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Democracy and governing in Moldova

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e-journal, II year, no. 34, 14 July 2004

Activity of public institutions

Economic polies

Transdnistrian Conflict

Foreign affairs

Studies, analyses, comments

I. Activity of public institutions

1. Parliament

1.1. Legal acts

Law on Completion of the Law on Citizenship drafted by the Presidency is aimed at aiding persons who resided or still reside on the soil of the Republic of Moldova (including Transdnistrian region) to acquire citizenship. Under the law, persons who resided on the soil of the Republic of Moldova prior to June 23, 1990 and still reside there are considered to be citizens of the Republic of Moldova. Via the same law, Parliament exempted pensioners and disabled from the obligation to pass an exam on language and Constitution when they apply for citizenship.

Law on Modification of the Law on Preventing and Fighting Money Laundering raised the minimal ceiling of money on which banking form is to be filled within three months by the natural or legal entity. Respectively, a new norm was added to Article 4 of the law thereby natural entities are obliged to fill a special form for each transaction in cash exceeding 300,000 Lei, while organizations will have to do so for each transaction exceeding 500,000 Lei. The form shall be filled in case transactions made throughout the month exceed the aforesaid amount. It shall be submitted to Centre for Fighting Economic Crime and Corruption within 15 days, which may, in turn, control any suspicious transaction and trace the money flow.

Law on Modification of Legal Acts on State Budget refers to the fiscal and budgetary policy Government intends to promote in 2005. It is recommended in the next year to:

  • reduce by 2% the income tax for legal entities (this year it is 20%, whereas in 2005 Government proposed it to be 18%);
  • reducing income tax for natural entities by increasing the personal exemption from 3,600 Lei this year to 3,960 Lei in 2005, increasing annual exemption for persons in care from 240 Lei in 2004 to 600 lei in 2005, as well as reducing the maximal quota of taxation from 10%, 15% and 22% in 2004 to 9%, 14% and 20% in 2005 respectively.

Government believes those measures would boost economy, as businesses would be able to increase manufacturing output and invest in development.

Law on Single Tax in Agriculture provides for establishing a single tax in agriculture, which is to be tested in a pilot project in Taraclia rayon. The single taxes would include the income tax, VAT (except for VAT on imports), taxes on real estate, taxes to road fund, tax on water and territory planning. The other taxes and fees, not subject to this law, shall be paid according to the law. The law defines the subjects of the law, tax quota and exemptions.

Also pertaining to agriculture is the Law on the Subsidized Insurance of Risks of Agricultural Production. The law aims at establishing a transparent mechanism of boosting insurance in agriculture so as to bring stability in agriculture development. The law defines insured risk as any natural calamity that incurs a damage to farms or fisheries, or any other unfavourable event producing damages. Preliminary estimates have indicated that allocations from state budget worth 40 million Lei are necessary for subsidizing insurance of risks in agricultural production, with 15 million Lei needed in the first year.

Law on the Modification of Legal Acts on Minors Leaving the Country was developed at the initiative of the President. It made passport compulsory for minors when leaving the country, as well as the consent of both parents whenever the child is leaving for permanent resident in other country. Under the law, any citizen is entitled to a passport from birth.

Under Resolution on approving the structure of the General Prosecution the following are to be part of the Prosecution General Office: Prosecutor General; Senior Deputy of the Prosecutor General; Deputies of the Prosecutor General; Prosecutor General Apparatus; Department of enforcement of penal investigation; Department of conducting penal investigation; Control department over penal investigation; Legal Department; General Investigation Department; Administrative and Financial Department; Prosecutors for special missions; HR Department; Internal Security Department; Personnel Training Department. Organizational chart, internal structures, roles and responsibilities of each department shall be outlined in the Prosecutor General's decision.

Of special importance is Resolution on enforcing state budget for 2003. According to the report approved by the Parliament in 2003 revenues amounted 4573,3 million Lei, while expenditures 4255,1 million Lei, and surplus in revenues over expenditures was worth 318,2 million Lei.

The report indicates continuous economic growth, a 6.3% GDP growth over 2002, i.e. 27.297 million Lei. On the other hand, budgetary and fiscal policies promoted by the Government throughout 2003 produced a smaller impact than expected. Thus, budget fell short of 95.9 million Lei.

