Romanian Government Reforms 2009-2011: Economic Revitalization and Fiscal Overhaul

1. Romanian Government Reforms 2009 - 2011

2. The Government had three major opponents in 2008 • THE ECONOMIC CRISIS – the most severe in the last 60 years • BUDGETARY DEFICITof5.7% (according to the european methodology)in the year with the highest economic growth (7.3%) that led the EU Commission to trigger the excessive deficit procedure. • AN UNREFORMED STATE and UNREASONABLE DECISIONS of the Tariceanu Government, which undertook social spending on debt, without coverage: • 7 normative acts which approved salary increasesin 2008 • increase of the pension point in 2008, from581,3 RON to 697,5 RON.

3. The Government Treasury received 7.6 bn. euro according to the stand - by agreement with IMF, European Commission and World Bank Total amounts drawn up to present: 17,4bn. euro, out of which 11,942 bn. euro from IMF. 7,6bn. euro 3 * There is another 1 bn. Euro from EBRD and EIB for investment projects in the private sector (no implication from the state)

4. The number of public employees decreased by 158.983 between 2008 and May 2011 May 2011

5. The reduction of the gap between public and private average gross earnings 2008 - 2011 Public Total Economy Privat

6. Adjusting the public expenditure: 2008 vs. 2011 Personnel Expenditure Investment Expenditure

7. Reforms 2009 - 2011 Economic recovery Fiscal Framework reform Public Administration reform The reform of Public Sector’s Employees Payment Public Pension reform The reform of Labour Legislation The reform of Social Dialogue The reform of Education System The reform of Health System The reform of Social Assistance The reform of Judicial System

8. 1. Economic recovery

9. Current GDP Forecast 2009 - 2012 9 Source: National Forecast Commission, May 2011

10. Government's vision in dealing with the economic and financial crisis • A. Structural state reforms • B. Measures for reducing the budget deficit and for the recovery of public finances through a major effort of the Government,out of which : • Two-thirds focused on improving and reducing public expenditure; • One third focused on increasing the revenues. • C. Measures for relaunching a healthy economic growth and on the long run,at times of major accumulated macroeconomic imbalances that limited the fiscal space necessary for triggering the economic recovery.

11. A. Avoiding major economic slippages The general budget deficit wouldhave been close to 10% of GDP in 2009 and to 14% of GDP in 2010 and 2011, in the absence of the austerity measures taken by the Government: Budgetary deficit without Government’s measures Actual/estimated budgetary deficit

12. 25% wage reduction in  the public sector,15% reduction of unemployment benefits and those for child raising. 50% reduction of fuel consumption expenditure for public institutions and 20% spending reduction for goods and services remained to be executed in the second half of 2010. Meals and gift vouchers no longer provided for the public sector personnel. Blocking the access to vacant positions and allowing the occupancy of 15% only of any positions that subsequently became vacant In the budgetary system. Reduction of 8,000 positions by reorganising institutions, public authorities and   120 governmental agencies. Improvement and reduction of the public expenditure The pension point value freezing in 2010 and 2011 and the national gross average salary indexing, as of 2012, by 100% of the inflation and 50% of the real growth of the gross average salary per economy Prohibition to cumulate pension with salaries in the budgetary system, for individuals with pensions higher than the gross average salary per economy. Recalculation of the special pensions – the service and State military pensions – and their inclusion into the public pension system. B. Measures to reduce the budgetary deficit B.1. Measures to reduce the public expenditures

13. Increasing the social contributions percentage up to the January 2008 level Extensionof the health insurancecontribution of 5.5% for pensions higher than740 RON per month. Increasing the standard rate of VAT from 19% to 24%. Measures to increase the budgetary revenues Increasing the duty ontobacco, alcohol, petrol and gas oil. Broadening tax basis by vouchers taxing and by increasing tax on interest and some local taxes. Tax increasefor individuals owning more buildings and for the means of transport with capacity displacement over 2000 cm³. Increasing charges and tax collection by reducing tax evasion. B. Measures to reduce the budgetary deficit B.2. Measures to increase the budgetary revenues

14. C. Measures to boost economic recovery Measures to save jobs and boost the absorption of the unemployed Fostering public investments Fostering private investments through state aid Fostering private investments through state guarantees Programmes to support industry and sustainable development “Buy Romanian” Programme “Prima Casă” Programme Measures to accelerate the absorption of EU funds Diminishing the fiscal and administrative burden Improving the business environment through fighting fiscal evasion Supporting the agriculture 14

