print version

Activity of Public Institutions

Parliament
Government
Presidency

Activity of Public Institutions

Parliament

1.1. Reshuffles

The Parliament has relieved Ion Platon from the post of judge of the Supreme Court of Justice.

1.2. Legislative acts

• Law on forced execution system. The law establishes the competence of the forced execution system, the legal status of personnel, rights and obligations, personal and social guarantees of judicial executor, and their responsibility. The forced execution is a task of the Justice Ministry and it is achieved through the execution department and execution offices in cooperation with other bodies stipulated by law.
• Law on support for small- and medium-sized business sector. The document aims to support the small- and medium-sized enterprises, given their importance in ensuring a sustained economic growth of Moldova. The law establishes the legal, economic and organisational grounds and forms of sustenance of development of small- and medium-sized enterprises by state. It regulates the classification of types of enterprises working in this sector into: - micro; - small and medium. The status of such an enterprise will appear in the virtue of the declaration on own responsibility, a document through which the economic agent declares the fulfilment of all requirements for subject of small- and medium-sized business sector.
• Law on modification and completion of the insolvency law. The essence of the law consists in overcoming the insolvency at lawsuits only, giving up this way the extra-judicial process of reorganisation of enterprises implemented at present and considered inefficient. The quality of administrator of insolvency or temporary administrator will be awarded only to a person registered as individual entrepreneur, who was awarded licence accordingly to the law and is independent from creditors and debtor. The law will be enforced on January 1, 2007, while the Board of State Creditors will transmit meanwhile the cases of economic agents working under debt restructuring conditions in line with signed memorandum agreements to the State Tax Inspectorate.
• Law on modification and completion of the law on bar. The amendments result from recommendations of international institutions, including notices of the Council of Europe in the field, and stipulate the transmission of functions of licensing and disciplinary responsibility of lawyers from the Justice Ministry to the Bar. Also, they establish the right of lawyers and prosecutors who have worked for 10 years to obtain a licence of attorney without examination and training, within six months after non-imputable dismissal from the post of judge or prosecutor.
• Law on modification and completion of the law on entrepreneur's patent. It bans the patent holders to trade certain goods under some conditions and to maintain some services. The document aims to ensure appropriate conditions in the domestic trade sector, to prevent fiscal frauds, to enhance the quality of services. Holders of patents who will stop their activity in connection with the new regulations will be able to get registered for free as individual entrepreneurs, with all necessary consequences (taxation of income, financial and statistic reports, respect for labour legislation, etc.). It also reduces the tax for patent, but introduces at the same time the mandatory social welfare taxes, and this fact reduces very much the effect of the lower cost of patent, while the monthly social welfare payments are pretty high.
• Draft law on testing by detector of simulated behaviour (polygraph). It defines the main notions, principles and fields where the testing by using the polygraph may by applied, requirements for testing, mode of use of its results. The testing will be taken to evaluate the truth of information communicated by tested person: - when the access to an information representing a state secret is provided and confirmed; - during operative activities of investigation; - during service inquiry; - for prevention and certification of contraventions within labour relations. The right to hold the testing is given to the Interior Ministry, the Centre for the Struggle Against Economic Crimes and Corruption, the domestic security service SIS, the State Guard and Protection Service, the Customs Service, the Defence Ministry, the Border Guard Service, the Prosecutor's Office, the Department of Penitentiary Institutions. Moldovan nationals, foreign citizens or stateless people will be tested if: - they get employed or serve in the bodies named above; - get employed or hold functions linked to ensuring of exploitation of very important, special or dangerous production objects; - receive or have access to information representing a state secret; - the testing is stipulated by labour contract; - it is part of operative activity of investigation; - the person is voluntarily willing to undergo the test.
• Draft law on inter-professional organisations of agri-food products. It regulates the creation and functioning of inter-professional organisations for a product or group of agri-food products at national level or on the area of production, the main objectives and activities, rights and obligations.
• Draft law on organisation and functioning of markets of agricultural and food products. The document proposes the setup of a legal framework on creation and organisation of markets of agricultural and food products by individuals and businesses that produce, store, process and/or trade these products on domestic and/or/foreign markets.
• Draft law on organisation and conduct of tourism activity in Moldova. It seeks the replacement of the existing law on tourism with a new document capable to regulate the legal relations related to drafting and promotion of state policy on tourism, organisation and coordination of tourism activity, especially of entrepreneurial activity in the field of tourism, forms of tourism, creation and activity of national tourism areas, requirements on quality of tourism services and ensured security of tourists, principles of international cooperation in the field.
• Draft law on modification and completion of the Election Code. The document approved in the first reading derives from the action plan of the parliament for fulfilment of the Council of Europe's recommendations and aims to remedy the shortcomings and to introduce the provisions recommended by OSCE/CoE on Election Code and electors in Moldova, recommendations of local and international observers at elections. The draft promoted by a group of lawmakers representing all parliamentary factions was elaborated by the Central Election Commission in cooperation with the Association for Participatory Democracy ADEPT.
• Draft laws on modification and completion of the Code of Civil Procedure and Code of Criminal Procedure. The drafts adopted in the first reading aim to adjust the provisions of the two complex legislative acts to recommendations from the CoE expertises concerning the new codes enforced in Moldova. Another draft contains reviewed provisions on use of preventive arrest and holding of person in custody during examination of penal case. Thus, it proposes that the term of holding of the accused person in preventive detention after delivery of the case to the court, from the day when the court received the case and till the day when the first court passes a verdict must not exceed 6 months, if the suspect committed an offence for which the law stipulates a maximum jail term of 15 years; and 12 months, if the person is suspected of an offence for which the law stipulates a maximum detention term of 25 years or lifetime detention. The suspect will be investigated in custody only in exceptional cases after these terms run off, and the term will be extended with three months every time until the court passes a verdict, on ground of an arrest warrant issued by a higher court on basis of a motivated proposal of the Prosecutor-General or his deputies. The promotion of amendments is a consequence of a parliamentary control on situation of suspects held in the preventive detention facility # 13 in the Chisinau municipality, being also dictated by frequent sentencing of Moldova by the European Court of Human Rights for unmotivated and long-term detention.

