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The PNL Congress: What to expect on September 25th?
The next few months are expected to be exceedingly tensioned, as elections to determine who will take over the leadership of the National Liberal Party (PNL) will take place on September 25th.
The PNL leadership decided on September 25th as the date for the party's Congress during a meeting of the Executive Bureau. PNL President, Ludovic Orban, proposed the date and the party leaders approved it by vote.
Until now, the two contenders, Florin Cîţu and Ludovic Orban, appear to be running very close in the fight for the presidency, with several branches having already declared their intensions.
According to the calendar, general meetings of local organizations were held between June 1st and July 15th, county election conferences are held between July 1st and August 10th, and the congressional campaign will run for 45 days between August 10th and September 25th.
However, things may look completely different as we get closer to the due date given that some cards are being kept up in their sleeves. As such, for the moment, we consider that the following figure is the most realistic depiction of the national level situation.
Orban also proposed that 5,000 delegates attend the congress to vote on the party's new leadership team. Each county will have a proportional representation based on the results of the previous two elections. As a result, the counties that perform better in polls will send more delegates to Congress.
However, we should pay special attention to how PNL's main branches (compounding up to 20% of the total delegates), or the so-called undecided branches, operate. Until now, it appears that they have created a "bargaining alliance" in order to boost their negotiating power. And they seem to be focused to obtain more out of their leader’s pockets. As a result, it appears like they will vote for the person who will give out more. And, according to our understanding the following branches are part of this „alliance”: Bihor ( Ilie Bolojan), Arad (Gheorghe Falcă), Giurgiu (Dan Motreanu), Constanta (Bogdan Huţucă), Prahova (Iulian Dumitrescu) and Vâlcea (Cristian Buican). A special situation is encountered in the case of Caraş Severin branch where the votes are believed to be split evenly between the two candidates.
Especially since the phenomenon that started in Cluj - which is the branch considered to be one of the main sources of reform with the main political leaders vouching on Florin Cîțu – haven’t touched everyone’s mind and heart. Important political figures kept their alignment with Ludovic Orban. For example, the Romanian economist and politician, with strong German ties, Siegfried Mureşan, who is holding the position of Vice-Chair of the European People's Party (EPP) since November 2019, Vice-Chair of the European People's Party Group (EPP Group) in the European Parliament and member of the National Liberal Party (PNL) remained a strong advocate of Ludovic Orban. Just as his close friend, Viorel Badea, who was elected President of the PNL Diaspora branch as the liberals from PNL Diaspora voted unanimously in support of Ludovic Orban's motion for a new term at the head of the party.
Thus, given the tight competition between Florin Cîțu and Ludovic Orban, we will analyze both scenarios as we want to offer an optimal perspective upon the changes that may occur, for companies to have all they need to formulate an appropriate strategy. As a result, despite the expected short-term political turbulence, the entire business environment may become more stable.
It should be noted that, although the next period will see significant changes, the situation will improve political stability in the medium term, as a result of the impact that all of these new adjustments will have on the way the main party is structured and the way it functions within the governing coalition. That's because the two candidates for the party's leadership have an unwritten agreement that the loser will "resign" from crucial posts and will "give up" activities that have a substantial impact on the party's operations.
Returning to the scenarios, we'll start with the situation in which Florin Cîţu wins the PNL Congress and becomes the party's leader. Mainly because, according to the information we gathered from the discussions with various political decision-makers - this is the scenario with the highest frequency, picturing certain reforms aimed at reducing Ludovic Orban's influence inside and outside the party - at the administrative level.
As for Bucharest, the situation is clear as Ciprian Ciucu, on 24th of July, went against Violeta Alexandru and won the elections, watching Florin Cîțu’s back. Even though certain events were indicative of this particular outcome, the result came as a surprise as Bucharest was thought to be traditionally in favor of Oran, especially since Ciucu received 498 ballots out of 922, winning by a margin of 93 votes with 19 being invalidated.
Thus, given the tight competition between Florin Cîțu and Ludovic Orban, we will analyze both scenarios as we want to offer an optimal perspective upon the changes that may occur, for companies to have all they need to formulate an appropriate strategy. As a result, despite the expected short-term political turbulence, the entire business environment may become more stable.
It should be noted that, although the next period will see significant changes, the situation will improve political stability in the medium term, as a result of the impact that all of these new adjustments will have on the way the main party is structured and the way it functions within the governing coalition. That's because the two candidates for the party's leadership have an unwritten agreement that the loser will "resign" from crucial posts and will "give up" activities that have a substantial impact on the party's operations.
Returning to the scenarios, we'll start with the situation in which Florin Cîţu wins the PNL Congress and becomes the party's leader. Mainly because, according to the information we gathered from the discussions with various political decision-makers - this is the scenario with the highest frequency, picturing certain reforms aimed at reducing Ludovic Orban's influence inside and outside the party - at the administrative level.
This situation is inflected by Florin Cîțu’s position as a rising star and as expected, he will want to confirm and secure his position as a leader inside the party, and his administrative position, by appointing close political allies in key positions.