15. C. Measures to boost economic recovery • Measures to save jobs and boost the absorption of the unemployed • Subsidies for companies hiring redundant people aged over 45 years or those that are single parents. • The employers are exempted one year from paying unemployment social contributions for those persons employed on a permanent basis. • Amount of the subsidy: 500 RON/month/employed person, for maximum 12 months. • The employers are obliged to keep the employees in activity at least 2 years. • 8,543 beneficiaries until 31st May 2011 (out of 14,650 estimated for 2011) • Subsidies for employers that hire redundant people who have 3 years until retirement • Employers benefit monthly from a subsidy of 500 RON, for maximum 3 years. • 86 beneficiaries until 31st May 2011 (out of 315 estimated for 2011) • Companies that hire persons on a permanent basis with disabilities for at least 2 years benefit monthly from 500 RON. • The employers are obliged to keep the employees in activity at least 2 years. • 83 beneficiaries until 31st May 2011 (out of 250 estimated for 2011) 15

16. C. Measures to boost economic recovery For the last 3 measures: • 37,2 mil. RON were allotted from the budget in 2011 – in the first 5 months of 2011, 30,3 mil. RON were already spent. • Subsidies for employers that hire young graduates • The employers are exempted one year from paying unemployment social contributions for those persons employed on a permanent basis. • The subsidy period is 12 months (18 months for the graduates – persons with disabilities), and the monthly subsidy depends on the level of studies: • 500 RON for primary school and gymnasium; • 600 RON for secondary school and post-secondary school; • 750 RON for tertiary education .    • The employer is obliged to keep in activity the employer for another 2 years after the end of the subsidy period. • Budget in 2011: 93.75 mil. RON. • 2,540 beneficiaries until 31st May 2011 (out of 10,290 estimated for 2011). • Fostering the apprenticeship and the young people employment during holidays. • 250 RON/month for employers and the monthly value of the services for the theoretical training of the apprentice, not surpassing 100 RON/month. • 250 RON/month for student/pupil employed during holidays, for at most 60 days. • Budget in 2011: 457 thousandRON.

17. C. Measures to boost economic recovery • Fostering public investments • Increasing the budgetary allocations for public investment from6,3% of GDPin 2008to 6,5% of GDPin 2011(from 32.6bn. RON in 2010, to 35.2 bn. RON in 2011) • Enactement of Public-Private Partnership Law (PPP) • Fostering private investments through state aid • 1. First pillar: large investment projects • State aid for investments over 100 mil. RON, which employ over 500 people. • Example:Turceni energy efficiency project. • The investment amounts to 296,5 mil. euro, out of which 36 mil. euro represents state aid.

18. C. Measures to boost economic recovery • Support for large investment projects through state aid scheme for projects over 5 mil. euro that employ at least 50 people. • Beneficiaries:10 investment projects worth 711,7 mil. euro in 2010, which create 4.767 new jobs. The state aid approved was 214.5 mil. euro. • Examples: • The tyre factory of S.C. Pirelli • Center of vehicle testing of Renault Technologie Roumanie • The factory of components for aerospace industry of S.C. Premium Aerotec • The gearboxes factory of Renault Mecanique Roumanie • The agricultural complex AAYLEX PROD (poultry abattoir) • The Injection Pump Factory of Delphi Diesel Systems Romania • Creating a new SUV car model – Automobile DACIA • Factory - pumping units for oil drilling - LUFKIN Industries • The manufacture of new carriage types for passengers - SC REMAR

19. C. Measures to boost economic recovery • 2. Second pillar: support for SMEs • Mihail Kogălniceanu Programme for financing the SMEs • The programme enforcement starts in August, 2011. • Subsidy for maximum 70% of the interest rate, but no more than 6,5% per year. • State guarantees for maximum 80% of the credit amount, but no more than 100.000 RON • The Programme is implemented online – reducing birocracy. • Total buget of the subsidies (2011-2013): 165 mil. RON • 2011: 24 mil. RON – 4.000 potential beneficiaries • 2012: 70 mil. RON – 2.000 potential beneficiaries • 2013: 71 mil. RON – 2.000 potential beneficiaries • Total guarantee fund: 400 mil. RON. • The credit line cannot surpass: • 125.000 RON/year/beneficiary • 30%, respectively 50% of the turnover on the last 12 months for the beneficiaries having other credit lines, respectively the beneficiaries without other credit lines. 19