1.3. Parliamentary control. Statements

Hearings

The Chamber of Auditors has reported to the Parliament on management of public finances in the budgetary year 2005. It presented generalised information about creation and use of public financial resources; integrity and management of public patrimony; actions taken by entities to remedy the violations and shortcomings discovered by Chamber of Auditors; findings of controls held at the request of parliamentary factions. Although it indicates a certain improvement of financial management expressed through a lower number of discovered violations and shortcomings, the situation is still unsatisfactory regarding the economical and efficient use of public patrimony. The controls conducted by chamber at the request of parliamentary factions covered the Association of the Deaf, the Society of Invalids and the Society of the Blind (at the demand of the PCRM faction) and the National Public Broadcasting Company TeleRadio-Moldova (at the request of the PPCD faction), with the Chamber of Auditors signalling shortcomings and inefficient management, but without major consequences on institutions concerned. The conclusion of the chamber on management of public resources recommend: - the consolidation of strategic planning capacities; - the simplified accounting of economic operations, monitoring and control procedures; - the establishing of a legal framework for administration of revenues in special funds; - the limitation of the governmental financing for some actions unplanned by annual budgetary law, with its further rectification; - optimisation and special control on investments from public budget; - ensured inventory and strict record of public patrimony, the prohibited creation of a joint stock society with violation of legislation and the loss of the state's right on public goods; - the revision of the mode of representation of state in economic societies by giving up the existing inefficient modality of representation in public authorities; - an transparent use of public money in local administration, a better administrative control of the Government; - execution of all decisions and recommendations of the Chamber of Auditors, etc. It was established after debates that the essential amendments promoted to the law on Chamber of Auditors during the parliamentary consensus had a minor impact, with most of actions aimed to improve the activity will be taken in perspective, in line with a plan on strategic development of the Chamber of Auditors, which will be implemented in the second half of 2006. All decisions of the chamber on controls have been unanimously adopted by its members, though they were appointed by different parliamentary factions, including the opposition. Although they have appreciated some positive sides of activity of the Chamber of Auditors, the opposition lawmakers who spoke out about report said that the situation regarding management of public resources is still deplorable, the efficiency of controls by chamber is minimal, high-ranking functionaries who admit violations are not punished and only primary executors are sanctioned, but they are and act under influence of political decision-making factors.

The minister of industry and infrastructure has informed the Parliament about situation regarding gas deliveries from the Russian Federation and prospects in electro-energy sector. Vladimir Antosii assured that the higher import price of Russian natural gas will not influence the electricity tariff for final consumers, as Moldova has signed a contract with Ukraine on importation of electricity that covers more than 70 percent of the need of our country, for 2.52 cents a kW/h. On the other hand, the minister acknowledged that the higher price of Russian gas will increase the internal gas tariffs, and they may grow up to 3 lei per cubic metre for some consumers, though Moldova imports the gas for over 2 lei per cubic metre. The higher tariffs will affect first of all the households who consume more than 30 cubic metres of gas a month (use the natural gas for heating). Antosii noted that negotiations with the gas giant Gazprom go on, in order to sign a natural gas delivery contract for at least 3-4 years, but noted that the minimum price will be 160 dollars per 1,000 cubic metres. The minister fell short of estimating the impact of higher prices on national economy and social condition of population, but noted that the government is hopeful to find alternative gas providing sources, especially after finalisation of the international gas pipe Baku-Tbilisi-Erzrum, which will cross Bulgaria and Moldova could contract certain quantities of gas from there. The Government does not nourishes big hopes regarding alternative energy resources (biomass, regenerating resources, Aeolian energy, etc.), as their share is supposed to cover maximum 3 percent of the need of energy resources in the near future.

Questions and Interpellations

The prosecutor-general has replied an interpellation of AMN Deputy Vitalia Pavlicenco, who demanded a control on involvement of functionaries of prosecutor's office in illegal deals and redistribution of properties¹. According to first checking, the actions were not completely confirmed, but certain elements requiring more investigations have been discovered.

