Călin Georgescu - blocked on the way to Cotroceni

The end of the calendar autumn was marked by the presidential and parliamentary elections that took place on November 24 and December 1. For this reason, in order to increase its chances before the election and to maximize the chances of its own candidates, the PSD-PNL government significantly increased state budget expenditures in November, despite the budget deficit of 6.19% of GDP noted by the Ministry of Finance in the budget execution for the first ten months of the current year. However, Marcel Ciolacu and Nicolae Ciucă, despite the huge sums invested in the presidential election campaign and the electoral handouts made from the state budget, were left bouche-bee (with their mouths open) after the November 24 election, after realizing that they had missed entering the second round of the presidential elections in which the quasi-unknown Călin Georgescu, supported by an obscure party - the Young People's Party, qualified from the first position. With an alembic speech, but based on the primary idea of national sovereignty, Georgescu managed to surpass all the candidates with chances, including George Simion - the candidate from AUR, although the independent officially declared zero campaign expenses. This is despite the fact that, according to data presented by the Permanent Electoral Authority, PSD spent over 56 million lei (10.1 million euros) on promoting Marcel Ciolacu, PNL wasted 17.6 million lei (3.5 million euros) on promoting Nicolae Ciucă, AUR paid 6.7 million lei (approximately 1.3 million euros) for George Simion's presidential campaign, and USR took 16.5 million lei (approximately 3.3 million euros) from its treasury for Elena Lasconi. Unlike the statesmen before her, Elena Lasconi managed to enter the second round of the presidential elections, with a few thousand votes over Marcel Ciolacu, even after the recount of the 9.4 million votes in the country according to the bizarre decision of the Constitutional Court of Romania.

The impact of the result of the first round of the presidential elections was felt on the Bucharest Stock Exchange, where volatility reached alarming levels between November 25 and December 6, with several days of significant declines in stock market indices due to exits by some investors who felt insecure due to the growing wave of extremism in our country.

Immediately after the first round of the presidential elections on November 24, a real scandal erupted due to the fact that the independent Călin Georgescu was promoted intensively on TikTok and Facebook, but did not declare any campaign expenses. Due to the existing suspicions that state (states hostile to Romania) and non-state financiers were behind him, President Klaus Iohannis decided on November 27 to convene the meeting of the Supreme Council for National Defense for the second day, in which the entire situation would be analyzed. Following the CSAT meeting on November 28, after analyzing the data provided by the Special Telecommunications Service, the Romanian Intelligence Service, the Foreign Intelligence Service and the Ministry of Internal Affairs, the members of this structure found that there were cyber attacks aimed at influencing the fairness of the electoral process in the presidential elections, from state actors (CSAT mentioned the Russian Federation as a priority) and non-state actors. The analysis of the documents revealed that, in violation of electoral legislation, a candidate in the presidential elections benefited from massive exposure due to the preferential treatment that the TikTok platform granted him by not marking him as a political candidate, respectively without requiring him to mark his video electoral materials with the unique identification code assigned by the Permanent Electoral Authority upon the appointment of the coordinating financial representative, an obligation imposed by electoral legislation. This preferential treatment was exacerbated by TikTok's failure to comply with the Central Electoral Bureau's Decision, which found that, in fact, the Chinese company, contrary to what was officially communicated to the Romanian authorities, had not implemented the provisions of the BEC Decision in any respect. From this perspective, the CSAT took note of the fact that, certainly, the social network TikTok, by not implementing the BEC Decision, had not complied with the legal norms regulating the conduct of the electoral process, with an impact on its final result.

Therefore, the CSAT requested the authorities with responsibilities in the field of security national authorities, those with responsibilities in the smooth conduct of the electoral process, as well as criminal investigation bodies to urgently take the necessary steps, according to their legal powers, to clarify the respective aspects.

Since the Constitutional Court of Romania decided on December 2 to validate the first round of the presidential elections, President Klaus Iohannis declassified on December 4 the documents presented at the CSAT meeting, which revealed the illegal financial support that Călin Georgescu received for online promotion in the presidential election campaign, there being information regarding amounts allocated by several individuals in the country, but also suspicions regarding the existence of external funding from a state hostile to our country.

Following this scandal, on December 6, when voting in the Diaspora for the second round of the presidential elections had already begun, the Constitutional Court decided to annul the entire electoral process regarding the presidential elections and restart it from scratch, a decision also confirmed by the High Court of Cassation and Justice, which rejected the appeal filed by George Simion regarding the annulment of the presidential elections. We note that on December 5, the Prosecutor General's Office and DIICOT opened two criminal investigation files regarding the financing of Călin Georgescu's campaign. The CCR's decision brought a big breath of fresh air for BVB investors, with the stock market returning to positive territory after almost two weeks of uncertainty.