As a result, the removal of Ludovic Orban from the Presidency of the Chamber of Deputies and the nomination of a fervent supporter of internal reform and a person with a common vision will be a natural outcome. And the front-runner for this position is Robert-Jonathan Sighiartău, who will most likely be replaced by Dan Vâlcenau, the present President of the NLP Gorj branch and a close friend of Florin Cîţu, if the position of general secretary of the party is released.
Changes may also occur within the Administration. As such, we believe that the current Prime-minister may rethink and readjust the structure of the central Administration.
However, we anticipate that, while significant, the changes that will occur will not exceed the maximum percentage of change that has been proved to ensure stability throughout a transition phase. As a result, at least 40% of the central leadership will stay in place.
As for the relationship with USR-PLUS, the communication will be maintained under the same conditions as before. Apart from leading with USR-PLUS and the Hungarian Democratic Union in Romania, there are no other viable possibilities.
As far as that goes, the alliance with USR-PLUS will continue its smooth flow given that:
• this alliance is the single option PNL has – for reasons related to the inconsistencies between their political vision, the character of the leadership and the source of their legitimacy, a coalition with the Social Democratic Party (PSD) or the Alliance for the Union of Romanians (AUR) is out of discussion,
• Florin Cîțu and Dan Barna have, broadly speaking, a similar perspective, despite any previous disparities,
• the differences between the two parties have faded out, and the reduced intra-partisan opposition will facilitate a more efficient and effective way of communication with USR-PLUS.
In the second scenario Florin Cîțu is situated on the losing end. Case in which Ludovic Orban Ludovic Orban will need to reassert himself politically in order to reaffirm his position and minimize any potential internal divisions. As a result, we expect that Orban will remove his counter-candidate as Prime Minister, after the elections. Situation in which he will “reinstate himself” as Prime Minister to send a powerful message.
These measures are similar to those that Cîţu will conduct if he wins the party's leadership, but they have a distinct significance and impact. For Orban, winning this election means reaffirming his authority and influence, whereas for Cîţu, it means affirming his capacity. Furthermore, the losing scenario has a minimal influence on Cîţu because he may return to his comfort zone, the economic sector, while maintaining his senatorial post.
Orban may also replace Ministers who support Florin Cîţu, in an effort to display his muscles strained by the need to bring the Administration closer to him.
Despite the stability that these elections bring in the medium and long term, the PNL's credibility is projected to dwindle. So, if the party is unable to find a solution that would restore the National Liberal Party's popularity, society's support for the party will decline by 2024, reaching a level close to 20%. And experience has taught us that, most of the time, this power void is occupied by the opposition.
Yet, PSD limited its operations to a minimum and USR-PLUS appears to be waiting for PNL Congress results before holding its own bottom-up elections.
The 3SI Sofia Summit and Business Forum
The Three Seas Initiative (3SI) Sofia Summit and Business Forum was held earlier this month, between 8th and 9th of July, with the goal of taking stock of developments and charting the Initiative's course. Between the Baltic Sea, the Adriatic Sea, and the Black Sea, 3SI is an informal presidential policy platform that brings together the 12 EU Member States.
As such, at the event hosted by Sofia, were present the high-level representatives and the Presidents of the 12 participating states - Republic of Austria, Republic of Bulgaria, Republic of Croatia, Czech Republic, Republic of Estonia, Hungary, Republic of Latvia, Republic of Lithuania, Republic of Poland, Romania, Slovak Republic and the Republic of Slovenia. Moreover, United States of America, the Federal Republic of Germany and the European Commission were also present to show their strong commitment to their partners.
The platform aims to support the participants' economic development, the European projects consolidation, and the transatlantic relationships strengthening by boosting US business presence in the area.
The BRUA project is one of the most important topics they have discussed. Romania supports the BRUA project, a gas pipeline aimed at ensuring access to new gas sources and facilitating the transit of Caspian gas to Central and Eastern European markets, among other things.
“A two-way transport capacity of 1.5 billion cubic meters to or from Bulgaria and 4.4 billion cubic meters to or from Hungary” is provided by BRUA. Romania is also engaged in a project presented by Hungary, namely the building of a gas corridor connecting Romania, Hungary, and Slovakia by October 2022. In terms of transportation, Romania is a participant in the Via Carpatica project, which is one of Europe's major highway projects. Along with Romania, Hungary, Bulgaria, Lithuania, Poland, and Slovakia are among the nations participating in I3M, which was suggested by Poland. The project, which aspires to build a transportation corridor from the north to the south of the European continent, also includes Greece and Ukraine. The motorway's Hungarian section is planned to be finished in 2022.
