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Background: Romania fell under communist control at the end of 1947. The communist leader, Gheorghe Gheorghiu-Dej, embraced Stalinism, but gradually loosened Romanian ties with the Soviet Union. The split widened under Nicolae Ceausescu, who took over as party general secretary in 1965. The grip of the Ceausescu clan on the economy and polity ended in a coup in December 1989. Parliamentary and presidential elections were held in May 1990. A new constitution was adopted in 1991, and this was revised in 2003.

Political structure: Romania has a bicameral parliamentary system. The Senate (the upper house) has 176 seats and the Chamber of Deputies (the lower house) has 412. Both chambers are directly elected for a four-year term from 41 single-member constituencies, comprising 40 counties and the municipality of the capital, Bucharest. The head of state is the president, currently Traian Basescu, who is serving a second five-year term. The Social Liberal Union (USL), comprising the Centre-Left Alliance of the Social Democratic Party (SDP) and the National Union for the Progress of Romania (UNPR) and the Centre-Right Alliance (ACD) of the National Liberal Party (NLP) and the Conservative Party (CP), formed a new government in April 2012, but the NLP withdrew from the government in February 2014, leaving the SDP with a small parliamentary minority and seeking support from the Hungarian Union of Democrats in Romania (HUDR).

Policy issues: Gradualism was the hallmark of reform in Romania in the 1990s. Macroeconomic-stabilisation programmes were undermined by a failure to undertake structural reforms, and periods of growth were superseded by bouts of high inflation and macroeconomic imbalance. Important structural reforms in the early 2000s helped to stabilise the economy, but lax fiscal and incomes policies led to overheating in 2007-08, as well as to rising external imbalances. A painful fiscal adjustment was a central component of Romania’s IMF stand-by agreement (SBA) in 2009-11; further fiscal and public-sector structural reforms are the focus of the 2011-13 precautionary SBA.

Taxation: Romania introduced a flat tax of 16% for personal income and corporate profits in January 2005. From July 2010 the uniform rate of value-added tax (VAT) increased from 19% to 24%. Social security contributions are high, equivalent to 49.5% of gross wages. Tax rates are likely to be raised as a result of fiscal shortfalls in the near term.

Foreign trade: In 2013 merchandise exports totalled US$65.9bn and merchandise imports totalled US$70.5bn. The current-account deficit was US$2.1bn, equal to an estimated 1.1% of GDP. Around 70% of exports went to the EU in 2013.

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