The cancellation of the presidential elections means that most of the 1.4 billion lei (i.e. around 300 million euros, compared to the 2019 presidential elections for which 150 million euros were allocated) allocated by the Government for this election was spent unnecessarily, as long as the electoral process was cancelled. To this amount must be added 109.59 million lei, which is the total amount spent by the candidates in the presidential elections according to AEP data, without the amounts undeclared by Călin Georgescu, but which, at first glance, would amount to millions of euros.

And to these amounts must be added the budgetary expenditures made by the Government in November, which we detail in the following lines.

• Increase in budget spending - a constant of the PSD-PNL government in November

In the last month of autumn, the Ciolacu cabinet adopted a series of important decisions that led to a significant increase in budget spending, allocating significant amounts, including from the Government Reserve Fund, for the modernization of infrastructure, supporting the economy, social protection and regional development.

Thus, the Government allocated 10.9 billion lei for the modernization of 143 kilometers of railway, ordered the purchase of 23 modern electric locomotives for the amount of 760.3 million lei, the purchase of 9 long-distance interregional electric trains for 447.4 million lei, but also supplemented the budget of the Ministry of Transport with over 1.4 billion lei to support rail transport and other infrastructure projects.

In the field of state aid, the Executive decided to grant 495.2 million lei as a grant to Nokian Tyres for a total investment of 3.116 billion lei in Oradea. The new factory will create over 550 jobs and will have a major economic impact at the local level.

Also last month, at the initiative of the Ministry of Economy, Entrepreneurship and Tourism, the Government allocated 100 million lei to continue payments to SMEs through the "Start-up Nation" program, edition 2022. This measure supports 500 entrepreneurs in our country.

Due to the lack of funds necessary to pay pensions following this year's recalculation, the Government supplemented the budget of the Ministry of Labor and Social Solidarity with 1.6 billion lei in November, money that will be used for the full payment of pensions in December 2024. The Executive also allocated an additional approximately 1.6 billion lei to the same ministry for the payment of allowances, indemnities and social assistance, including for heating in the cold season.

Significant amounts were also allocated from the state budget in the field of Health. Thus, the Government approved the financing of 4.48 million lei for the modernization of the Timişoara CF Clinical Hospital and the supplementation of the Ministry of Health budget with 1.4 billion lei for the full payment, in December 2024, of medical materials and services.

Also, 400 million lei were allocated to finance the reimbursement requests of beneficiaries of the Regional Operational Program 2014-2020, eliminating the existing funding deficit, and over 2.1 billion lei for projects in the field of renovation, tourism and culture carried out through PNDL 1 and PNDL 2.

Another measure taken by the Government last month was the increase in the gross minimum wage in the country, which will increase from January 1, 2025 from 3,700 lei to 4,050 lei, a measure that would benefit over 1.8 million employees.

• Budget deficit of 6.19% of GDP

The increase in budget expenditures following the normative acts adopted by the PSD-PNL government and the discretionary allocation of amounts from the Executive Reserve Fund during this year were also felt in the 10-month budget execution, published by the Ministry of Finance in November, an execution that shows us a budget deficit of 6.19% of the Gross Domestic Product, 1.19% more than the deficit foreseen at the end of 2024 by the state budget law adopted by Parliament at the end of 2023.

The cited document shows that the execution of the general consolidated budget in the first ten months of 2024 ended with a deficit of 109.42 billion lei, compared to the deficit of 62.81 billion lei for the ten months of 2023. Total revenues amounted to 473.53 billion lei in the first ten months of the year 2024, but the general consolidated budget expenditures were 582.94 billion lei, which means a nominal increase of 21% compared to the same period of the previous year. Of the total budget expenditures, personnel expenditures amounted to 133.72 billion lei, up 23.8% compared to the same period of the previous year, expenditures on goods and services were 75.53 billion lei, up 20.9% compared to the same period of last year, interest expenditures were 32.86 billion lei, and social assistance expenditures reached 185.53 billion lei, up 14.9% compared to the same period of 2023. Subsidy expenditures were 14.93 billion lei, of which 3.3 billion lei represent the amounts granted under the compensation scheme for the consumption of electricity and natural gas by non-household consumers. Investment expenditures, which include capital expenditures, as well as those related to development programs financed from domestic and foreign sources, amounted to 88.4 billion lei, up 38.1% compared to the first ten months of 2023.

• BNR maintains the reference interest rate

In this macro-economic and political context, the Board of Directors of the National Bank of Romania (BNR), meeting on November 8, 2024, decided to maintain the monetary policy interest rate at 6.50% per annum, to maintain the interest rate for the lending facility (Lombard) at 7.50% per annum and the interest rate on the deposit facility at 5.50% per annum. In making that decision, the members of the Council also took into account the updated forecast of the NBR indicating a slight increase in the annual inflation rate in the last months of 2024 - from 4% (as in the previous forecast) to 4.9% - followed by significant fluctuations in the first half of 2025, as well as several sources of uncertainty that may affect the economy and price dynamics. Among these sources of uncertainty are fiscal policy, given the possible budgetary consolidation measures in 2025, labor market developments and wage dynamics, energy and food prices, influenced by geopolitical tensions and the severe drought in 2024, and the impact of geopolitical conflicts, including the war in Ukraine and the situation in the Middle East.

