President Klaus Johannis is weakening Romania’s pluralist democracy. The anti-democratic actions taken by the president of Romania during his administration are highlighted in recent research by the British think tank Oxford Analytica.

The report’s authors claim that Klaus Johannis’s standing in society has significantly declined.

Johannis speaks little, and his public appearances have steadily decreased. His advisors stay out of the public eye and are believed to come from the business and intelligence world. (…) President Klaus Johannis’ popularity is now in freefall, as his attempt to reduce the influence of Parliament by allowing the purge of anti-corruption judges and bringing military figures into politics seems to be backfiring. His efforts in 2021 to forge a coalition between two typically rival parties that hold a parliamentary majority have undermined competitive politics and scrutiny of government actions.

Oxford Analytica

According to Valahia News, the attitude of President Klaus Iohannis toward the armed forces and intelligence agencies raises questions about the viability of democracy in Romania. The study focuses on the PNL-PSD (National Liberal Party and Social Democratic Party) case, in which the president’s involvement in severing the alliance between the PNL and USR (Save Romania Union) and forging the coalition between the PNL and PSD—two typically rival parties—which holds the majority of seats in Parliament—was responsible for the rise in corruption in Romania. The data also shows that his attempts weakened control over government operations and competitive policy.

President Klaus Johannis renounces his role as a mediator between state bodies and between the state and society. Fears are growing that a disorderly, sometimes chaotic, yet identity-pluralist system is being replaced by a monolithic version where corruption and inefficiency continue to thrive but without meaningful checks and balances.

Oxford Analytica

According to experts, his ambition to lessen the power of the parliament, permit the removal of judges who investigate corruption cases, and involve military leaders in politics raises concerns about Romania’s democracy.

The research included several crucial subjects, including the army’s and the secret services’ strong influence on Klaus Johannis and Nicolae Ciuca’s government; abandoning all reforms; ending the battle against corruption; intimidating anti-corruption judges; and buying media.

Oxford Analytica claims that Romania’s legal troubles could result in large financial cuts from the EU and that Schengen membership is „unlikely” to occur. British academics also claim that Romania wants to bolster its secret services to keep an eye on international investments there. The analysis gives the legislative proposals about the secret services a lot of attention and shows that the drafts were developed by intelligence service personnel (a problematic legal act) with the knowledge of the President’s and Prime Minister’s offices.

Photo Source: Klaus Johannis Facebook

Secret communications within Uber, the American behemoth that has changed passenger transportation worldwide, expose illegal expansion strategies into other markets.

Recent events revealed a big scandal regarding the Uber Company. The Guardian revealed secret documents on how tech giant Uber broke the law, conned the police, took advantage of violence against drivers, and clandestinely lobbied governments during its ambitious global development.

In order to operate the powerful machinery of policymakers, the firm has spent a large quantity of money to hire an army of outside consultants.

More than 100 politicians and decision-makers from 17 different countries, including Emmanuel Macron and Joe Biden, as well as members of the European Parliament and European Commission representatives, were met by Uber representatives between 2014 and 2016. Representatives of Uber sought political backing at the highest levels in Romania as well.

Uber has „collaborated” with many top politicians in Romania to change legislation. Emails from the Uber office in Romania identifying the lawmakers who need to be contacted were included in the records.

Lobbying in Romania

In Romania, professional lobbying is just getting started, but like everywhere else, the largest volume of influencing activity is made by trade associations, corporations, non-governmental organizations (NGOs), civil society, syndicates, employer unions, think tanks, lawyers, and other individuals and groups. The law governing lobbying in Romania was drafted there. The legislative initiative defines lobbying as „any contact person organized and structured to exert influence on public representatives in the interest of a client.” Controlling lobbying activities is a prominent aspect of Romania’s political process and is a constitutionally protected right.

However, Uber wanted to impose the cab-hailing service in Romania and worldwide, even if it meant breaking the law and going against taxi rules.

The data reveals how Uber attempted to win back support in Romania by covertly contacting political figures and high-position leaders.

About the Uber Files investigation in Romania

Uber has been touted as a leader in the digital revolution, yet it has turned to outdated methods to win over powerful politicians.

Since 2015, when Uber started operating through a subsidiary in Romania, Uber has managed to amend the law on the prohibition of passenger transport for a fee without a taxi license into the regulation of all passenger transport operations urban-type.