20. C. Measures to boost economic recovery • “Minimis” state aid scheme • Beneficiaries: the projects of 905 SMEs were approved during 2008-2010. The total amount paid was 192 mil. RON. • Creation of the solevirtual portal One Stop Shop:www.immoss.ro • Support for women's entrepreneurship development in the small and medium enterprises sector through the multiannual national programme during 2005-2012 • Beneficiaries: 826 women applied online and 232 women attended the entrepreneurial training course in 2010. 600.000 RON were allotted for this programme in 2010. • The absorption rate is 100%. • Credit for entrepreneur women – EximBank • Credit linewithinterest rate subsidied for the SMEs thathave women as major stakeholders or are managed by women that are also stakeholders. • Interest rate: 5 pointsunder the market interest rate (minimis aid) • Credit value: maximum 100,000 euro. 20

21. C. Measures to boost economic recovery • 3. Third pillar: microenterprises • The “START” Programme for the development of entrepreneurial skills among young people and the facilitation of their access to financing • The Programme is created for microenterprises active for less than 2 years. • Grants of maximum 70% of the eligible expenses for the investment project, but no more than 100,000 RON / beneficiary. • 2010 • Beneficiaries: 71 companies • Absorption rate: 100%. • 2011: • Budget: 10 mil. RON (almost 30% higher than in 2010). • 1st phase: 800.000 RON – workshops for entrepreneurial training (8 locations) • 2nd phase: 9,2 mil. RON – financing business plans through grants within budget. • Maximum number of companies that can be financed: 92. 21

22. C. Measures to boost economic recovery • The National Multiannual Programme for the creation and development of technological and business incubators. • Budget allotted and spent in 2010: 2,9 mil. RON (absorption rate: 100%). • Budget allotted in 2011: 6,15 mil. RON, double as compared to 2010. • 3 incubators created in 2006 • Alba Iulia – 13 incubated firms (86 new jobs) • Braşov – 17 incubated firms (37 new jobs) • Sfântu Gheorghe – 17 incubated firms (48 new jobs) • 2 incubators created in 2010 • Tg-Mureş – 20 incubated firms • Mangalia – 8 incubated firms • 1 incubator created in 2011 up until now: Bacău • 4 incubators by the end of 2011: Timişoara, Satu Mare, Câmpia Turzii, Dorohoi. 22

23. C. Measures to boost economic recovery • The Programme for young entrepreneurs • Grants up to 10,000 euro, but no more than 50% of the business plan’s value. Both the young who obtains the credit and the one co-financing the business plan from own sources can benefit from the grant. • The National Guarantee Fund provides guarantees for the loans needed for the business plan, covering 80% of the loan, but no more than 80,000 euro. • The new employer is exempt from the payment of social security contributions for up to 4 employees, but he must employ at least two persons. • 1.069 files submitted, out of which446 files approved(from 657 files assessed) – up to 4th July 2011. • Up to 14th July 2011, 4,361 companies were recorded at the National Trade Register Office - out of which 2,809 are currently already registered. • Most companies were registered inBucharest (498) and Cluj (319), followed by the next counties: Braşov (231), Dolj (187), Timiş (176). 23

24. C. Measures to boost economic recovery • Fostering private investments through state guarantees • Support for SMEs through FNGCIMM • Beneficiaries: 9000 guaranteesworth over 650 mil. euro in 2010, which led to the creation/preservationof over195.000 jobs. • Beneficiaries:FRC issued1860 indemnities totaling 371,6 mil. RON for financing projects of 1.401 mil. RON, for 1.630 SMEs which employ over 45.350 employees, in 2010. • Providing government guarantees of 80% of the loan for beneficiaries of projects financed from structural funds in priority areas for the Romanian economy, for maximum 4 years . • Beneficiaries: FNGCIMM issued guarantees that amount to approx. 19 mil. RON in 2010 for the implementation of investment projects of about 450 mil. RON. • Total ceiling of guarantees that may be issued in 2011 amounts to 300 mil. euro.   24

