1.

Political risk and economical environment

Political risk wich affect the economical environment is a type of risk faced by investors, corporations, and governments. It is a risk that can be understood and managed with reasoned foresight and investment. Broadly, political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisionsor any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives. Political risk faced by firms can be defined as - the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies (fiscal, monetary, trade, investment, industrial, income, labour, and developmental), or events related to political instability (terrorism, riots, coups, civil war, and insurrection). Portfolio investors may face similar financial losses. Understanding risk as part probability and part impact provides insight into political risk. For a business, the implication for political risk is that there is a measure of likelihood that political events may complicate its pursuit of earnings through direct impacts (such as taxes or fees) or indirect impacts (such as opportunity cost forgone). As a result, political risk is similar to an expected value such that the likelihood of a political event occurring may reduce the desirability of that investment by reducing its anticipated returns. There are both macro- and micro-level political risks. Macro-level political risks have similar impacts across all foreign actors in a given location. While these are included in country risk analysis, it would be incorrect to equate macro-level political risk analysis with country risk as country risk only looks at national-level risks and also includes financial and economic risks. Micro-level risks focus on sector, firm, or project specific risk. Some macro-level political risks concerning Romania economic environment: a) government stability That ended a three-month long political crisis (octomber december 2009) and led to a resumption of the international aid deal, boosting the leu and reducing the cost of insuring Romania's sovereign debt. Greater political stability also gave the central bank room to cut interest rates to a record low to kickstart the economy. But governament only narrowly survived a noconfidence vote filed by the leftist opposition last month over his planned cuts. What to watch: The opposition aims to file a fresh no-confidence motion in government, which it could probably win. A defeat for the government would cause a full-blown political crisis and probably send markets into freefall.

b) protests and strikes The government was forced to take same austerity measure to balane public deficit. Most probably this measures will be kept for a while. Trade unions have promised more action to try to force the government to abandon its austerity plans Some 30,000 people rallied in Bucharest on May 19 against deep public spending cuts, casting doubt on the government's ability and willingness to force the measures through. As consequnce the leu and blue-chip stocks fell on the protest, and the cost of insuring Romania's sovereign debt rose. What to watch: Can unions can gain enough backing for general strikes and to extend them beyond one day? Short-term action is unlikely to have a significant impact on markets but a prolonged national strike -- possible if resentment grows -- would raise pressure on the government and finances and eventually dent asset prices. Feelings on the street are running high, and many protesters say demonstrations could grow and turn violent, which would increase the impact on foreign investors. c) stalling recovery The economy is still in recession after shrinking 0.3 percent in the first quarter from the previous three months. The government, international organisations and economists have all cut their forecasts and most now expect GDP to contract in 2010. Prospects of recovery are undermined by scarce foreign direct investment which halved in January-March, and a collapse in property prices which economists say have not yet hit bottom. What to watch: Probablyl the central bank will start to tighten monetary policy due to fear of the rise in VAT pushing up inflation, which it delay the economical recover. d) corruption Romania shares the top spot among EU countries in rankings of perceived corruption and its failure to fight graft poses a risk to austerity measures and to the IMFled aid deal, both vital to economic recovery and investor confidence. Bucharest has not only failed to make any progress since an EU report in March 2010 but has gone backwards -- passing legislation that made a Brussels-backed antigraft body that checks politicians' wealth virtually impotent. A fresh EU report on Romania's judicial progress is due in July and is likely to be critical. The harshest punishment the commission could enforce would be a temporary stop to recognition of Romanian court decisions in the EU, which could be a further deterrent to investors. This would probably not move asset prices in the short term but would send an important signal that Romania is becoming an worse place to do business.