According to a Rise Project investigation, the man who could ensure the connection between Uber and the political area was Peter Imre, who died in the meantime. Peter Imre was the director of Adevarul Holding and an influential local consultant with multiple political connections in Romania.

Through Peter Imre, Uber was able to appeal to the Minister of Transport Ioan Rus, with Iulian Matache, Secretary of State in the Ministry of Transport, Mircea Toader, the Vice President of the Transport Committee in Parliament, responsible for amendments to the taxi law, Catalin Popescu-Tariceanu, Senate President, Bogdan Chiritoiu, the president of the Competition Council, Sorin Grindeanu, the minister for the Information Society, and many others, to convince them to appoint a parliamentarian from each party to introduce the legislative changes that Uber needed.

In 2015, as the local cab faced growing customer dissatisfaction and piracy, Uber entered the contest to dominate the Romanian market. When Uber’s operations in Romania were not regulated, taxi drivers began to demonstrate, and some professional associations filed lawsuits for unfair competition.

At the moment, the Uber files case is under investigation, it is not known who will be prosecuted, but according to the journalists, there are many charges in high positions.

Numerous organizations that unite American, French, German, and Romanian investors urge the Government to preserve a single tax and reinstate the tax system in order to promote economic growth.

In the context of the Social Democratic Party’s demands that the Government rethink its budgetary policy and give up the single quota, the major organizations in the business environment are opposed to removing the single tax, considering it a simple tax system and essential for economic growth.

The business environment also suggests: increasing tax collection and combating tax evasion through harsher sanctions and controls in areas where problems are identified; reevaluating the framework in which microenterprises and PFAs are used in Romania.

As long as they are used in good faith, in a truly entrepreneurial manner, and not to conceal employment arrangements, these are advantageous and acceptable forms of organization.

Foreign Investors Council, press release

Identifying the key industries that the Government wants to promote while taking into account Romania’s interest and the medium- and long-term perspective, relocating the tax system to stimulate work, bring black and gray work to the surface, decrease employee departure, and bring Romanians abroad home are other recommendations (boosting the export of high value-added goods and services can help reduce the trade deficit).

At the same time, the economic climate views it as essential to make any change to public policies after transparent engagement with all parties involved. To establish the groundwork for a long-term, transparent, digital, and predictable tax system, the business community also affirms its openness and willingness to communicate with the authorities.

The recommendations come from the Council of Foreign Investors (FIC), the American Chamber of Commerce in Romania (AmCham), the French Chamber of Commerce in Romania (CCIFER), the Romanian-German Chamber of Commerce and Industry (AHK), the CONCORDIA Employers’ Confederation, the Association of Foreigners Romanian Business Leaders (RBL), Romanian-British Chamber of Commerce (NRCC), Romanian-British Chamber of Commerce (BRCC), Hellenic-Romanian Bilateral Chamber of Commerce (HRCC), Belgian Chamber of Commerce, Luxembourg, Romania and Moldova (BEROCC).

On June 11, Marian Enache was elected Constitutional Court (CCR) president. The vote was held in private after the new CCR judges took their oath before Romania’s president, according to a press release from the organization.

Mihaela Ciochină, Laura-Iuliana Scântei, and Bogdan Licu, the three judges of the Constitutional Court (CCR), were sworn in in the Cotroceni Palace. They have a nine-year term in office.

I wish the new constitutional judges much success. Congratulations, and I want you to do as you swore. It is a job of great responsibility, and I am convinced you will do it successfully. Likewise, I wish a lot of success to the constitutional judges who continue their mandate. Together, I want you to ensure compliance with the Constitution and be a balancing factor in Romanian society.

Klaus Iohannis, Romania’s President

This choice is controversial because of the history of the current president. So, who is Marian Enache?

Marian Enache served in many roles, including deputy, presidential adviser, ambassador, and judge.
Marian Enache (67 years old) is a familiar face in the local political arena, having been elected representative of Vaslui on the National Salvation Front’s lists in the May 20, 1990 elections. Then, from 1996 to 2000, and again from 2012 to 2016, Enache served in Parliament as a deputy.

Marian Enache served in many capacities, including deputy, presidential adviser, ambassador, and judge.
During his political career, Enache has been a member of five parties.

Marian Enache served as a deputy, presidential adviser, ambassador, and judge in the United States.
In 1993, he was appointed Romania’s ambassador to the Republic of Moldova, serving as a prezidențial adviser on legal issues to President Ion Iliescu. His career was shaken by a significant controversy in 2009 regarding his ties to the communist police. Marian Enache had a network file at the time, according to the National Council for the Study of Security Archives, but the file no longer exists in the CNSAS archives.