25. C. Measures to boost economic recovery • Programmes to support the industry and the sustainable development • Programme for the improvement of the industrial products competitiveness • Funds allotted in 2011: 15.102 mil. RON • Funds allotted in 2010: 18.903 mil. RON. • Beneficiaries: 37 completed projects • Support for market traders and services through the development and modernization Programme • 5 mil. RON allotted in 2010 • 1793 companies applied online for 188 projects, out of which 117 contracts were concluded. • The absorption rate is 98%. • For 2011 the Government allotted a total budget of 7 mil.RON, which is 40% higher than in 2010. 25

26. C. Measures to boost economic recovery • “Rabla” Programme • 2010 • Beneficiaries • 189,323 used cars traded-in scrappage • 62,550 new cars purchased, out of which 25,263 Romanian cars • Total funds: 722 mil. RON • 2011 • Beneficiaries (until 5th of July 2011) • 56,644 cars taken from collectors • 8,141 new cars purchased, out of which 2,773 are Romanian cars • Total funds: 544.5 mil. RON, out of which 88.5 mil. RON payments for 2010 are from the budget allotted for 2011. 26

27. C. Measures to boost economic recovery • “Green House” Programme– for individuals • 2010 • 18.000 files submitted, out of which 16.000 files financed • Budget:110 mil. RON • 2011(The session was open on 01.06.2011) • Number of files submitted: 18.987 • Budget: 100 mil. RON The national multiannual programme for increasing the energy efficiency in residential buildings • Budget in 2010: 300 mil. RON, out of which budgetary loans:150 mil. RON. • In 2011, the budgetary loans allotted worth 150 mil. RON. • Beneficiariesin 2010-2011: 29.000 flats.

28. C. Measures to boost economic recovery • The programme regarding the growth of energy production from renewables • 52 projectsabout to be financed, worth over 906 mil. RON. • “Buy Romanian” programme • Aims at increasing the institutional capacity of Ministry of Economy to formulate, implement, coordinate and monitor public policies and boosting the Romanian economy. • The funding (5.2 mil. RON) comes from European funds (Operational Programme Administrative Capacity Development). The programme duration: one year from the signing of the financing contract. 28

29. C. Measures to boost economic recovery • “Prima casă” programme has been improved • Prima Casă 4 (1st June – 4th July 2011): • 298 guarantees for dwellings, worth6.1 mil. euro. • Beneficiaries: every person who not owns a dwelling in exclusive property or with the husband / wife, no matter how and when it was acquired, or owns at most a dwelling in exclusive property or with husband / wife, acquired in any other way than through the Prima Casă Programme, having a surface area of maximum 50 sqm. • The funders (banks) have the possibility to use a threshold level of 50% of the guarantees provided under the Prima Casă Programme, with a proportional sharing of risks and losses between the state and the funder. • In 2011: 5,416 guarantees, worth 205.7 mil. euro (for the programmes Prima Casă 3 and Prima Casă 4). • Overall programme Prima Casă (1-4): 40,375 guaranteesup until now, worth 1.635bn.euro. 29

30. C. Measures to boost economic recovery • Measures to accelerate the absorption of EU funds • The granting of financial facilities to the beneficiaries: • Doubling the maximum pre-financing quota, from 15 to 30% of the eligible value. • Providing pre-financing also to the private beneficiaries which enjoy state support, up to 35% of the grant’s value. • The private beneficiaries have the option to open project accounts with commercial banks. • The obligation for the micro-enterprises to provide their own contribution to the eligible costs (in the POR) is removed. • Speeding up the auction procedures, by modifying the legislation concerning the acquisitions. • Simplification of the applicant’s guide:at the project’s submission,some documents are no longer required or are replaced with statements on the applicant’s own responsibility. • The Management Authority has the possibility to sign financing contracts with a value up to 20% higher than the allotment approved through the operational programmes (“over-contraction”), in order to assure a faster pace of absorption, to offset the savings on some projects and to anticipate any unforeseen ineligible expenses. 30

31. C. Measures to boost economic recovery • Diminishing the fiscal and administrative burden for companies in difficulty through: • Despite of the budgetary constraints, the flat tax rate of 16% was maintained. • The VAT payback procedure was improved. • Until now, 237 of taxes and tariffs were reduced/unified, from491 at the beginning of 2009. • The minimum tax was eliminated starting from October 2010. • The single statement regarding the social contributions and the record of insured persons was implemented from 1 January 2011. The single statement will be completed exclusively online starting from 25th August 2011. • Central and public administration debt to economic agents has halved since 2008. • The level of interest rate due for tax debts to the state budget, social security budget, not paid on time, was reduced from the 0.05% (18.25% annually) to 0.04% for each day of delay (14.6% annually). 31