PSL Deputy Igor Clipii has asked the Prosecutor-General's Office and the domestic security service SIS to investigate the publishing of a book titled "Cartea Neagra a Tradarii" (Black Book of Treason), which contains disparagement against some political leaders, during the 2005 parliamentary electoral campaign. The book was published in a large circulation, without identity signs required by law (order, author, printing company, etc.). Clipii argued his demand through the need to sanction the guilty persons and stronger political battle before the 2007 local elections.

PPCD Deputy Gheorghe Susarenco has asked the Prosecutor-General's Office to report on measures taken to sanction public functionaries (policemen, judges, prosecutors) who are to blame for adoption of some decisions contested at ECHR, which made the Strasbourg-based court sentence Moldova for applying the torture.

Declarations

The speaker has promised that the Parliament will debate in the first reading draft legislative acts on consolidation of autonomy of local public administration by the end of the current session: the law on decentralisation, a new law on local public administration and amendments to legislation on local public finances. The drafts will be sent to the Council of Europe for expertise after they are passed in the first reading.

The parliamentary faction representing the Our Moldova Alliance (AMN) has released two declarations on recent speeches and actions of Moldovan President Vladimir Voronin. A document accuses the chief of state of launching some anti-national and anti-Romania statements, followed by a stance on recent statements of Romanian President Traian Basescu. Another declaration invokes the usurpation of state power by President Voronin by convoking a wide sitting with the participation of heads of the three powers in the state (that the Constitution bans), through intervention in legislative process (obligation of anti-corruption examination of legislative acts), and through criticism against members of the Parliament, the institution which elected the chief of state and the president is responsible in front of it.

Government

2.1. Rules. Appointments

The Government has proposed the appointment of Ion Robu to the post of Extraordinary and Plenipotentiary Ambassador of Moldova to Azerbaijan. Robu has headed the National Commission for Securities till April 2006, but he recently tendered his resignation from unknown reasons.

Valentin Guznac was assigned as deputy minister of local public administration. Previously, Guznac was deputy mayor of the Balti municipality.

The executive has decided to relieve Petru Grecu from the post of deputy director of the National Regulatory Agency for Telecommunication and Informatics without explaining the reasons. This way, the ANRTI Management Board holds only one out of three posts of directors that it must run (Iurie Tabirta was relieved from the post of ANRTI director in 2005 from unknown reasons).

2.2. Decisions

Decision # 768 from 05.07.2006 concerning transmission of some real estate. By motivating with the need to execute the Parliament decision # 1198-XIII from 29 May 1997 concerning illicit privatisation of the sanatorium Legkovik, the Government has decided to transmit the buildings of the former sanatorium from balance of the Privatisation Agency of the Ministry of Economy and Trade to the balance of the Ministry of Health and Social Protection. The Ministry of Health and Social Protection will rent these buildings for free to the Association Casa Sperantei, an institution sponsored by first lady Taisia Voronin, for the organisation of the recovery centre for children suffering from severe handicap of locomotion apparatus, without any right to use them for other purposes. It should be noted that this decision of the Parliament was the object of control in the Constitutional Court, which has outlawed many provisions, including the word "illicit" from the name of the document, but the Government insists on takeover of the unconstitutional name in its decision adopted after 9 years.

Decision on reorganisation of the Ministry of Education, Youth and Sport. Under amendments to the law on Government, the Ministry of Education, Youth and Sport is reorganised into the Ministry of Education and Youth and the Sport Agency (with the latter taking over the sport-related tasks). The decision also allows the dismissal of ministerial employees "in line with the law on public service and labour legislation in effect." The Ministry of Education and Youth must table changes of structure, maximum personnel and its regulation of activity within 15 days, while the Sport Agency will present its structure, maximum staff and regulation of activity.

Decision extending the term for confirmation of citizenship and issuing of identity acts to residents of eastern districts of Moldova. The July 1 deadline was extended till late 2006 in connection with lots of applications of residents from eastern districts of the country.

Decision on preparation of educational institutions for the academic year 2006-07. More than buildings of educational institutions are supposed to be renovated, while education directorates and local authorities will conduct a census of children who will be admitted at school.

Decision approving the regulation of motor passenger and luggage transportation. The document contains a series of innovations whose implementation is controversially commented by transporters and passengers, who fear that some unwise decisions will violate their rights.

Decision on allocation of finances. The Government imposes the Ministry of Finance to allocate "1,100,000 lei from general means of the state budget" to the Ministry of Local Public Administration for an efficient activity of this ministry, "by establishing the covering source when the 2006 state budget will be eventually rectified."

2.3. Sittings. Decisions. Declarations

Efficiency of privatisation of some enterprises

The prime minister has chaired a sitting of the contest commission for privatisation of tobacco and wine enterprises. It heard reports of members of the commission and managers of some privatised enterprises regarding respect for privatisation requirements and contract-related obligations by investors of enterprises S.A. Calarasi Divin, S.A. Nis-Struguras, S.A. Vismos. Vasile Tarlev highlighted the need of honouring all assumed commitments, maintaining and increasing the number of workers of these enterprises, and developing the raw material base, including the planting of vine in the due terms. The administration of enterprises was invited to participate actively in the Government-promoted programmes on diversification of markets.