Rail-2-Sea, a 2,342-kilometer railway for civil and military usage linking Constanța with the Polish port of Gdansk, is another proposal suggested by Romania. The Craiova - Roşiori - Bucharest line would be finished in 2025, while the final two phases of the project would be completed in 2029, namely the Romanian routes:
· Cluj - Napoca - Câmpia Turzii – Teiuş,
· Arad - Timişoara - Caransebeş - Orşova - Tr. Severin - Craiova;
Romania is also engaged in a rail freight project, the so-called " Viking route," which is an earlier Lithuanian initiative aimed at transferring international freight lines from Europe to the Caucasus and Asia by rail. (TRACECA route) as well as freight from Turkey and the Middle East to Northern Europe and the other way around.
TRACECA is an international transport program comprising the European Union and 12 other nations with the goal of improving economic, commercial, and transportation links in the Black Sea Basin, the South Caucasus, and Central Asia.
In the digital realm, Romania offers a regional digital hydrographic monitoring platform with participation from the Initiative's member nations, as well as a project of linked digital energy storage solutions.
President Klaus Iohannis, speaking at a news conference after the meeting in Sofia, stated that Romania is particularly interested in the "Rail-2-Sea and Via Carpathia projects, as tangible efforts of great economic importance and true strategic value for the area."
The European Green Transition Package and Romania's Challenges
On July 14, 2021, the European Commission presented the largest climate legislative package in history. The package is bound to fundamentally change the way in way in which our economy works, the way in which companies to business or banks issue loans. Furthermore, this unprecedented climate package will forever change international trade and aims to set the EU the forefront of the fight against climate change and the shift towards a more sustainable economy. In this sense, “Fit for 55” is more than a legislative package, but rather, a fundamental shift towards a different economic model.
The European Commission adopted a set of proposals to prepare EU policies on climate, energy, land use, transport, and taxation, so that by 2030 the Union's net greenhouse gas emissions will decrease by at least 55% compared to 1990 levels. Achieving these emission reductions over the next decade is essential for Europe to become the first climate-neutral continent by 2050 and to translate the commitments of the European Green Deal into reality. With these proposals, the Commission presents the legislative instruments that will help us achieve the objectives agreed in the European Climate Act and fundamentally transform our economy and society.
The package of 13 proposals includes tightening the EU Emissions Trading Scheme (EU ETS), pricing emissions from heat and transport in a parallel ETS and adding a carbon border adjustment mechanism (CBAM) to tax high-carbon imports, such as steel and cement.
Other proposals include phasing out petrol and diesel car sales across the bloc by 2035, raising targets for renewables and energy efficiency, setting higher, binding national targets for sectors outside the EU ETS and, separately, setting binding goals for carbon dioxide (CO2) removals. A new “social climate fund” is proposed to help vulnerable households disproportionately affected by higher fossil fuel prices, offering “temporary” income support and longer-term investment.
Lengthy negotiations will now begin between the EU’s executive branch, member state governments and the European Parliament. Many details are likely to change before the reforms are adopted.
Challenges for the Romanian Economy
As far as Romania is concerned, the post-pandemic era and the push for a European Green Deal can present a set of unprecedented challenges and opportunities. Romania has been highlighted in the landscape of the economies of the European Union by a high pace of economic growth, development and convergence over the last decades, a development driven by the strong dynamics of productive investments, with a drive impact for the other components of GDP.
This crisis has shown, more than previous ones, the need for a change in the structure of economies, with a focus on activities to protect the environment, implement and support innovation and technology, increasing inclusion and reducing inequality. Furthermore, the current crisis will involve important efforts to ensure the sustainability of debt accumulated, especially at the level of the public sector, but also of the private sector.
Financial measures to support the day-to-day activity of firms and encourage new investments, measures aimed at the resilience of the labor market by partially covering expenditure on wages, providing tax facilities for new employees, flexibility of working hours, etc., are essential elements for mitigating the long-term effects of the health crisis on the production capacity of the economy and the overall wealth of the population.
We believe that this decade will be marked by considerable economic growth, development, and economic convergence for Romania. A scenario supported by the very good prospects for productive investment dynamics and the implementation of the programs launched by the European Union in 2020 and 2021, including the Next Generation EU financing instruments and the set of legislative overhauls that are set to fundamentally change European economies.
On the other hand, we draw attention to the structural challenges in the internal economy in the short and medium term: the development of critical infrastructure (transport, education, health); implementation of the ESG framework; reform an digitalization of the public sector; adjustment of the trade balance deficit with agri-food goods (from a record level of around EUR 3 billion in 2020); improving economic convergence between regions (transition to a multi-risk growth economy); the fruition of advantages from the perspective of Romania's position at regional level; generating local profitable companies with regional development ambitions; the transition of the capital market from secondary to emerging, with favorable implications for the dynamics of medium-term development and well-being indicators. Furthermore, probably the largest systemic risk for the Romanian economy is a 4th pandemic wave prompted by the Delta COVID-19 variant, as the Romanian economy is likely not prepared for another set of restrictions on economic activity.
To sum up, Romania is set for an unprecedented economic overhaul. And the way in which the political landscape will manage to turn challenges into opportunities will be crucial for Romania’s development in the coming decade.