32. C. Measures to boost economic recovery • Measures for fighting fiscal evasion: • Implementing the control of reach individuals. • Implementing the control of electronic trading. • Completion of the integrated border security customs system. • Elimination of the illegal trade with cigarettes from the duty-free shops. • Creation of the Register of intra-EU operators, comprising all the taxable and non-taxable legal persons who perform intra-EU operations. • Development of IT transeuropean systems, which exchange information between them, and which support customs functions in the “Electronic Customs” programme. • Monitoring the movement of excise products under suspension. Romania was one of the first countries of EU that has implemented the informatic system of surveillance and control of these products at intra – EU level. • Application of the reverse charge for VAT, for the delivery of certain types of cereal and technical plants - the beneficiary must pay the tax, instead the supplier (the measure is available until 31st May 2013). 32

33. C. Measures to boost economic recovery • Results obtained in 2010, by the tax inspection bodies,Garda Financiară and Autoritatea Naţională a Vămilor, following the 329.994 inspection and control actions: • Supplimentary amounts determined:11.622 mil. RON (74% more than in 2009) • Value of established damages:7.045 mil. RON(24% more than in 2009) • Precautionary measures:5.164 mil. RON(121% more than in 2009) • The value of outstanding amounts from returns with negative amounts of VAT with refund option, presented bytaxpayers,recorded, in general, a downward trendfrom 2008 up to present: from 3.382 mil. RON in December 2008 to 1.714 mil. RON in May 2011. • The number of days which exceeds the legal term for processing the requests for reimbursementhas beenreduced, and is represented by the decreasing number of requests for reimbursement which exceeded the legal term of 90 days: from 1.814 requests in December 2008 to 746 requests in May 2011. 33

34. C. Measures to boost economic recovery • Supporting the Agriculture • „Primul siloz” Programme • Beneficiaries: 240 certificates of deposit have been issued since 2009 until 30th June 2011; • At present, 98 certificates are in circulation of a total amount of 269 mil. RON guaranteed by the Administrator of the scheme – the Rural Credit Guarantee Fund, of the amounts allotted by the Ministry of Agriculture and Rural Development. • The National Rural Development Programme (2nd pillar of the Common Agricultural Policy) • Projects completed up to 30th June, 2011: 1,777. • Submitted projects: 69.686 worth over 14,7 bn. euro. • Selected projects : 47.692 worth over 4,4 bn. euro. • Contracted projects: 30.072 worth approx. 4 bn. euro. • Payments:2.12bn. euro(21%of the 2007-2013 allocation). • For 2011: 16 sessions for the projects’ submission, with a total financial allocation of 1.64 bn. euro. • Payments per surface for farmers (1st pillar of the Common Agricultural Policy) • In 2011, the subsidy per hectare will reach more than 170 euro, 40 euro higher than last year. • Payments in advance for 80% of farmers, until February 2011. • In 2011, over 2 million hectares will be introduced in farming, reaching the largest area of ​​land worked in the past 20 years. 34

35. 2. Fiscal Framework reform • Fiscal-budgetary responsibility Law 69/2010represents a turning point in public finances and establishes the principles, objectives and priorities of the multiannual budgetary and fiscal policy:introduces expenditure ceilings, reduces the number of budget adjustments, eliminates the risk of populist decisions around election campaigns and sets up The Fiscal Council etc. • The main objective is to gradually reduce the budget deficit to 3% in 2012. • These reforms aim at reducing the tax and administrative burden: • Compensation of the VAT to be paid with the VAT to be reimbursed - development of a unified computer selection system of VAT returns from the national database, according to which “the oldest return goes first”. • Forced execution can be suspended or delayed, according to the new regulations - applied in case the taxpayer has an application in progress for refund/reimbursement or submits one and the amount requested is equal to or greater than the fiscal claim because of which the execution started. • Reduction of the level of interest rate due for tax debts to the state budget, social security budget, not paid on time, from the present 0.05% (18.25% annually) to 0.04% for each day of delay (14.6% annually). For budgetary debts owed to local governments, the interest rate was reduced from 3% (36% annually) to 2% (24% annualy) for each month of delay. 35