2. Economical globalization
The globalization in fact means a great interaction at economical level betwen the countryes. When the bigest states growth all states growth and vice-versa. This could be a vulnerability or an advantage. We have today a great example of crise which could be called global depresion. The economic depression occured at first in the USA and expanded very fast to entire World Economy. The globalisation of depression imposed the need of a meeting of the most economic powers leaders to find solutions. The leaders of the most 20 powerful economic countries, meaning 75% of the World Economy, established an agreement upon anti-depression measures. Although the measures are different from a country to another, the common conclusion is that the state should imply in economy. So, the state support will be given to banks and some industries, with the purpose to minimize the consequences of depression upon population. At the same time, it was established to increase the role of International Monetary Fund and World Bank in helping countries with less financial possibilities to support some fields of their economies. In Romania, the results of depression are present mainly in the Real Estate field, including the construction sector, but also in a decreasing of manufacturing products for export or for domestic market (i.e. auto industry). These results due to the scarcity of cash, caused by the fact that banks from Romania financed the loans for domestic market by borrowing money from their headquarters from abroad, not by rising their own capitals or by stimulating the population savings. But banks are not the only guilty institutions implied. So, the savings of people and companies, which might be the main source in financing the banks (and the cheapest), were discouraged by negative efficiency and by taxing the incoms provided by interests. Much more, the guarantee at low levels practised for deposits, made many capitals to move to other markets, where the whole sum of money in banks is guaranteed. Another occured problem was the trading deficit, also reflected in the current account, as long as in 2009 the movement of capitals owing to Romanian workers from abroad, as well as foreign straight investments are diminished.The difficulties are worsen by the growing of budget deficit perspectives, due to a reduction of public rises because of lowering the companies profits and population incomes. To stop the problems that Romanian economy has to face this year, the Government have to put in practise some of recommended measures by the European Commission. The highest efficiency on long run would be granting financial support to some companies, to agriculture and to invest in infrastructure. To cover these suplimentary expenditures the Government shoud cut other less important budgetary ones. The most important anti-depression measure is considered to be the financing of infrastructure projects, especially in transportation. This measure is useful not only for new jobs, but also for the integration of Romania in the European Union, will cut the prices for transportation and will make to increase the goods transited from the Eastern countries to European Union countries through Romania. So could be offered new opportunities of development for the companies working in this field. The development of infrastructure is not only an anti-depression measure, but it is the most important one for future economic development of Romania. Without investments

in transportation infrastructure, Romania will escape from depression poorer and more disadvantaged than its present position, comparing to the other countries of Europe. The economic depression in Romania is mainly a home-induced one, generated by a mistaken mix of macroeconomic policy during several years. The economic growth proved to be non-sustenable, falling down in only one quarter. The growth was based on a debt-financed consumption and the private consumption turned to excess because all the macroeconomic measures were thought in a pro-cyclical manner. In our opinion, the most damaging measure was the unique tax quotation on incomes, that stimulated the consumption. Now we have the first over-consumption recession in Romania. The first step in stopping the depression should be the cutting of wastes and budgetary expenditures in administration. The cheapest money is that you already have and can save it. Those savings could be used for investments in infrastructure, this way bringing new jobs and pushing up other economic fields. Such kind of investments must be fulfiled by making a multi-yearly budgetary planification, being the only way to reduce suplimentary costs. Also the fiscal policy mistakes must be removed - not only to rise the budgetary funds,but also for a more proper distribution of taxes, in the benefit of disadvataged social categories. At the same time, a public plan for joining euro currency must be assumed, with a certain decided deadline. This will grow up the foreign trust in our economy (and a lower cost for foreign loans, implicitly),and most of all, well be obliged to make needed financial and budgetary reforms, as well as the structural reforms (conerning the rising of level of competition, labour market flexibility, agriculture modernizing, beaurocracy reduction).

3. Big income differences

Net Monthly Income constant 2005 Airline Pilot Computer Programmer Accountant average salary Flight Attendant average salary Miner average salary General Physician Teacher Professional Nurse Physiotherapist Office Clerk Bus Driver Wood Grinder Carpenter Furniture Finisher Baker 5,784 2,438 2,516 2,077 1,891 1,771 1,244 1,105 915 896 883 720 629 584 545

Hotels-Restaurants

538

From statistic we can see: a big diference in income and small salary for jobs whic ask good preparation. As a result today Romania face two phenomena. a) Poverty Poverty has a firm grip on Romanias rural areas, where almost half (44 per cent) of the population lives. In 2003 the UNDP Human Development report estimated that 38 per cent of rural people were living in poverty, compared with 14 per cent of people in urban areas. Rural people are particularly vulnerable to the hardships brought by the painful economic and social transition after the collapse Of communism. The restructuring of the farm sector led rural people and displaced industrial workers to revert to subsistence farming on privatized land. Productivity and incomes are low because poor subsistence farmers and livestock producers have limited inputs and resources. They use outdated farming methods, and they have little or no access to capital and markets. b) Emigration In general, the Romanians who go abroad represent a competitive working force, well trained.The graduates from the higher education represent about 10-12 % of the total of persons who had legally emigrated, and over a quarter of these are graduates from the high-school and post-high school education, according to the Demographical Decline Study of the Romanian Academy, of 2007. The emigrants with vocational and technical studies represent approximately 9%, while the persons who have graduated only from the primary or secondary school, represent less than a third of the total of emigrants. The Romanians going abroad has manifested, in 90s as a phenomenon of intelligence exodus, as it was a migration of highly qualified working force. In the first wave, the engineers, the arhitects, computer scientists, economists and teacher followed. In the last years, we have witnessed the massive migrationof unqualified working force or with medium qualifications, wich made the employers talk more and more about an acute crisis of the working force regarding this segment. Currently, those who emigrate are the Romanians with positions for which there are very high salary discrepancies. The differenceas appear in constructions, agriculture and health.