State budget provided for transfers of funds for territorial development worth 708.3 m Lei, however only 89.2% of the budgeted amount was transferred. Some of the allocations were unevenly distributed, for instance Balti Municipality and Gagauz Yeri received 100% of the funds, whereas other regions only 78%.

To address the shortcomings identified, the Government is to take certain measures: to develop and approve a single mechanism of concentrating all financial sources including extra-budgetary funds to the revenues item of the state budget; to spend the reserve fund of the Government as provided for; to monitor capital investments; to take measures to reduce domestic and foreign debt, etc.

(For further details on Parliament activity see contents previous next

2. Government

2.1. Reshuffles

To fill existing vacancies Government appointed Olga Poalelungi as the Head of Migration Department and Pavel Vasiliev as Deputy Minister of Energetics. However, the greatest reshuffle of the week envisaged ousting Minister of Justice Vasile Dolghieru, who would be replaced by Victoria Eftodi.

2.2. Decisions

  • On June 29, Government Action Plan for the 3rd quarter of 2004 was approved. During the quarter 6 draft conceptions and national, sector programs are to be developed; as well as 13 draft laws and 12 draft normative acts and regulations. In addition, 6 analysis of the public administration activity would have to be conducted and 8 organizational measures be undertaken.

    Among the most important acts to be developed one might mention: Conception on integrated medical information system; Conception on education in the Republic of Moldova and State Program for their implementation; Technical assistance program for years 2004-2006 complementary to and in support of PRSP; Dwelling Code of the Republic of Moldova; Law on conflict of interest; Law on State Budget for year 2005; Law on National Justice Institute; Law on Lobby; Law on Abolishing Domestic Violence; Regulation on the temporary children shelter; Regulation on functioning of guardianship. Out of the 8 organizational measures to be undertaken the most important refer to: ensuring ratification of the Free Trade Agreement between Republic of Moldova and Bulgaria, signing Memorandum of Understanding between Moldovan and Turkish Governments.

    Also, scheduled for the 3rd quarter is completing the ratification of Free Trade Agreements with all the states members to the Stability Pact for South-Eastern Europe. Another Government motion of July 29 approved the draft law on the ratification of the Free Trade Agreement with Croatia.

  • Government also endorsed a draft law on the system of calculating salaries in the budgetary sector. It provides for an increase in salary commencing 2005 until 2010, so as to gradually double the salary.

  • Another draft endorsed by the Government envisages indemnifying pensions on a yearly basis. Indemnifying index shall be set depending on the price hike.

  • On July 7, Government approved the draft law on the amendment of the Law on Protecting the Right of the Child and national passport system. The amendments entitle children of up to 16 and youth raging 16-25 years to free IDs. These amendments were required by the International Covenant on the Rights of the Child and European Charter on Youth Participation in Regional and Municipal Structures which Moldova ratified.

  • Government made public the banks that won the tender on servicing treasury of the Ministry of Finance throughout 2004-2007, namely: Banca de Economii, EximBank and Banca Sociala. The three banks hold a "C" type authorization, are authorized by the National Bank of Moldova to accept deposits of the State Treasury also they have branches in the localities where territorial treasuries have their offices. Noteworthy, Banca Sociala, Moldinconbanc and Banca de Economii were servicing the Ministry of Finance from 2001 up till now.

  • Government also approved the Action Plan for economic and financial recovery of state-run industrial factories throughout 2004 - 2005. The document provides for some legal, administrative, and economic measures in view of bolstering manufacturing output and streamlining or shutting down unsustainable companies. In addition, the plan provides for setting up a national agency on protecting competition as well as funds for industry development, innovation and transfer of economic know-how.
contents previous next

3. Presidency

3.1. Guarantees for a Democratic Process and Mass Media Freedom

"Guarantees for a Democratic Process and Mass Media Freedom" is the title of the initiative launched by President Voronin on July 5 during his meeting with Vladimir Filipov, a special representative of the Council of Europe's Secretary-General, and Neil Brannon, deputy chairman of the OSCE mission to Moldova. President Voronin called on all political parties to rally around Moldova's democratization process and support the independence of the media.