36. Recent changing of the Accounting Law • 2 specific objectives: • reduction of costs for companies drawing up financial statements; • reduction of bureaucracy in financial administration. • We introduce a simplified accounting system for small businesses that meet two cumulative conditions: their assets and turnover are less than 35,000 euro: • these companies will prepare 2 financial statements instead of 5; • these companies do not report the balance sheet biannually, but the annual balance sheet only; • the balance sheet and the profit and loss account will be elaborated in the simplified accounting system with a small number of components and a plan of 50 accounts instead of 400 accounts; • accounting documents can be signed also by people with higher economic studies, not only by expert accountants, based on a civil convention. • 349.000 companies (57% of the total active companies in the market) are benefiting from these measures. 36 36

37. 3. Public Administration reform • By imposing personnel norms for central and local public authorities, the public apparatus was reduced from 1.398.757 people in December 2008 to 1.239.774 people in May 2011. • 141 governmental agencies were abolished, merged or restructured. • E-governance to eliminate bureaucracy: • Development of e-ROMANIA National Platform and National Electronic System (SEN). • Electronic Single Point of Contact - sets out the online interaction between public institutions in Romania and service providers. • Results: in 2010 there were savings of around 3 bn. RON as a result of the transparent procedures development for electronic procurement SEAP. 37

38. 4. Reform of the Public Sector Employees’ Payment • The Unitary Payment System Law regulates the payment for all categories of personnel paid from public funds, unlike the previous period when this remuneration was comprised in 39 Laws. • Expected results: • the ratio between the basic minimum salary and the maximum one of the public sector employees is 1 to 15, approaching the best European practices; • harmonization of the payment system for the public sector employees take into account the importance, the responsibilities and the complexity of the activity and the required level of education for the activity performed; • a new hierarchy of basic salaries has been created, both between different fields of activity and within the same field, depending on the complexity and the importance of the activity; • salary increases necessary for achieving this objective take into account the macroeconomic indicators and the evolution of social indicators; • compliance with the salary bill of 39 billion RON for 2011. 38

39. 5. Public Pension reform • Under the legislation adopted in the pension system: • the financial sustainability of the pension system on the medium and long term is ensured; • the contributiveness principle is enforced in the public pension system; • the retirement laws which are not in compliance with the contributiveness principle were abolished and special pensions were recalculated; • a minimum social pension of 350 RON was established; • the cumulation of pension incomes with salary incomes in the public sector is prohibited for those with pension incomes higher than the average gross salary in the economy; • reduction of the number of early retirements; • more severe criteria are implemented for granting disability pensions; • starting with the 1st of January 2011, working groups I and II are entitled to payments, this means 1.541.000 pensioners; the budgetary effort amounts to 403 mil. euro in 2011. • in 2012, pensions will increase by 100% of the inflation rate, plus 50% of the real growth of average gross salary for the previous year. 39

40. 6. The reform of Labour Legislation • A new Labour Code was implemented. Main objectives: • increasing the flexibility of the work relationships; • adapting the work relationships to the dynamics of the labour market; • maintaining the Code’s regulations in line with the European legislation; • discouraging the illegal employment by adopting tougher sanctions; • establishing performance as a criteria in the labour contracts and in the work relationships. Since the entry into force of the new Labour Code, 1st May 2011, until 11th July 2011, the number of recorded employment contracts increased by 648,435 (out of which 65.87% are on a permanent basis). 40

41. The number of employment contracts concluded is 144,111 higher than in 2008 41

42. 7. The reform of the Social Dialogue • The Government decided to promote the Social Dialogue Law by assuming responsibility, according to art. 114 in the Romanian Constitution. • The Social Dialogue Law completes the Labour Code: • it reforms the way the trade unions, the employers unions, the Economic and Social Council are organized; • it adapts to Romania’s present needs the rules that concern the collective work contracts and labour conflicts solving. 42

43. 8. The reform of the Education System • By implementing the National Education Law, the Romanian educational system was fundamentally reformed. • The main modifications concern : • the rethinking of the role of the early education; • the quality insurance of the public primary and secondary education system; • establishing an educational system based on training skills rather than the assimilation of information; • the re-configuration of the National Curricula; • the implementation of an Educational Portfolio; • the implementation of the financing per student principle – public money allocation will became transparent and will comply with the strategic educational targets, according to thefinancing follows the student principle; • the implementation of the School after School Programme; • the support of the children and of the young people capable of high performances; • the provision of equal access to study in the Romanian universities; • the definition of university types and classification of university ranking as well as the implementation of a proper methodology for the hierarchisation of the programmes of study; • the redefinition of the PhD by instituting two types of PhD, the Scientific and the Professional one. 43