Finalisation of negotiations on gas deliveries

The Government released a communication on July 3 saying that "the tariff for the natural gas imported by Moldova from the Russian Federation will grow twofold compared with 2005, up to 160 dollars per 1,000 cubic metres starting July 1, 2006, following difficult negotiations with Gazprom," after it avoided to confirm or deny the imminent rise of the price of natural delivered to Moldova by Gazprom. According to the communication, "the Government has managed to preserve the state patrimony during negotiations; it did not sell or accept the reduction of the state share in assets of the energy system of Moldova due to the strong stance of the Moldovan side." The National Agency for Energy Regulation will calculate the natural gas tariffs for all categories of consumers on basis of the negotiated price. According to estimates, "all tariffs will be increased proportionally to the rise of the price of imported gas." The Government will take the necessary measures for a partial, nominal compensation of additional expenses after the price rise, in order to minimise the impact of higher tariffs of natural gas on household consumers. Thus, the tariff will grow by 25 percent only for households who consume up to 30 cubic metres, in order to reduce the negative impact of higher natural gas price. We note in this context that under the Memorandum with IMF (pct.22) the Moldovan Government has pledged "to make consumers (households and enterprises) pay the higher gas prices for natural gas, so that to recover the costs and to maintain the current system of nominative compensations."

3. Presidency

3.1. Decrees

The Moldovan president has accepted the resignation of Alei Mironic from the post of director of the Academy of Public Administration (Mironic has recently become chairwoman of the Moldovan council of veterans. Alexandru Roman, head of the municipal education directorate, was appointed rector of the Academy of Public Administration. President Vladimir Voronin has signed a decree on awarding of the Labour Glory Order to parliamentarian Dumitru Prijmireanu. The order was awarded for a long and prodigious work in public administration bodies, contribution to a better legislation and intense organisational and public activity, as the lawmaker has turned 55.

The chief of state has awarded the Civic Merit Medal to Ion Muruianu, judge of the Supreme Court of Justice. The medal was awarded for a long and prodigious work in law bodies, contribution to justice making process and merits in promoting the judiciary and law reform.

Valeriu Ciapchin, chairman of the building company INCONEX-COM SRL, was awarded the Labour Glory Order for substantial contribution to building the sport complex of FC Zimbru.

3.2. Sittings. Decisions. Statements

New dissatisfaction with anti-corruption struggle

On July 5, the Moldovan president chaired a sitting of the Supreme Security Council (CSS) on economic security of the state. Vladimir Voronin raised dissatisfaction with how the domestic security service SIS ensures the economic security of the state and demanded the immediate dismissal of SIS deputy director Anatol Gozun and the revision of the structure and functioning concept of the economic security directorate of SIS. Voronin considers that this subdivision in the current formula is incapable to detect, to study and to combat the factors that threaten the economic interests of Moldova. The sitting of CSS examined the situation in the public acquisition system, with the chief of state saying that it favours the appearance of public money laundering schemes. Voronin demanded the interior minister to dismiss a lieutenant colonel from carbineer troops who has acquired low quality goods for the Interior Ministry and to impose disciplinary sanctions to other servants in charge with internal security and administration of carbineer troops. The chief of state noted that any case of this kind will be settled this way. He demanded the urgent revision of legislative and normative acts on management and control on public acquisitions in order to exclude the possibility to launder public money through mechanisms of purchase of goods and services for state beneficiaries. According to a press release, Voronin considers that the law on public acquisitions adopted in 1997 (but modified 9 times in 2001-2006) "has contained mechanisms of stealing public money through corrupt schemes from the very beginning and these mechanisms are working until now."

A couple of days later, on July 8, the Moldovan president raised dissatisfaction with corruption in public institutions at a sitting with the participation of all heads of central state institutions (the Government, the Parliament, the Supreme Court of Justice, the Prosecutor-General's Office, the Constitutional Court, SIS, the Centre for the Struggle Against Economic Crimes and Corruption, etc.), saying that all institutions have arrears in this field. Vladimir Voronin outlined that a governmental team is invited to improve the situation, in order to eliminate notions such as injustice and corruption from society, while members of the executive must quit their posts if they are not aware of this fact. The chief of state noted that an organic law is needed to impose an anti-corruption expertise of all draft economic and social laws. He criticised the inconsistent implementation of the strategy on prevention and combat of corruption, bureaucracy of public services, and inefficient activity of financial control bodies which hold unfair, groundless controls of economic agents. Voronin considers that governmental institutions do not organise an internal anti-corruption fight, while cases of corruption are hidden by departmental interests. Prime Minister Vasile Tarlev said at the end of the sitting that nobody will be fired from the cabinet of ministers, but the signalled shortcomings must be remedied and other measures must be taken to prevent them in future.