Voronin dismissed allegations that the Party of Communists (PCM) intends to manipulate the 2005 parliamentary elections and subject the independent media to repression and harassment. President Voronin indicated that in order to refute those allegations it was necessary to modernize the democratic institutions in the Republic of Moldova and perfect the legal conditions for the functioning of independent and public media. According to the President, for the aforesaid goals to be fulfilled, five conditions were necessary:

  1. "all the political forces in the country should start from the premise that regardless of the outcome in the forthcoming elections, efficient and accountable rule of law should remain unchanged;
  2. /…/ all political parties shall be interested in ensuring and guaranteeing human rights and freedom of speech;
  3. all political parties and socio-political organizations, state bodies and mass media shall equally abide the law and reconfirm their attachment to moral values of a democratic society, refrain from employing black campaigning, from calls to ethnic discrimination or violation of national minorities' rights;
  4. all actors to the political and social processes shall view as unacceptable the use of administrative, economic and criminal levers against electoral process, including freedom of speech;
  5. all responsible parties and movements, media outlets shall equally view as unacceptable resorting to ideas of territorial disintegration, secessionism or Republic of Moldova joining another state".

Besides those obligations "which the power is willing to assume unilaterally", President Voronin suggested a string of additional guarantees:

  1. amending certain provisions of the Civil Code so as to set a ceiling for the material and moral compensation a person may demand from a media outlet for damages relating to the business reputation or a person's honour and dignity;
  2. setting up a national watchdog on human rights;
  3. putting in place an efficient mechanism of enforcing court rulings;
  4. all public radio and television stations in Moldova approve a project based on the recommendations of the OSCE mission to Moldova and the special representative of the Council of Europe secretary-general on basic democratic standards for the electronic media.

Later during the week, in a joint press release of the diplomatic representations in Chisinau of France, Germany, United Kingdom, Poland, United States, Hungary as well as the office of the Council of Europe's special representative and the Organization for Security and Cooperation in Europe mission said they salute last week's launching by 12 nongovernmental organizations of a drive aimed at ensuring free and fair parliamentary elections in 2005. They also saluted President Voronin's initiative.

As for political elite and media, which was invited for discussions with President Voronin on July 6 and 7, it remains split. Some of the them saluted President's initiative as timely. Some voiced their objections and lingering concerns, while others alleged President's initiative was nothing but an electoral trick, thereby citing the shortcomings mentioned in the OSCE Observation Mission report on 2003 local elections; the current state of democratic institutions in Moldova; and the failure of similar initiatives such as "Social Pact", etc.

The fact that many of the party leaders share the same doze of scepticism, makes it quite improbable that many parties would rush into signing the so-called "Convention on the ethical standards of electoral debate".

In spite of the many reserves one might have to the President Voronin's initiative, it should be acknowledged that the suggestion to amend Article 16 of the Civil Code is quite timely. In fact domestic press and NGOs in the field have been insisting on such measures for quite a while, as the said provisions pose a threat for media outlets to go bankrupt if found guilty of damages relating to the business reputation or a person's honour and dignity. contents previous next

II. Economic polies

External financial position of the Republic of Moldova

According to the latest press-releases of the National Bank, Republic of Moldova's foreign debt dropped in May by 111.46 million USD and as of May 31, amounted 870.93 million USD. At the end of April direct public debt guaranteed by the state amounted 982.39 million USD (including funds from IMF which as of January 2004 amounted to 140 million USD). Moldova managed to reduce the servicing of its foreign debt after redemption of bills issued in exchange for debts on gas worth 114.5 million USD, at a price of 50.135 million USD.

According to the latest issue of the National Bank's newsletter "Monetary overview", as of end of May public debt amounted 794.58 million USD, whereas public debt guaranteed by the state - 76.35 million USD. Sources in National Bank pointed out that yet another 118.62 million USD need to be reimbursed, while appreciation of USD against other currencies has swelled the debt by 7.04 million USD. Hence, arrears to the interest rate payment worth 0.12 million USD have been accrued. As of May 31, 2004 the total amount of arrears including those accrued in the previous years amounted to 26.6 million USD.

Private debt not guaranteed by the state (including arrears on interest payments) amounted to 444.4 million USD at the end of May. Analysts forecast for 2004 a breakthrough in servicing foreign debt, however due to GDP growth and appreciation of Lei against USD the ratio of foreign debt servicing in GDP will drop from 51.5% to 42.9%.

Meanwhile, National Bank's foreign currency reserves decreased by 39.7 million USD, to 270.75 million USD at the end of May, after National Bank gave a 50 million USD loan to the Government for redeeming bills issued to Gazprom in 2000 in exchange for a portion of the debts accrued throughout 1996 and 1997. In May Chisinau redeemed at a price of 50.135 million USD bills worth 114.5 million USD. On June 17 Parliament approved a credit of 600 million Lei, i.e. 50 million USD, to be granted for this purpose to the Government for a five year period.