In order to maintain economic stability, the NBR Board of Directors states that a balanced mix of macroeconomic policies and the implementation of the necessary structural reforms are needed.

The NBR's decision also came in light of the increase in the current account deficit and external debt. Thus, according to data published last month by the central bank, the current account of our country's balance of payments registered a significant deficit of 19.7 billion euros in the period January-September 2024, compared to 16.06 billion euros in the same period of the previous year. During the same period, Romania's total external debt increased by 17.8 billion euros, reaching 186.18 billion euros at the end of September 2024. Of the total debt, long-term external debt reached 138.82 billion euros (representing 74.6% of total external debt), marking an increase of 13.7% compared to December 31, 2023, and short-term external debt reached 47.3 billion euros (25.4% of total external debt), increasing by 2.4% compared to December 31, 2023.

• Strategies for economic development

In November, the Government adopted a series of essential strategies for sustainable development, modernization and national security. These programmatic documents target the industrial sector, the energy sector, the non-energy mineral resources sector, the market surveillance sector and the defense industry. Each strategy has clearly defined goals, detailed actions and implementation objectives, aiming at adapting to the green and digital transition, economic competitiveness and increasing national capacities. Here is a comprehensive analysis of them.

Thus, the Industry Strategy 2024-2030 provides for increasing the competitiveness of the industrial sector by adopting advanced technologies, promoting innovation and the transition to the circular economy, supporting industrial exports and the resilience of supply chains, as well as developing a skilled workforce and attracting investment in sectors with high added value.

The action plan includes priorities such as advanced technologies, artificial intelligence and industry 4.0, aiming at re-technologizing the industry to adapt to digitalization and creating a legislative framework to support industrial companies through structural funds, PNRR and state aid schemes.

The National Strategy for Non-Energy Mineral Resources 2025-2035 addresses the need for reindustrialization and the responsible use of non-energy mineral resources, in the context of the transition to sustainable mining and the circular economy. The document proposes the inventory and valorization of strategic resources, including tailings dumps and tailings ponds, the transformation of the mining industry from energy-intensive mining to responsible mining and the development of industrial capacities for the production of batteries and advanced materials such as graphene.

The National Market Surveillance Strategy 2024-2027 aims at the conformity of products traded on the market, consumer protection and the elimination of non-compliant practices. Through it, a National Contact Point for the RAPEX rapid alert system will be created, measures will be implemented to streamline controls throughout the distribution chain, which will lead to a reduction in the number of non-compliant products existing on the market in our country.

The Energy Strategy for the period 2025-2035 aims to develop a sustainable, competitive and secure energy sector, aligned with the EU climate objectives. The main objectives pursued in this programmatic document are to reduce natural gas imports to zero by 2027, to reduce greenhouse gas emissions by 87% by 2035, to promote advanced heating and cooling solutions to increase energy efficiency and to provide universal access to electricity, including in remote and vulnerable areas.

The energy strategy provides for the following objectives: to achieve a total installed capacity of 40 GW by 2035, with 80% from renewable sources; to install 19.5 GW from wind and solar sources, respectively increasing the share of renewable energy in electricity consumption from 41% in 2020 to 61% in 2035; to develop a total electricity storage capacity of 2,000 MW by 2030, through batteries and pumped storage hydroelectric power plants; integrating 5% biomethane into the natural gas network by 2030 and 10% by 2050; extending the life of existing capacities until 2035, building new large-scale capacities, as well as small modular reactor (SMR) generation capacities.

The last strategy approved last month was for the defense industry for the period 2024-2030. The document provides for the development of a resilient industrial ecosystem for the defense industry, emphasizing modernization and international cooperation. Based on the needs for the provision of weapons, ammunition, products, systems and military platforms of the National Defense System Forces as well as the need to protect essential security interests, 14 priorities have been identified, including the resumption of the manufacture of powders with a single, double, triple and spherical base and the development of capacities for the production of high explosives (TNT, RDX, PETN), powders necessary for the production of rocket fuel, the resumption of the manufacture of detonating, initiating and other pyrotechnic elements, the domestic provision of the main raw materials necessary for the manufacture of powder for ammunition or the transformation and revitalization of the manufacturing capacities of infantry weapons and optoelectronic equipment in such a way as to ensure the transition from the existing individual armament to the NATO standard. For the implementation of this strategy, amounts will be allocated from the state budget, from non-reimbursable European funds, based on state aid schemes and dedicated European programs.

Read November in numbers

Read The prospect of Călin Georgescu winning the elections brought massive drops to the BVB