Totals of first half-year

The Moldovan president has convoked a news conference on generalisation of events that took place in the past 6 months, and he spoke out about aspects of interior and foreign policies of the country. Vladimir Voronin said the following:

• The state budget and social welfare indicators are better than expected, while collections are larger.
• The medium nominal salary on economy has grown by 26.7 percent. The real salary has risen by 9 percent, compared with the similar period of last year, given the inflation rate. The real medium pension has grown by 22.5 percent.
• Negotiations with the IMF have lasted 4 years and ended with better results than success, with the IMF being already a partner, not a mentor for Moldova.
• The economic growth remains stable and it was about 6.2 percent in the 1st trimester, though it was reduced by trade embargo. Investments in economy have grown by over 19 percent. Currency reserves of the national Bank have risen by 36.5 percent. Crediting of the economy has increased by 42.7 percent. The rate of crediting in national currency has dropped by 2.5 percentage points. Deposits in commercial banks have grown by 33.2 percent. At the same time, deposits of individual have advanced by 42 percent.
• The country has progressed much in executing the Moldova-E.U. Action Plan and the next perspectives of its implementation are being established.
• The E.U. and Ukraine have helped making order in the Transnistrian section of the border, as almost all leading exporting enterprises from Transnistria have got registered in Chisinau. The Moldovan authorities will accept to maintain a full budgetary autonomy of Transnistria and will sanction again through law the rights to property of Transnistrian entrepreneurs even under a final political settlement.
• The partner of Moldova, Russia, is reorganising and renewing its foreign policy and the Chisinau authorities hope that the reasonable calculation and pragmatism dominate this foreign policy. What is happening between Russia and Moldova regarding delivery of energy agents does not have a political nature.
• The Moldovan authorities call for minimisation and withdrawal of any military presence in Moldova, for the status of neutrality as strategic reference of security.
• The perspective of union between Moldova and Romania does not exist even after Moldova's entry in the E.U.
• Moldova's policy on modernisation and European integration is irreversible and does not represent the object of any talks regardless of external political defiance.
• The Moldovan president did not receive an official proposal from Romanian President Traian Basescu for the concomitant entry in the E.U.
• The signing of the basic political treaty and border treaty with Moldova, rather than the presentation of a new plan would be the best assistance of Romania in the Transnistrian settlement process. Voronin informed that he has invited the E.U. to assist the negotiation of these documents, so that the sides sign them by the end of this year.
• The Christian Democratic People's Party and the Democratic Party are the main opposition forces.
• The Communist Party is undergoing a permanent reform after its creation and it was recently accepted in the European United Left. A document is being drafted to outline the future objectives of the party.

Concerns with right implementation of Labour Code

Vladimir Voronin has convoked a sitting on recent amendments and completions to the Labour Code, which allows the dismissal of retirees². The sitting was convoked in response to petitions received by central institutions and some publications, which said that heads of different institutions and organisations misapply the new provisions of the Labour Code. The president considers that employers and citizens often lack right and exhaustive information about norms regulating the labour relations. The exchange of opinions and the information released at the sitting led to the conclusion that amendments and completion to the Labour Code neither contravene to national and international legislation, nor violate the right of person to continue working after retirement. The president asked competent officials of Government and Parliament to monitor how correctly heads of various state sand private structures apply the provisions of the Labour Code, demanding the organisation of some actions to inform the population about essence and goals of amendments and completions.

Respect for schedule of visits to Chisinau City Hall

The Moldovan president has visited the Chisinau City Hall and discussed with decision-making officials there. Vladimir Voronin said that the staff cuts in the Chisinau City Hall are the first ones of this kind and others will follow in future, so that the necessary personnel only will be maintained. The sitting was held behind closed doors, without municipal councillors, and the chief of state told journalists that it was constructive while the presidency monitors the activity of local public authorities, though an adequate cooperation had been earlier impossible. Ad-interim mayor-general Vasile Ursu said that the sitting has tackled issues related to social-economic development of the capital, which will be accomplished in three stages, while the first one will finish by the Day of the Republic through reconstruction of the Pan Halipa street and the memorial complex Eternitate. The chief of state and the Finance Ministry have established the need of more finances for implementation of priority development programmes of the capital. Vladimir Voronin was satisfied with cooperation with the Chisinau City Hall and appreciated the opening of an information and consulting centre for population, proposing the extension of this experience in all mayoralties in Moldova.

European integration prospects

On July 14, Vladimir Voronin convoked a consultative sitting on various problems related to the European integration process. Taking part in the sitting were Speaker Marian Lupu, Deputy Speaker Iurie Rosca, the leader of the parliamentary faction representing the Democratic Party of Moldova, Dumitru Diacov, members of the cabinet of ministers and presidential advisers. The participants exchanged opinions about latest developments in the process of implementation of the Moldova-E.U. Action Plan. The chief of state highlighted the need of a strict respect for the terms of commitments assumed by Moldova while signing this strategic document for the European future of the country, indicating in particular the commitments linked to continuity of the process of democratisation of society. Vladimir Voronin highlighted the importance of mobilising the efforts of all state subdivisions and structures to implement the reforms established by Action Plan.

Economic Policies

1. Prices and inflation

Estimates for inflation: chain price rises...