In May Central Bank purchased on the domestic market 9.35 million USD and 72.3 million Euro, thereby it managed to somehow counterbalance the situation after issuing the loan. The reserves consist mainly of liquidity and long-term placements - 184.2 million USD, including in other Central Banks - 94.0 million USD and other foreign financial and banking institutions - 90.08 million USD. Securities account for 86.49 million USD. According to National Bank, liquidity and placements in other foreign central banks dropped in May by 24.36 million USD and 25.5 million USD respectively, whereas placements in securities rose by 9.93 million USD.

The goal of the Moldovan National Bank in 2004 is to preserve the international currency reserves "at an acceptable level so as to cover for at least three months import". After the national currency was put in circulation, National Bank managed to double the foreign currency reserves in 1994-1997, i.e. from 180 million to 365.7 million USD, however after the 1998 Russian financial crisis the reserves dropped 2.5 times, to 143 million USD. Despite the fact that IMF stopped funding Republic of Moldova throughout 1999-2003, funding which to a large extend was used to fill reserves, in five years Central Bank managed to refill the reserves by 150 million USD, by massively purchasing foreign currency on the domestic market (supplied by Moldovan citizens working abroad). contents previous next

III. Transdnistrian Conflict

1. Ilascu Group wins trial at ECHR

On 8 July the European Court for Human Rights (ECHR) in Strasbourg delivered at a public hearing the judgement of the ECHR Grand Chamber in the case of Ilascu and others versus Moldova and Russia (see The Court held in favour of Ilascu and others and obliged Moldova and the Russian Federation to pay the members of the Ilascu group moral and material damages, as well as to cover the costs of the legal assistance granted they have received during the trial.

The ECHR judgement found Moldova guilty for not taking the necessary measures to stop the human rights violations in the Transnistrian region, where the members of the Ilascu group were sentenced by a tribunal of the non-recognised "Transnistrian republic" for alleged acts of terrorism. The Russian Federation was found to share the guilt as it holds de facto control over the Transnistrian region due to the stationing of its troops and weapons in the region as well as the political, economic and military support it has given the break-away authorities.

The ECHR called upon Moldova and Russia to take all measures to liberate two members of the Ilascu group Tudor Petrov-Popa and Andrei Ivantoc, who are still in the Tiraspol prison.

The Moldovan authorities have not had an official reaction to the ECHR decision yet. Several hours after the judgement was published, the Moldovan Minister of Justice Vasile Dolghieru was dismissed via presidential decree. While no reason was invoked for the dismissal, local observers have noted that it might have been related to the ECHR judgement.

The Russian Federation, on the other hand, has formulated its position towards the ECHR judgement in a communique of the Russian Foreign Ministry published on the same day (see According to the communique, the Russian Federation showed bewildered by the "inconsistency, contradictory character, subjectivism and political engagement" of the ECHR. According to international law, the communique says, Russia may not be found guilty of the accusations brought against it by the Ilascu Group, because the said event took place before Russia joined the European Convention for Human Rights in 1999. The document also says that "the several hundred Russian military men" deployed in the Transnistrian region are there to participate in the peacekeeping forces and may not serve as an instrument of control over a territory inhabited by almost one million people.

2. The resolution of the OSCE Parliamentary Assembly on Moldova

The Parliamentary Assembly (PA) of the OSCE adopted at its annual session held on 5-9 July in Edinburgh a resolution on Moldova. In the resolution the OCSE deplores the deadlock to which talks on Transnistria have come, but welcomes that fact that, in principle, both parties are ready to resume dialogue to attain a final solution on the basis of the federalisation idea. The OSCE PA calls upon all parties concerned to make the necessary efforts in this sense, urges the Transnistrian authorities to cooperate constructively in the process of Russian weapons withdrawal from the region, and encourages the resumption of the political dialogue between Moldovan Members of Parliament and the members of the Transnistrian Supreme Soviet.

In an interview to Radio Free Europe, Kimmo Kiljunen, deputy chair of the OSCE AP and principal rapporteur on Moldova, said that the OSCE AP supported by unanimity the initiative to hold in September a round table with the participation of political forces from Moldova and Transnistria, which would adopt an official declaration whereby the two parties would commit to some basic principles for solving the Transnistrian conflict. According to Kiljunen, these principles would include the territorial integrity of Moldova, the idea of federalism as a basic principle for a final solution, international guarantees for a final agreement and exclusively non-military solutions.

