Bogdan Tudorache

The Government will adopt by Decision the project for the establishment of the Romanian Sovereign Fund, according to the premier’s adviser, Darius Vâlcov. The Prime Minister’s adviser argues that the Soveregin Fund for Development and Investment (FSDI) could be set up in about two weeks after the official motivation of the Constitutional Court’s decision to reject the adoption of the ordinary law initially intended to set up the investment vehicle. “It is going to to be clarified by the Constitutional Court. I believe that in two weeks from when it will be announced (the motivation, n.r.), the Fund also will be established,” Vâlcov said, during a Friday TV show.

Meanwhile, Ovidiu Nicolescu, Honorary President of the National Council for Private Small and Medium Sized Enterprises in Romania (CNIPMMR), held a press conference on Monday and said that the law on the establishment of FSDI is illegal , unconstitutional, creates a monopoly position and contains too many exceptions. “We don’t know with what intentions it was started. But we look at the effects. Effects show that a large amount of profit involving dozens of state-owned companies and autonomous companies can be used discretionarily, that state shares can be sold without either a rule, to whoever wants it, when they want, at what price they want, that they can buy shares from the capital market in disregard of the rules of the game of Romania and European Union. It is clear that those who will have this fund will have a excessive power, without protecting the interests of the state, of the population. A few individuals could do what they want with a large amount of assets and liabilities,” Nicolescu said, quoted by Agerpres.

According to the provisions, the cash contribution to the share capital of FSDI, which is 9 billion lei, or about 2 billion euros, must be paid according to the Law no. 31/1990, within a maximum of 12 months from establishment.

Among the exceptions mentioned by Ovidiu Nicolescu are those related to the distribution of profits, the payment of share capital, from capital market legislation, as well as exemptions for the sale of the shares of the companies owned by the state. Other private-sector members have also expressed their opposition to the establishment of this Fund in its current form, as it would focus the investment strategies of state-owned companies in a single, politically-controlled decision-making bloc.

Then, there are voices claiming that the fund can not be set up by government decision, as it would be considered part of the state budget, and its expenditures would cumulate the structural deficit of Romania. “The FSDI can not be technically set up by government decision, from the simple but heavy argument that EUROSTAT would set the fund into the public sector and consequently the fund’s expenditure would cumulate to the structural deficit of Romania. I remind you that the Recommendations of the European Commission addressed to Romania on 23 May 2018 specifically address the situation of the budget deficit and the structural deficit. The European document states once again that Romania has deviated from the assumed target of having a structural deficit of maximum 1% of GDP”, says the former head of State Privatizations (OPSPI), Gabriel Dumitraşcu.

Structural defict is an indicator introduced by the European Commission after the economic crisis, because it more faithfully reflects the health of state budget. It is a more restrictive indicator than the budget deficit, as it takes into account the cyclical nature of the economy. Essentially, it includes fixed budget expenditures, such as pensions, wages or social assistance, and weights budget revenues with the economic cycle. In short, the structural deficit indicates the level of deficit in a growth economy, if the level of growth does not exceed the potential, Dumitraşcu argues. “In any case, it is good to know that following the consultations held by the Ministry of Finance with the EC, until the declaration of unconstitutionality of the law, FSDI was not out of the public sector,” Dumitraşcu says in a facebook post.

On July 19, Finance Minister Eugen Teodorovici said the Fund would be set up by a government Decision, after the Constitutional Court announced that it is not possible to set it up by an ordinary law. “Following the decision of the Constitutional Court, the next steps are at government level – issuing an ordinance to create the general legal framework that the Court deems necessary, and the next step would be to issue a government Decision to establish the Fund,” Teodorovici said .

On July 18, the Constitutional Court of Romania accepted the statements made by President Klaus Iohannis, PNL, USR and PMP to the law on the establishment of the Sovereign Development and Investment Fund.