The Consumer Price Index (CPI or inflation rate) rose by 0.2% in June, while the cumulated inflation rate for the first half of this year was 7.4%. Moldova may face some factors of risk which halts the anti-inflation fight - adjustments of administrated prices and modifications of tax policy in the next period - after the natural gas price has grown up to 160 dollars per 1,000 cubic metres. According to our estimates, some adjustments of regulated prices, especially of electricity, heating and gas may occur, as the regulation authorities have revised the price rise schedule for these utilities. The effects of these chain price rises will be observed in house maintenance and, implicitly, in CPI.

Prices of natural gas for Moldova may be at European level by 2008...

In this regard, the scenario that the prices of natural gas for Moldova will be at European level by 2008 may be materialised, as the Government has failed to sign a long-term agreement with Gazprom. As regards the electricity, a full liberalisation of this market may be observed in early 2008, concomitantly with the partial liberalisation of heating price and withdrawal of the national reference tariff (about 230 lei/1GK). It is not a surprise that the Government has already asked the Ministry of Finance to present the draft budget law for 2007 by late August.

We could presume that excises for main groups of products covered by this regime may also grow, a measure which will affect the inflation. The adequate budgetary policy could to support the anti-inflation fight, which could direct to balanced deficits and contribute to a better productivity of work and economic growth through paces of expenses (directed especially to productive objectives). On the other hand, the growth over expectations of international prices of crude oil and natural gas and of some food products may also slow down or even stop the inflation.

Food products, alcohol and non-alcohol drinks cover over 40% of consumption basket...

Food products, alcohol and non-alcohol drinks hold a large share, representing more than 40% of the consumption basket, almost double compared with their share in some member states of the European Union, notably the Czech Republic (20%), Slovakia (17%) and Hungary (21%). As regards the prices for house maintenance in consumption basket rank the second place after food products, though their share is relatively lower than in other countries. On the other hand, the costs of maintaining a house (water, electricity, has and other fuels) are estimated as much higher after the rise of the gas price. The rise of prices for some products with administrated process starting July, 2006 may lead to the growth of monthly average inflation rates, as expected. The 10% forecast for 2006 is impossible without substantial adjustments of administrated prices.

2. Tax policy

We have budgetary surplus...

According to statistics, over 4 billion lei (about 235 million euros) was raised to the state budget in basic revenues in the first half of this year, by 17.5% more than in January-June 2005. At the same time, about 3.73 billion lei was spent from the state budget or by 30.6% more than in the first half of last year. Data show a clear budgetary surplus of over 200 million lei or 0.5% of GDP.

...but we do not know to use it

Perhaps it is hard to understand why? A wrong criticism could say that Moldova is incapable to spend some additional money efficiently because the amounts directed to development, infrastructure or healthcare and education reforms have been used for consumption (salary rises, subsidies, social programmes, etc.) every time until now. Following this logic, it would mean that Moldova is condemned a priori. In reality, this is not a fatality, but a need of prudence from at least two reasons.

On one hand, the economic structure makes a large budgetary deficit threaten more the payment balance (which is much adverse nevertheless) and inflation. On the other hand, the inexistence of a tax strategy for more years produces curious jumps in executing the budget and incoherence of planning: a budgetary surplus was also registered in 2005 and like now the budget had a surplus because of the shortage of investment projects or incapacity to implement them. This also explains the incapacity of efficient spending mentioned above: the financial statistics show that the expenses for investments in fixed capital grew slowly in the first five months of this year, even much slower than in pessimistic scenarios launched in early 2006 - by only 9%, compared with 27% in the first trimester of the precedent year and 15% in 2004.

3. Currency and currency market

Leu is sensitive to international shocks...

Foreign funds (speculative or hedge funds) have started withdrawing from emerging countries, challenging the depreciation of their currencies, due to increasing geopolitical tensions, Iranian nuclear programme, tests of North-Korean rockets or the conflict between Israel and Lebanon plus the rise of the world price of crude oil up to about 77 dollars per barrel. Nor the Moldovan leu has got rid of these developments, with the euro reaching 16.36 lei in May and 16.85 in July. The U.S. dollar had a similar evolution: it rose from 13 lei per dollar in May up to 13.3 lei per dollar in July. We estimate a fluctuating exchange rate for euro by the end of this year - minimum 16.5 lei and maximum 16.8-17 lei per euro, while the exchange rate of the U.S. dollar could be between 13.3 and 13.5 lei per dollar.

Potential dangers of depreciation: private foreign debt and regional markets...

But what could happen further on? If this negative evolution of international financial markets continues this way, after increasing the gold ounce up to maximum of the past 26 years - over 740 dollars and we may face a situation of crisis similar to the autumn 1998 one. The emerging economic areas may be the main "targets" this time, which have profited of massive inflows of speculative capitals in the past years. Turkey is a good example, which had to increase the reference interest up to 22% in order to protect its lira, while the Hungarian forint, for example, registered the lowest quotations in the past years.

BNM officials have recently assured that we have why to be calm, as the fluctuations of exchange rates are part of the rule of game. BNM is not concerned with speculative funds (funds which did not invade us indeed), while an eventual sterilisation will be easily achieved, given the currency reserve of about 640 million dollars of the central bank. Problems may occur due to the boom of private foreign debt, which has exceeded the public debt. However, as regards the leu/dollar relation, it seems that the current geological situation is favourable for the U.S. currency, as shown by evolution of euro/leu parity, and this creates premises for its comeback to the level of 12.8 lei per dollar, which was not reached since late 2005.