3. NATO Summit in Istanbul calls for completion of Russian weapons withdrawal

The final communique of the meeting of NATO Heads of State and Government, held on 28-29 June in Istanbul, noted the progress that was made in 2003 on withdrawal of Russian military forces from the Republic of Moldova, but expressed regret over the fact that progress has not continued in 2004 and that the extended 31 December 2003 completion date was not met. NATO Head of State and Government called for the intensification of this process, but did not fix a new deadline for the completion of the withdrawal.

At the same time, the NATO summit participants reiterated their commitment to the CFE Treaty as a cornerstone of European security, and recalled that fulfilment of the remaining Istanbul commitments on the Republic of Georgia and the Republic of Moldova will create the conditions for Allies and other States Parties to move forward on ratification of the Adapted CFE Treaty.

Both on the eve of the summit and during the summit, Russian officials tried to accredit the idea that the link that NATO is trying to make between the ratification of CFE Treaty and the evacuation of troops from Moldova and Georgia is not justified. In an interview to the Russian news agency RIA Novosti, Serghei Lavrov, the Russian Foreign Minister said that the commitments to withdraw troops from Georgia and Moldova are political ones, unlike the CFE treaty clauses, which are of legal character. contents previous next

IV. Foreign affairs

1. CIS informal Summit

On July 3, President Vladimir Voronin flew to Moscow for the Summit of the CIS Heads of State. According to official source, participants discussed the agenda for the CIS Summit in Astana due in September 2004 and joint celebrations of the end of WWII.

During the summit, Vladimir Voronin had a private meeting with his Russian counterpart Vladimir Putin. According to the press-service, the Two considered issues related to "developing bilateral relations, resolution of Transdnistrian conflict, and other issues of mutual interest".

Russian and Moldovan press alike (state-run and independent) scarcely covered the reunion, which explains why the reactions to such an important document as Declaration of the Chief of States on "state of affairs within OSCE" were late to come. The reason for issuing a declaration was the fact that "this European organization fails to fully meet its tasks formulated in its founding documents, its primary focus being human rights dimension and functioning of democratic institutions to the expense of other dimensions of collective security, such as military, political, economic, environmental and humanitarian". The Declaration was submitted by Russia's permanent representative to OSCE, Aleksandr Borodavkin, during the OSCE Permanent Council meeting in Vienna on July 8. BASA-press reported that Georgian President, Mihail Saakasvili, was the only one who refrained from signing, while President Voronin insisted on formulating some reservations with regard to OSCE's activity pointing to the "gap between OSCE's activism in supporting democratic standards and passivity in resolving frozen conflicts in the CIS".

Given that Transdnistrian conflict is also a frozen one and more importantly considering President Voronin's numerous public acknowledgements of the OSCE assistance in settling Transdnistrian conflict, one may notice some shifts in attitude. This shift in attitude might resume to the following - OSCE is solely to be blamed for the lack of progress in settling Transdnistrian conflict. This attitude is in contrast to the attitude shared by opposition, public figures and analysts alike who are rather inclined to blame the stubborn and uncooperative stance of Tiraspol, which is supported by Moscow. They do point out that in fact OSCE did a big favour to Moldova when it opposed the signing of "Kozak Memorandum".

The joint Declaration of the CIS Heads of States was intended to draw the attention towards the need to take urgent and wide-scale measures to fundamentally refocus OSCE's priorities and activities.

contents previous

V. Studies, analyses, comments

Echo of the bread crisis
Anatolii Gudym, 14 July 2004

Many people still remember the troubles of the wheat and bread crisis of 2003: bad wheat harvest, protracted reaction of the Government, "bread mafia", abrupt increase (39.8% a year) of prices for bread, emergency actions of the Parliament, Government and economic units to import wheat. One as well could think the situation is under the control now »»»

What happens after ECHR' ruling?
Igor Botan, 14 July 2004

On July 8, European Court for Human Rights (ECHR) ruled on the "case of Ilascu and others v. Moldova and Russia". ECHR ruled that Russia and Moldova are guilty of violating provisions of the European Convention on Human Rights, in particular the right to freedom and prohibition of torture and inhuman or degrading treatment or punishment »»»


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