WJPBR Email News List [EMAIL PROTECTED] Peace at any cost is a Prelude to War! Romania's Communists Poised for a Comeback Summary Propelled by a banking scandal, the Romanian government may be on its way out of power. The current administration, which has led the country in its bid for membership in both NATO and the European Union, suffered unprecedented losses at municipal elections May 4 - partly as a result of the scandal. After four years of pro-Western rule in Romania, the country seems prepared to consider a return to leaders who are leftovers of the communist era. Analysis A banking scandal threw Romanian investors into panic last week, resulting in the collapse of a national investment fund. An anonymous source leaked information to the public that led to a run on the bank. The information leak - apparently politically motivated - was the first in what will likely be a string of events aimed at weakening the current government. The banking scandal - combined with success at the polls in recent elections - will strengthen the hand of the Social Democrats, composed of former communist-era officials, led by former president Ion Iliescu. Supporters of the ruling Christian Democratic Party largely boycotted local elections on May 4 and, along with low voter turnout, helped throw the elections to the Social Democrats. In November, the country will hold parliamentary and presidential elections. By themselves the local elections cannot indicate who will win in the fall. But the public's awareness of the corruption surrounding the banking sector, however, does suggest an imminent collapse of the Romanian administration. If the Social Democrats can continue to expose government corruption, while influencing voters at the municipal level, they may be able to manipulate mass sentiment enough to position themselves for a win in November. ________________________________________________________________ Would you like to see full text? http://www.stratfor.com/SERVICES/giu2000/060600.ASP ___________________________________________________________________ In mid-May several anonymous phone calls to investors in the Romanian Commercial Bank (BCR) began a run on the bank that led to the collapse of its partner, the state-run National Investment Fund (FNI), according to Bucharest press reports. A total of 10,000 small investors - out of 300,000 with investments with the fund - reportedly attempted to withdraw their cash from the BCR. With only 4 percent of its $164 million worth of assets liquid, the fund collapsed. Romania's ruling Christian Democrats say the crisis was an attempt by the political opposition to sway the elections. They are probably right, in that the crisis would not have happened without the anonymous phone calls. A problem had already been brewing; but it was sparked into a crisis by a timely leak of information to the public. Initially Stefan Boboc, president of the National Securities Commission (CNVM) denied any knowledge of FNI's precarious and illegal financial position. Two days later he was charged with directly managing the fund's questionable operations, reported the Romanian daily Economy Today. _______________________________________________________________ For more on Romania, see: http://www.stratfor.com/cis/countries/Romania/default.htm __________________________________________________________________ Boboc, arrested on June 2, is charged with abuse of power for allowing FNI to submit false accounting statements to hide its dangerous financial status. In addition to holding only 4 percent liquid assets, instead of the required 30 percent, FNI also failed to report approximately 86 percent of its shares. By law, only 10 percent can be unaccounted for. Romanian authorities want four other FNI officials for their involvement in the scandal. One of them, the fund's chief administrator, fled the country. The banking scandal cost the state an estimated $49 million, and possibly November's elections. Timed for just a few days before local elections, the banking crisis left the Christian Democrats looking corrupt and untrustworthy - with a potent real life reminder to voters with empty bank accounts. While voters abandoned the Christian Democrats, the Social Democrats gained control of Romania's local governments, including the mayorship of Bucharest. In addition to being the second most popular party in the country, the former communists now have the ability to install local officials, who can affect the ability of the ruling party to campaign. With six months before both parliamentary and presidential elections, the successor to the Romanian Communist Party may have just enough time to convince voters on a local level to vote for them nationally while restricting ruling party access to the political apparatus at the municipal level. The pro-Western ruling party is decidedly vulnerable. The Christian Democrats are members of the majority coalition in parliament, with 30 percent of the seats, but the Social Democrats are not far behind, with 23 percent. And, in the 1996 presidential election, Iliescu came in a close second to current President Emil Constantinescu. Economic scandal and political infighting will likely surge as Romania edges closer to its elections. The next four years - coincidentally the term length of the next president - will be telling in Romania's bid for membership in NATO and the EU. Western leaders, although diplomatically friendly, do not smile on former communist leaders such as Iliescu, who led the country from 1989 until 1996. Iliescu says that he supports Romania's accession to the EU, but has so far been so demanding that his participation - not to mention his leadership - threatens to stall the process. For instance, he asserts that EU expansion is for the good of the EU, not Romania, and therefore Romania should be treated the same as all full-fledged member states. But, Romania is geographically pivotal to the expansion of NATO and the EU. Already, despite the country's economic and defense deficiencies, the Western alliances are eyeing Romania. By winning in November's elections, Romania's Social Democrats could stall NATO and EU plans for expansion. 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