Transdnistrian Conflict

Vladimir Voronin speaks about the Transnistrian issue

On 11 July President Vladimir Voronin held a press conference during which he discussed with the journalists a number of internal and external policy issues, including the Transnistrian settlement.

According to Voronin, most of the problems that Moldova has had over the past months have been related to the stand adopted by Chisinau in the Transnistrian problem. In particular, the president mentioned that this position is the key negative factor in the Moldovan - Russian relations that have started to deteriorate since the "unfortunate story with the Kozak Memorandum", which Moldova refused to sign in November 2003. President Voronin showed unhappy with the fact that the Transnistrian region receives financial assistance from Russia and with the signature by the break away leader Igor Smirnov and Russian Deputy Prime Minister of a Protocol of cooperation whereby Russia pledged to grant pensions and other social benefits to Russian citizens living in Transnistria.

Voronin showed satisfied with the results of the activity of the EU Border Assistance Mission at the Moldovan - Ukrainian border, and informed the journalists that soon the Mission will extend its activity to the demarcation line between the Transnistrian region and the rest of Moldova along the Nistru River. Voronin said he would insist that the EU Mission continues working and extends its mandate, as "the task of Moldova and the international community is to completely undermine the economic basis of existence of the Transnistrian leadership", the Russian news agency Novii Region reports.

At the same time, Voronin said that the majority of big Transnistrian enterprises have already registered in Chisinau and promised that even when a complete political settlement of the conflict is reached the Moldovan authorities will accept "complete budget autonomy of Transnistria". "We are equally open to consecrate once more, by law, the property rights of Transnistrian entrepreneurs. The issue of ownership is not one about which Moldovan authorities wish to argue", Voronin stated in his speech during the press conference on 11 July.

Referendum in Transnistria

The referendum regarding the future of the Transnistrian region will take place on 17 September 2006, according to a decision of the regional legislative body from Tiraspol. The voting ballots will include two questions: 1. "Do you believe it possible keeping the course towards international recognition of the Transnistrian Moldovan Republic and its later entry into the Russian Federation?" and 2. "Do you believe it possible giving up independence of the Transnistrian Moldovan Republic and its entry into the Republic of Moldova?".

The referendum questions were developed on the basis of proposals by Transnistrian leader Igor Smirnov. The initial version of the first question referred to the possibility of Transnistria developing priority relations with Russia. According to Smirnov, quoted by Olvia-press, at the recommendation of Russian experts this question was changed, as "Russia can only accept in its composition independent states".

The second question too differs from its initial version, which was: "Do you believe it possible the entry of TMR in the composition of Moldova?". In addition, if initially, according to a decision of the 6th Congress of deputies of all levels of Transnistria of 31 March, it was envisaged to organise a referendum to "establish the form of peaceful cohabitation of Transnistria with the Republic of Moldova", the 17 September referendum is to decide on "Transnistria's relations with the Russian Federation and with Moldova".

Smirnov praised the decision of Transnistrian deputies, stating that the referendum will put an end to the process of territorial partition of the former USSR, and in these conditions Transnistria needs to establish its own vector of development, based on the will of the people, Olvia-press reports.

In an interview with the Russian news agency Regnum, the Chairman of the Supreme Soviet in Tiraspol, Evghenii Sevciuk, said the referendum is a response to "the negative position that has been adopted by Moldova regarding Transnistria, and to which Ukraine and the European Union aligned". "In circumstances of external aggression, when Moldova is claiming the principle of deciding Transnistria's fate without the Transnistrians, we do not see any other way out than by consulting the Transnistrian people within a referendum," Sevciuk said. He showed convinced that the Transnistrians will answer positively the first question regarding joining Russia, and will overwhelmingly say "no" to the second question. Asked by Regnum.ru about how it would be possible, technically, for Transnistria to join Russia, Sevciuk said that for this the international recognition of Transnistria will not be necessary, as the referendums in Montenegro and, eventually, Kosovo, will have established the principle of solving conflicts via referendums.

Earlier, both the Moldovan authorities and representatives of the international community, including the EU and the OSCE, said they would not recognise the results of the Transnistrian referendum.

Explosion in a Tiraspol mini bus, seven dead, many injured

Early morning on 6 July, in Tiraspol, an explosion took place in a mini bus killing seven passengers and heavily injuring another 11 passengers. The explosion also injured 10 passengers from a trolleybus stationing at the lights next to the mini bus. Among the victims was a nurse of the Russian military hospital in Tiraspol and two Russian peacekeepers.

The incident is the most lethal one registered in the Transnistrian region since the military hostilities on the Nistru in spring - summer 1992, and has left a profound mark on the region, which, despite being in a state of conflict, has otherwise become accustomed to a peaceful life.

The Transnistrian authorities declared 8 July day of mourning in the region. Moldovan President Vladimir Voronin sent his condolences to the relatives of the deceased and proposed to the Transnistrian authorities help in investigating the explosion and healing the wounded. The Moldovan offer was rejected by the Transnistrians who feared Moldovans sought political gain by offering help. In exchange, in Tiraspol arrived a team of Ukrainian explosives specialists and a team of Russian criminal investigators to help the Transnistrian interior bodies with the investigations.

