust company which closed all its branches last week following a request to the capital markets' regulator (CNVM) that it be allowed to suspend trading on a temporary basis as investors were attempting to make huge withdrawals from the fund. Investors in FNI took to the streets across Romania in protest while riot police stood by. President Emil Constantinescu addressed the nation on television, saying "The government will have [to issue] an emergency decree to strengthen legislation on unit trusts and other non-banking financial institutions." (Reuters - 29 May 2000) Constantinescu called for probes into the affairs of FNI by the Ministry of the Interior and the Security Services saying that this collapse could be seen as a threat to national security.
Arrest warrants have been issued for Maria Vlaş, FNI president, and three of her senior executives. Vlaş, who left the country as FNI stopped making payments to investors, is being sought by Interpol. Mediafax reported on 31 May that the Minister of the Interior now know of the whereabouts of Vlaş - he revealed that she was in a unnamed country that does not have an extradition treaty with Romania. By the end of the week journalists had determined that she was in Venezuela. Other executives of the FNI are being investigated on suspicion of fraud and embezzlement. Police also intend to investigate CNVM. A police statement said CNVM had "failed to monitor the FNI's activity and made possible infringements of capital market rules." (Reuters - 31 May 2000)
Leader of the Democratic Party Petre Roman summed up the FNI crisis by saying, "Some political officials of our country are asking the people to be calm. Well, the people are thinking that these political officials had the obligation to protect them from trouble. The fall of FNI must not be politicized, but those responsible for the loss of the savings of 300,000 people must not get away with it." (Nine o'clock - 1 June 2000)
At least one other bank seemed to be drawn into the apparent financial crisis. Following rumours that the Banca Comerciala Româna (BCR) faced cash shortages a mob entered the Sibiu branch demanding their money and causing damage. BCR clearly stated that the rumours were unfounded and were supported by Finance Minister Traian Remeş in their assertions. Prime Ministerial Advisor Adrian Vasilescu said, "The BCR is one of the soundest banks in the country and, even if more rumours were spread, they would remain ineffective. The bank has a complex portfolio, state securities and cash, and it can handle any situation." (Mediafax - 29 May 2000)
Prime Minister Mugur Isârescu said on Tuesday that the misinformation campaign against the BCR came at a time when the International Monetary Fund (IMF) stand-by loan was due to be confirmed. The IMF loan agreement will result in the release of further loans and grants from the World Bank and the European Union (EU). The implication was obvious - the rumours campaign was deliberately designed to damage Romania's standing with the international financial community. Economist Ionuţ Balan said, "The aim is clear. The idea is to demolish the government's monetary program." (Agence France Presse - 31 May 2000) Reports in Mediafax on 31 May indicated that the BCR had returned to normal and many of their customers realised that they had been the deceived by a campaign designed to affect the stability of Romania's economy.
On Wednesday a meeting of the Supreme Defence Council was chaired by President Constantinescu. The Council set up a commission to work with the Prosecutor General's Office to investigate the collapse of the FIN. Their consideration of the BCR incident led them to believe that this had been a threat to national security. Romanian media have talked throughout the week of a planned action to destabilise the economy which originated in Bucharest. Anonymous phone calls to customers of the BCR urged them to withdraw their funds from the bank while attempts were also made to break communications between the Savings House Bank (CEC) and its branches.
The IMF announced on Tuesday that it was to postpone making any decision about the extension of Romania's stand-by loan until 7 June. Spokesperson Conny Lotze said that this delay was intended to "allow time for the Romanian authorities to formulate their policy response to the recent developments in the financial system." (RFE - 31 May 2000) Romania's representative with the IMF, Ion Dragulin, said, "The situation is relatively serious and the exact dimension of its effects is not felt yet. The fund has doubts on their proportion. That is the very reason why the dialogue is necessary, to convince the IMF that we are on the right path." (Mediafax - 31 May 2000) The Romanian Government will have to propose additional regulatory measures and controls for mutual funds and the banking sector. President Constantinescu has already called for the suspension of CNVM while investigations into its role in the FNI collapse take place.
Of course, politics in an election year are never far from the surface. Interior Minister Constantin Dudu Ionescu attacked the comments of Adrian Nastase of the Party for Social Democracy in Romania, (PDSR) who had placed all blame for the collapse of the FNI onto the senior partner of the ruling coalition, the National Christian Democratic Peasants Party (PNŢCD). Ionescu pointed out that the FNI was established when the PDSR was in power. He said that he believed the scandal was deliberately contrived to take attention away from the involvement of leading figures of the PDSR in the Costea case.
An opinion poll carried out for the Foundation for an Open Society by Metro Media Transylvania showed that the majority of Romanians were not satisfied with their standard of living. 75 percent of the sample of 1796 people said that they were either not content or not at all satisfied with their living standard. 36 percent of those questioned felt that they were worse off financially than they were before 1990. When asked whether the family income was enough to live on 37 percent said that income provided only the bare necessities while 41 percent said that money coming into the home did not even pay for the minimum requirements.
The poll, which was taken between 4 May and 14 May, went on to consider voting preferences. The PDSR holds a convincing lead with 47 percent of voters saying they would vote for the main opposition party. Ion Iliescu, the leader of PDSR, is in front in the presidential contest with 51 percent preferring his candidature, while Emil Constantinescu is in second place with 19 percent. Ioan Muresan, commenting on behalf of the PNŢCD, said, "the poll is an attempt to manipulate public opinion before the vote on 4 June." (Nine o'clock - 1 June 2000) 4 June is the day when the first round of the local elections will take place.
A letter sent by the leader of the PDSR, Ion Iliescu, to President Constantinescu was released on Friday. In the letter Iliescu attacked Constantinescu for carrying out a dirty election campaign and declared as untrue the President's statement that Romania was in a desperate state when he took over
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Iliescu must also be worried about his and the PDSR's credibility as more is revealed about their links to the Red-line outrage, the Costea case and possibly to the scandal surrounding Fondul Naţional de Investiţii... which was where we began.
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