Judge Marian Enache earns about EUR 14,150.00 (70,000 lei) every month.
Marian Enache’s estate consists of four plots of land: three in Gorgota commune (Prahova county), each measuring 2,238 square meters, 2,288 square meters, and 1,800 square meters, and one in Corbeanca commune (Ilfov county), measuring 1,116 square meters.

Enache additionally receives EUR 19,500.00 (96,936 lei) annually from the Chamber of Deputies under the heading of old-age allowance. Enache, the prominent character in Vaslui during the December 1989 Revolution, obtained the indemnification of a revolutionary until recently, which does not appear in the judge’s most recent declaration of fortune.

The French President, Emmanuel Macron, will visit Romania at the military Base 57, Mihail Kogalniceanu in Constanta, on June 14.

At Mihail Kogălniceanu’s 57th Base, which oversees a NATO fighting force, France has some 500 soldiers and a missile system. On June 15, Macron will pay them a visit at the Military Base before travelling to Chisinau, the capital of the Republic of Moldova.

At the Mihail Kogalcineanu base near Constanta, Romania’s main Black Sea port, which has become extremely important since the start of the war, Defense Minister Sébastien Lecornu will be welcomed with Foreign Minister Catherine Colonna.

To strengthen NATO’s „position of deterrence and defence on Europe’s eastern flank,” the French president will be greeted by Romanian Prime Minister Nicolae Ciuca and meet with representatives of the Aigle mission. In the nation, France has constructed a state-of-the-art ground-to-air defence system.

According to Valahia New, president Emmanuel Macron will deliver a solid commitment to NATO allies and European partners after Romanian President Klaus Johannis visit the NATO base on June 15.

Since Jacques Chirac visited Romania in 1998, Emmanuel Macron has been the second French president to visit Romania. The president said that the country most impacted by Russia’s invasion of Ukraine, with which it shares a border, will get „direct solidarity (from) France,” the president said. Additionally, France is providing material and financial support to the Republic of Moldova, which has demonstrated „exceptional solidarity” by accepting nearly 480,000 Ukrainian migrants and the remaining 80,000.

According to French officials, the president of France’s visit purpose to Romania and the Republic of Moldova is to show his support for those nations who are the most impacted by the situation in Ukraine.

Joe Biden announced his intention to nominate Kathleen Ann Kavalec as the United States’ ambassador extraordinary and plenary to Romania. This is the first time an American administration has appointed a woman as ambassador to Romania.

According to a White House press release, Kathleen Ann Kavalec is a career member of the Senior Foreign Service with the rank of Minister-Counselor who has been on detail from the Department of State since 2019 as the Head of Mission at the Organization for Security and Cooperation in Europe (OSCE) Mission to Bosnia and Herzegovina.

She previously worked as the State Department’s Deputy Assistant Secretary for European and Eurasian Affairs. Kavalec previously served as the Director of the Office of Russian Affairs and the Deputy Chief of Mission of the United States UNESCO Mission in Paris, France. As Deputy Coordinator for Assistance in the European Bureau and Director for Conflict Prevention in the Coordinator’s Office for Reconstruction and Stabilization, Kavalec oversaw significant U.S. foreign assistance programs.

As mentioned by Valahia News, Kavalec has extensive experience in this region of Europe, having served as Cultural Affairs Officer at the U.S. Embassy in Bucharest, Romania, Political Counselor at the U.S. Embassy in Kyiv, Ukraine, and Political Officer at the U.S. Embassy in Moscow, Russia (twice). She worked in Washington as a Legislative Management Officer in the Bureau of Legislative Affairs and as the Director of the Economic Unit in the Office of the Coordinator for Assistance to the Newly Independent States. Kavalec, a California native, received an A.B. in Political Science from the University of California, Berkeley, and a Master of Science in Foreign Service from Georgetown University in Washington, D.C. Kavalec has received numerous State Department honours, including the Presidential Rank Award.

According to the press release, she is fluent in Romanian, Spanish, Portuguese, French, and Russian.

After the Capitol riot, the former U.S. ambassador to Romania, HE Adrian Zuckerman, was forced to resign before the end of his term in January 2021.

After auditions, Congress will vote on and approve the nomination.