The version of involvement of Moldovan secret services in the explosion, initially voiced by some officials in Tiraspol, was later refuted by the head of the Transnistrian security department, Vladimir Antiufeev. Following some preliminary investigations, he stated on 10 July that the explosion happened on the basis of an artisan bomb, which was to have another target than the passengers of the mini bus. Antiufeev excluded the possibility of the explosive material having originated from the Russian military depots in Colbasna. The causes and authors of the deflagration are still unknown.

The de facto Ministry of State Security of Transnistria has announced a 10,000 USD reward for information on the authors of the explosion and the targets thereof. In parallel, the Tiraspol authorities said they would adopt additional security measures in the public transport in the region.

Foreign Affairs

Republic of Moldova - Council of Europe

Deputy Vlad Cubreacov, member of the parliamentary delegation of Moldova to the Parliamentary Assembly of the Council of Europe (PACE), has told a plenary sitting of the Parliament that PACE rapporteurs for Moldova told a meeting with members of the commission for respect for commitments of CoE member states in late June that the Moldovan authorities fail the assumed commitments, the activity in the field is inefficient and this fact will serve as ground to maintain the CoE monitoring on Moldova.

The European Court of Human Rights has sentenced Moldova in two more cases. The ECHR ruled in the case "Boicenco vs Moldova" that Nicolai Boicenco, inquired by law enforcement bodies for committing some offences, has faced torture and inhuman treatments. The Court also indicated the violation of the right to freedom and defence and the violation of the right to appeal to the ECHR. Moldova is due to pay 40,000 euros to Boicenco in non-pecuniary damage and another 7,000 euros in cost and expense.

The ECHR ruled in the case "Gurov vs Moldova" that the authorities have violated the right to a fair trial, examination of the civil case filed by applicant in Moldovan courts, as a judge with expired mandate has participated. The Government did not deny the practice when judges continue their activity until the Moldovan president makes a final decision, as no law regulates this situation¹. The ECHR considers that the participation of the judge with expired mandate was illegal and this practice contravenes to the principle saying that the judicial system in a democratic society must not depend on discretionary executive power. The Court ordered the Moldovan Government to pay 1,200 euros in costs and expenses to the applicant.

Republic of Moldova - European Union

The E.U. Border Assistance Mission to Moldova and Ukraine has inaugurated a new office in Chisinau. The decision was made after a monitoring of transborder activities, with the purpose to obtain a larger coverage.

Eneko Landaburu, director-general for external relations in the European Commission, who is in charge with monitoring the implementation of objectives of the European Commission regarding its relations with all relevant countries in the world, has paid a working visit to Chisinau. The European official has met the chief of state, the speaker, the minister of foreign affairs and European integration, and other governmental officials. The sides studied the results of cooperation between Moldova and E.U., including the implementation of the Action Plan. The E.U. representative said that the community is interested in developments in Moldova and it will continue to provide the sought assistance in various fields. The role of the E.U. is seen in supporting the European integration decision of Moldovan authorities, including through political tools within the Neighbourhood Policy. Representatives of Moldova raised the problem of simplification of visa regime, signing of an accord of autonomous asymmetrical trade preferences.

Moldova's Deputy Foreign Minister Valeriu Ostalep and the adviser for the British prime minister for the E.U., Kim Darroh, have agreed in London to elaborate a permanent mechanism of consultation with the United Kingdom, in order to ensure an efficient implementation of the Moldova-E.U. Action Plan. Ostalep sought the support of the United Kingdom for a pragmatic and efficient approach by Moldova of the European integration process, noting that the assistance of British experts for problems related to European integration raises a great interest of Moldova.

Republic of Moldova - Russian Federation

Although Moldova's Prime Minister Vasile Tarlev has joined the final stage of negotiations, S.A Gazprom will deliver natural gas to Moldova in exchange for 160 dollars per 1,000 cubic metres, starting July 1. The agreement was signed for one trimester only, while negotiations on a long-term contract continue.

Negotiations on resumption of wine exports to the Russian Federation have failed and a certainty will appear in late August. Earlier, Rospotrebnadzor representatives have asked the Moldovan authorities to table an action plan for an eventual resumption of Moldovan wine exports, which was already worked out. Representatives of the Russian Federation were told to present clear parameters for determination of wine quality, on basis of indicators of the World Organisation of Vine and Wine.

Moldova in the world

The British Parliament has hosted a wine tasting, as Moldova's Deputy Foreign Minister Valeriu Ostalep paid a working visit to London. The tasting was organised by Moldova's Embassy in cooperation with the British Parliament and with support of the British importer of Moldovan wines FBL, the John Smith Trust foundation. Lord Dubs, leader of the friendship group with Moldova in the British Parliament told the reception that "this action was an act of solidarity with Moldovan wine producers." Taking part in the reception were members of the British Parliament, representatives of the British Foreign Ministry, British governmental and nongovernmental institutions, mass media and diplomatic missions in London.