Press review (Sept 16)

Romania's national dailies of Tuesday give front-page coverage to the effects of the Wall Street crisis on the Bucharest Stock Exchange, rising labour costs, and encouraging companies that run on Romanian capital.
Romania's economy has to rely on companies running on Romanian capital that are able to expand to neighbour markets, instead of on multinationals, as it is happening now, because the multinationals may change their business plans in accordance with the foreign economic context, Prime Minister Calin Popescu Tariceanu said on Monday.
Ziarul financiar quotes Tariceanu as saying he is worried about a slowdown in economic growth and even a decline in growth recorded by European countries, because this can have repercussions on Romania's economy.
Labour costs in Romania advanced 22.9% in the second quarter of 2008, placing Romania second in the European Union in terms of labour cost rises, Romania libera and Evenimentul zilei remark citing Eurostat press releases.
Wage costs went up 22.9%, while non-wage expenses advanced 23.1%, both year on year.
Gandul remarks that the local currency, the leu, is getting enfeebled by the US crisis, and Bursa notes that there is pressure on the leu, both reporting about the first effects of the US financial crisis on the leu. Ziarul financiar reports that on Monday the leu was fully smacked by a wave of withdrawals of foreign investors that closed their positions on emerging markets in the wake of the downfall of US giant Lehman Brothers and the takeover of Merrill Lynch by the Bank of America over the weekend.
In a mater of minutes, the euro jumped from RON 3.5850 (the last quote on Friday) toward RON 3.64.
The National Bank of Romania (BNR) on Monday stepped in and mopped up RON 1.7 billion in deposits, as a slight excess of liquidity had built up.
The Bucharest Stock Exchange (BVB) strongly felt the shock triggered on the world capital markets by the bankruptcy of the US Lehman Brothers bank, with the BET-XT index of the best traded 25 stocks on BVB declining 4.2%, and securities traded by the SIF financial investment companies losing more than 5% of their value. All the BVB indices fell to their lowest in the past three years, Ziarul financiar remarks.
"The US market crisis will be felt on the Romanian market mostly as an even more drastic decline. That is why we can safely say the BVB has entered a liquidity crisis. Besides the foreign influences, the BNR monetary policy is also contributing to the deepening of the crisis, because these policies make access to funding harder," the paper quotes General Manager of IFB Finwest stock brokerage company Octavian Molnar as saying.
The papers note that the Wall Street crisis does not have only indirect effects on the BVB. One of the most seriously hit companies in Romania is the Impact (IMP) real estate developer, in which Lehman Brothers bought a 2.8-percent stake one year ago.
On Monday, shares in Impact declined 4.7% in value, in keeping with the market trend, but the decline for the entire month is 50%. "It is possible that the impact of the negative news from the US is overrated on the Romanian market, given the previous experiences. This is mainly the result of local investors reacting emotional and having mostly acted in a speculative manner," Ziarul financiar quotes Deputy General Manager of KD Investments unit trust administrator Jan Pricop as arguing.
Ziarul financiar also remarks that Romania's current-account deficit has reached levels that are hard to sustain in the long term and it must be corrected; foreign investment, which has been seen as a source for sound funding, might soon get to put pressure on the widening of foreign trade disbalancement, as multinational companies have started repatriating their profits derived in Romania.
The current-account deficit should be corrected to 10% of the Gross Domestic Product (GDP), down from a current 14%, because at this level it is increasingly harder to sustain, the paper quotes head of the Raiffeisen Bank Research Department Ionut Dumitru as saying.
Dumitru also says the problem now is whether or not the deficits are sustainable any longer, given the unprecedented turbulence on the world market, a liquidity crisis and expensive funding.
Amidst news about the latest developments in the American International Group (AIG) on the New York Stock Exchange, the papers carry the statements of the Romanian Insurance Supervision Board indicating that the solvency and liquidity indicators of the two Romanian insurance companies in which the US AIG group is a significant stakeholder – AIG Life Asigurari SA and Societatea de Asigurari AIG Romanai SA – are meeting the prudential rules in force.
The two companies are also said to have worked on a profit in the first half of 2008 and also to have concluded reinsurance agreements with many reinsurance companies, and the risk percentage in the group of which they are members is very small.

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