Huluşi Akar, Minister of Defense of the Republic of Turkey, and Prime Minister Nicolae-Ionel Ciuca met at Victoria Palace in Bucharest to discuss the importance of the bilateral relationship limited to the Strategic Partnership, close economic cooperation, and shared concerns about regional security and the Black Sea.

According to Valahia News, the prime minister addressed the Ukrainian conflict and condemned the illegal, unprovoked, and unacceptable actions on the ground. The Prime Minister also directly connected the Black Sea situation and NATO’s need to include the Black Sea as a strategic interest region in the future Strategic Concept. The framework for energy cooperation was also discussed, as was Turkey’s role in transiting necessary amounts of gas to Romania, Moldova, and Ukraine via the Turkish transport system.
There was discussion about the bilateral agenda, economic and trade dimensions, military cooperation, and defence industry cooperation.

During his visit to Romania, Minister Hulusi Akar was also welcomed at the Cotroceni Palace, where he met with President Klaus Iohannis.

The significance of this official meeting lies in the strengthening of the external relationship with Turkey, particularly in these times of insecure regional security.

The Russian Federation has declared ten representatives of the Romanian Embassy in Moscow as personae non-gratae, according to the Ministry of Foreign Affairs, in response to Romania’s declaration of personae non-gratae on April 5 of 10 people working in the Russian Federation’s Embassy in Bucharest.

The Ministry of Foreign Affairs informs that the Russian Federation declared as persona non-gratae 10 persons working within the Romanian Embassy in Moscow, this being a reaction to the declaration personae non-gratae by Romania, on April 5, 2022, of 10 persons working within the Embassy Of the Russian Federation in Bucharest

MFA

The Ministry of Foreign Affairs recalls that the Romanian authorities’ decision was based on the activities and actions of the ten individuals who violated the provisions of the 1961 Vienna Convention on Diplomatic Relations. The MFA reiterates its strong condemnation of Russia’s illegal, unjustified, and unprovoked aggression against Ukraine, as well as war crimes and other international crimes committed by Russian forces in that country.

According to a local news source, Cristian Istrate, Romania’s ambassador to the Russian Federation, was summoned to the Russian Foreign Ministry and stayed for only 15 minutes. He emerged with an envelope containing the names of the ten Romanian embassy employees who will be expelled. In such cases, the names of those expelled are not made public.

It is unknown what he will do after leaving the post.

On Friday, April 15, Standard & Poor’s Global Ratings maintained Romania’s government debt’s sovereign rating of BBB- / A-3 for long-term and short-term debt in local currency and currency. The rating agency also confirmed the outlook’s stability. The rating came after Fitch last week confirmed Romania’s BBB- rating.

Romania’s grade is bolstered by its EU membership and full access to foreign capital markets, according to S&P. In addition, the likelihood of absorbing a considerable amount of European cash, as well as the country’s energy dependence on Russia’s natural gas and oil, minimise the risks posed by the conflict in Ukraine, according to Valahia News.

The Romanian government is implementing effective measures to counter the effects of the energy crisis and the war in Ukraine. We are not the only ones to say it, says Standard & Poor’s, which confirms the country rating and the high degree of security for investors, maintaining a stable perspective.

Adrian Caciu, Romania’s Minister of Finance

According to Standard & Poor, sustained economic development combined with a reduction in the government fiscal deficit could lead to the consolidation of Romania’s productive capacity and, as a result, to a possible action to raise our country’s sovereign rating.

While the government presents all of these international rating agency evaluations positively, Romania’s constant growing inflation, which is already in double digits, is a problem, and preventative measures are implemented too slowly for the vulnerable populace to benefit from them. Foreign institutions are also more cautious when assessing Romania’s growth potential this year, placing it at around 1.9%, down from an enthusiastic 5% at the start of the year.

As a result, ordinary Romanians must brace themselves for one of the most difficult economic periods in recent memory despite the government’s confidence.

Fitch Ratings – Frankfurt am Main – 08 Apr 2022: FitchRatings has affirmed Romania´s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-‘ with a Negative Outlook.

A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS

Credit Fundamentals: Romania’s ‘BBB-‘ rating is underpinned by EU membership and EU capital flows that support investment and macro-stability, and GDP per capita, governance and human development indicators that are above ‘BBB’ category peers. These are balanced against larger twin budget and current-account deficits than peers, a weak record of fiscal consolidation and high budget rigidities, and a fairly high net external debtor position.

Negative Outlook: The Negative Outlook reflects continued uncertainty regarding the implementation of policies to address structural fiscal imbalances over the medium term and the impact of the Ukraine war and energy crisis on Romania’s economic, fiscal and external performance.