44. 9. The reform of the Health System • The implemented measures aim at: • the decentralization of the health system and the increase of the degree of participation of the local authorities in the management of the hospitals – of the 435 public hospitals subordinated to the Ministry of Health, 370 were transferred to the local public authorities; • the restructuring of the hospital system; • the introduction of a national health card; • the implementation of the copayment mechanism, except for the social vulnerable groups or for those with a small income; • the control of the expenditure on medicines; the increase of the patients’ access to modern treatments, at accessible costs, by introducing a new policy of medicines price control and by introducing new technologies; • the increase of the collection basis for the health insurances, by addressing the pension revenues of more than 74 RON; • the development of public-private partnerships and the attraction of the business environment in the development of integrated sanitary systems; • the beginning of the process of introducing standards at all the levels of the Romanian health system and of a system that guarantees the quality of the medical services. 44

45. 10. The reform of the Social Assistance • At least the following objectives are envisaged: • the orientation of the social assistance programmes according to the value of the family revenues and the restructuring of the about 200 national and local social benefits; • the consolidation of the guaranteed minimum income programme, of the aid for the payment of the heat invoices and of family allowance in a new single frame; the finalization of the decentralization of the social services in the field of domestic violence, in order to increase the local authorities’ responsibility, and to ensure the necessary financial resources; the development of the support services responsible for the integration of the Roma families in the society; • the provision of the socio-economic balance of the families living in an urban and rural space, of the elderly, of the disabled and of their families; • the rethinking of the legal and institutional framework concerning the protection of the mothers, the increase of the birth rate, the decrease of child abandon and the diminution/decrease of the domestic violence phenomenon, the increase of the quality of the children’s life in difficult environments and the minimum quality standards meeting in all the special services dedicated to children in need; • the rethinking of the social protection measures for the families with special needs and the increase of the degree of dynamism of the active measures of the family solidarity; the increase of the active participation of the civil society and the sustainable development of the partnership in favour of family development and protection. 45

46. 11. The reform of the Judicial System • Four new codes were implemented – the Civil Code, the Criminal Code, the Civil Procedure Code and the Criminal Procedure Code – in order to restore the judicial system’s credibility, by enhancing the transparency, by simplifying the legal framework and by improving the accessibility degree. • The positive aspects of these reforms are already visible in the reports issued by the Cooperation and Verification Mechanism. The Law of the Small Reform of the Judicial System was also adopted (Law 202/2010). • Expected results:: • the speeding up of the trials; • the simplification of the procedures; • the diminishing of the costs; • the improvement of the quality of the act of justice by enhancing the accountability and the specialization of both judges and prosecutors; • a more effective delimitation of the material competence, the unification of the jurisprudence and the transformation of the act of justice into a predictable process; • the adjustment to normal limits of the sanctioning treatment; • the development of the business environment, both by the revision of contract regulation and by inclusion of distinct regulation of contracts specific to the banking sector. 46

47. Economic impact of the decisions made

48. Correcting deficits and vulnerabilities • Collected budgetary revenues in GDP reached in 2010the highest level in the last 6 years (33% of GDP). • Budgetary deficit is under control • As compared to 7.3% in 2009, the budget was elaborated in 2011 in order to reduce the deficit to 4.4%, and in 2012 to less than 3% of GDP. • Current account deficit is almost 38% lower • In the first 5 months of 2011, it amounted to 1,8 bn. euro, which is 37.7% lower as compared to the first 5 months of 2010. • Vulnerability caused by the large short – term external debt was corrected • In 2010, the short-term external debt was 18.4 bn. euro, as compared to 20.6 bn. euro irresponsibly engaged in 2008. • The share of short-term external debt in the total external debt decreased from 28.5% in 2008 to 20.3% in 2010. • The share of short-term public debt in the total public debt decreased from 45.1% in 2008 to 32.9% in 2010. • Average inflation is decreasing • From 7.85% in 2008 to 6% in 2010 and we are forecasting a level of 5.1% in 2011. • Credit recovery is taking place through the major cost reduction • Monetary policy interest rate decreased form 10.25% in 2008 to 6.25% at the moment. 48

49. Structure of budgetary revenues: 2008 – 2011(% GDP) 49

50. Structure of public expenditure: 2008 – 2011(% GDP) 50