Heightened Short-Term Challenges: The Russian invasion of Ukraine represents a significant macro headwind, as it will heighten short-term risks to growth and inflation, and to a lesser extent, to public and external finances. Trade and export links with Russia—as well as Ukraine and Belarus—are very limited (exports to the three countries accounted for only 2.3% of the total in 2020), and unlike other countries in the region, Romania imports only a modest share of its gas from Russia (20%, the is rest domestically produced). However, steep increases in commodity prices, supply-side disruptions and weaker growth in Romania’s main trading partners (mainly the eurozone) will have significant spillovers, heightening short-term risks.

Public Investment Key Growth Driver: Fitch expects GDP growth to slow to 2.1% in 2022 (from 5.9% in 2021), primarily reflecting a slowdown in private consumption and exports. Although the government has put some measures in place to offset higher energy costs, they will likely be insufficient to prevent a loss of purchasing power. We expect public investment to provide some momentum in 2H22, in line with higher absorption of the 2014-2020 Multi-Annual Financing Framework and from the Recovery and Resilience Fund (RRF). In 2023 we expect investment dynamics to further accelerate, which combined with our assumption of normalisation of external trade and supply chains, will lift growth to 4.8%.

Inflation Higher for Longer: We forecast the harmonised index of consumer prices (HICP) will average 10% in 2022 (the highest rate since 2004), with inflation likely to reach double digits in 2Q22 and possibly 3Q22 (from 7.9% in February), reflecting significant pass-through from higher energy and commodity prices as well as second-round effects. The government has placed a cap on electricity and gas prices for households and some companies until April 2023, which should limit inflation pressures somewhat. Unlike other countries in the region, wage growth appears moderate (largely due to restraint on public wages), but pressures are likely to rise as the labour market continues to tighten and employees feel a squeeze on their living standards. Fitch expects inflation to soften to 5.5% in 2023, in large part reflecting base effects.

Central Bank’s Multiple Priorities: The National Bank of Romania (NBR) has tightened its main policy rate by 1.75bp since September 2021 (to 3% in April) and increased its interest rate corridor in an effort to tackle rising inflation. The authorities have also focused on exchange rate stability to limit inflation pass-through, with the currency maintaining broad stability in 1Q22 following interventions by the central bank. We expect the tightening cycle to continue but at a modest pace to prevent an even faster economic slowdown. The NBR reactivated its programme of government bond purchases in March to improve liquidity and limit volatility in domestic bond yields, a tool we expect to be used only sporadically. However, if volatility persists and macro-challenges accentuate, the NBR might find it more challenging to balance multiple policy priorities, raising the risks of a sharper adjustment on the growth or fiscal side.

Challenging Public Finance Outlook: The government overperformed its budget targets in 2021 (we estimate the accrual deficit at 7.5% of GDP versus 8% in the budget) thanks to strong revenue performance and CAPEX under-execution. This better-than-expected starting position, as well as the government’s commitment to adhere to wage and pension spending limits in 2022 (as was the case in 2021), will help the authorities manage increasing expenditure pressures stemming from rising macro-challenges. The energy cap will have a modest net cost to the budget (most of it will be financed by taxing profits of energy producers) and the authorities estimate costs for Ukrainian refugees to total at least EUR1 billion (0.4% of GDP). However, we believe there are likely to be additional demands for support measures, the scope of which will largely be dependent on access to funding. Overall, and despite expectations of solid revenue growth due to a high deflator, we expect the fiscal deficit to reach 7.1% of GDP this year, compared with the budget target of 6.3%.

The ruling coalition remains committed to medium-term fiscal consolidation and implementation of ambitious revenue measures to boost tax collection and expenditure reforms tied to the RRF. However, this will require difficult political compromises and the passage of key pension and wage bills by mid-2023, just before the busy 2024 electoral cycle begins. Romania has a very weak record of adopting structural fiscal reforms, often relying on under-execution of investment to meet deficit targets.

Broadly Stable Debt, Financing Pressures: Under our baseline scenario, strong nominal growth and a modest reduction in the primary balance will keep the public debt/GDP trajectory on a very gradual upward trend, rising from an estimated 48.9% in 2021 to 51.3% in 2023 (and compared with a ‘BBB’ median of 55%). The strong commitment to exchange rate stability somewhat moderates the potential risks from high foreign-currency exposure (50% of total debt). Financing needs will remain large in 2022 (at around 11% of GDP), requiring significant domestic and external issuances. This will heighten the risks around financing flexibility, in particular in the event of additional domestic or external shocks.

Large External Imbalances: Fitch expects Romania´s current account deficit (CAD) to average 6.8% of GDP in 2022-2023, down slightly from a 13-year high of 7.0% in 2021 and compared with the current ‘BBB’ median of 1%. Some of the improvement will be due to a weakening of domestic demand in 2022 (which lowers import demand), followed by our expectations of a recovery in manufacturing exports in 2023. Foreign direct investment picked up in 2021 but in conjunction with capital transfers only covered around 66% of the CAD last year. We expect this ratio to remain broadly constant in 2022-2023, even as EU flows accelerate. High public external debt issuances will keep the net external debt position at around 22% of GDP over the forecast period, compared with the ‘BBB’ median of 5%.

Political Stability: The grand coalition of the centre-left PSD and centre-right PNL has proven remarkably stable since taking power in December, despite various areas of policy disagreement and confrontational stance in the past. The coalition government has turned its focus to dealing with Ukrainians and the cost of living crisis while fully supporting the EU stance against Russia. There are few risks around short-term stability, in particular as parties want to focus on meeting RRF milestones to unlock generous funding. Nevertheless, public discontent could increase rapidly if the cost of living crisis accentuates, potentially risking more populist policies or sharpening internal divisions within the coalition.

ESG – Governance: Romania has an ESG Relevance Score (RS) of 5[+] for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Romania has a moderate WBGI ranking at 59.2 percentile, reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

-Fiscal: Reduced confidence in the capacity to implement fiscal consolidation that undermines fiscal policy credibility, leads to a faster-than-projected increase in public debt, reduces financing flexibility or increases risks to macro-economic and external sector stability.

-External: A sustained deterioration in the balance of payments, for example, reflecting a sharper widening in the CAD and/or failure to attract non-debt financing flows.

-Macro: Weaker growth prospects, for example, reflect a more pronounced or longer period of an economic slowdown that leads, for example, to increased fiscal pressures.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

-Fiscal: Improved confidence that the government´s fiscal strategy will lead to a narrowing fiscal deficit and broad stabilisation of general government debt/GDP over the medium term.

-External: Evidence of increased economic and external resilience to tighter financing conditions and geopolitical risks.

SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)

Fitch’s proprietary SRM assigns Romania a score equivalent to a rating of ‘BBB’ on the Long-Term Foreign-Currency (LT FC) IDR scale.

Fitch’s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to SRM data and output, as follows:

– External Finances: -1 notch, to reflect Romania’s higher net external debtor and net investment liabilities positions than the ‘BBB’ median, as well as higher external vulnerability than implied by the SRM model, given adverse policy developments in recent years that have impacted external competitiveness and aggravated its exposure to shocks.

Fitch’s SRM is the agency’s proprietary multiple regression rating models that employ 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to an LT FC IDR. Fitch’s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories range from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCES CITED AS KEY DRIVERS OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG CONSIDERATIONS

Romania has an ESG Relevance Score of ‘5[+]’ for Political Stability and Rights as WBGI has the highest weight in Fitch’s SRM and is therefore highly relevant to the rating and a key rating driver with a high weight. As Romania has a percentile rank above 50 for the respective governance Indicator, this has a positive impact on the credit profile.

Romania has an ESG Relevance Score of ‘5[+]’ for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as WBGI has the highest weight in Fitch’s SRM and is therefore highly relevant to the rating and is a key rating driver with a high weight. As Romania has a percentile rank above 50 for the respective governance indicators, this has a positive impact on the credit profile.

Romania has an ESG Relevance Score of ‘4[+]’ for Human Rights and Political Freedoms as the Voice and Accountability pillar of the WBGI is relevant to the rating and a rating driver. As Romania has a percentile rank above 50 for the respective governance indicator, this has a positive impact on the credit profile.

Romania has an ESG Relevance Score of 4[+]’ for Creditor Rights as a willingness to service and repays debt is relevant to the rating and is a rating driver for Romania, as for all sovereigns. As Romania has a record of 20+ years without a restructuring of public debt, which is captured in our SRM variable, this has a positive impact on the credit profile.

Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of ‘3’. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or to the way in which they are being managed by the entity. For more information on Fitch’s ESG Relevance Scores, visitwww.fitchratings.com/esg.