„VASILE GOLDIŞ” - publicatii.uvvg.ropublicatii.uvvg.ro/docs/studiaeconomia/2012-3.pdf · Miculeac Melania Elena 110 Mihuţ Aurel 116 Molnár István 1 Munteanu Nicolae-Eugen

UNIVERSITATEA DE VEST „VASILE GOLDIŞ” din ARAD

STUDIA UNIVERSITATIS

„VASILE GOLDIŞ”ARAD

SERIA ŞTIINŢE ECONOMICE

ECONOMICS SERIES

VOLUME 22, ISSUE 3/2012

Arad 2012

Studia Universitatis “Vasile Goldiş” Arad Economics Series Vol 22 Issue 3/2012

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SCIENTIFIC BOARDPreşedinte:Prof. Cristian HAIDUC PhD - vice rector, Faculty of Economics, „Vasile Goldis”Western University of AradMembers:Prof. doc. Ing. Maria URAMOVA, PhD - Faculty of Economics, Matej Bel University,Banska Bystrica, SlovakiaProf. Janos PUSKAS, PhD - Dean, Szent Istvan University Godolo, HungaryAssoc. Prof. Ilona MATHE, - Szent Istvan University Godolo, Hungary Prof. FlorinDUMESCU, PhD. - Faculty of Economics, „Vasile Goldis” Western University of AradProf. Dorina ARDELEAN, PhD - Faculty of Economics, „Vasile Goldis” WesternUniversity of AradProf. Marian Florin URSU, PhD - GoldSmith College, London University, EnglandProf. Corneliu MAIOR - Deparment Manager, „Vasile Goldis” Western University ofAradProf. Dorel MATEŞ, PhD - Faculty of Economics, Western University of TimişoaraProf. Ionel BOSTAN PhD. - Faculty of Economics and Public Administration, Stefan celMare University of SuceavaProf. Mariana MURESAN, PhD - Faculty of Economics and Business Administration,Babeş-Bolyai University of Cluj NapocaProf. Elena HLACIUC PhD - Faculty of Economics and Public Administration, Ştefan celMare University of SuceavaProf. Anca DODESCU PhD. - Faculty of Economics, University of Oradea.Assoc. Prof. Victoria BOGDAN, PhD. - Faculty of Economics, University of OradeaAssoc. Prof. Ioana POP COHUȚ, PhD. Faculty of Economics, University of Oradea

EDITORIAL BOARDEditor: Lecturer: Andrei ANGHELINA, PhD. Faculty of Economics, „Vasile Goldis”Western University of AradAssociate Editors:Prof. Horaţiu ŞOIM, PhD. Faculty of Economics, „Vasile Goldis” Western University ofAradLecturer Eugen REMEŞ, PhD. Faculty of Economics, „Vasile Goldis” Western Universityof AradLecturer Delia DAVID, PhD. Faculty of Economics, „Vasile Goldis” Western Universityof AradLecturer Florin DUMITER, PhD. Faculty of Economics, „Vasile Goldis” WesternUniversity of AradLecturer Ştefana DIMA, PhD. Faculty of Economics, „Vasile Goldis” Western Universityof AradLecturer Cosmina REMEŞ, PhD. Faculty of Economics, „Vasile Goldis” WesternUniversity of AradSecretary: Daniela POPA, Faculty of Economics, „Vasile Goldis” Western University ofArad

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CUPRINS

Imre Gurzó, István Molnár - SOME THOUGHTS ABOUT THEQUESTION OF "HUNGARY AND EU MEMBERSHIP" ………………... 1Rodica Diana Apan - THE CREDITOR’S FAULT - MEANS OFEXTINCTING THE SURETYSHIP; SPECIAL FEATURES WITHIN THEBANKRUPTCY PROCEEDINGS ................................................................. 15Olimpia Neagu - ROMANIA AND EUROPE 2020: HOW FAR WE ARE? 25Mircea Teodoru - THE COMPANY'S PROMOTIONAL POLICY ANDTHE CONSUMER'S BEHAVIOR ................................................................. 32Sorin Blaj - CRISIS EFFECTS ON THE FISCAL REVENUES INROMANIA AND EUROPEAN UNION STATES ………………………… 37Mihaela Bratu (Simionescu) - IMPROVING THE ACCURACY OFMACROECONOMIC FORECASTS MADE BY NATIONALCOMMISSION OF PROGNOSIS AND INSTITUTE OF ECONOMICFORECASTING FOR ROMANIA ................................................................ 43Persida Cechin Crista, Timeea Maria Dumescu - CONSIDERATIONSREGARDING THE REFORM OF THE EUROPEAN FINANCIALSUPERVISION SYSTEM .............................................................................. 59Nicolae Paul Virag, Gheorghe Claudiu Feieş, Marian Socoliuc -CONTRIBUTIONS TO IMPROVE ACCOUNTING AND FINANCIALREPORTING OF EXPORTS OF GOODS AND SERVICES ....................... 65Silviu-Sorin Cordovan, Negrilă Ovidiu - MODELS OF INSTITUTIONALORGANIZATION OF FINANCIAL MARKETS AND BANKING INEUROPE ......................................................................................................... 73Ana-Maria Popescu (Stîngaciu), Nicolae-Eugen Munteanu - SMART,SUSTAINABLE AND INCLUSIVE GROWTH FOR 2014-2020 ................ 80Ştibli Florin - LEADERSHIP: HOW TO CREATE A WINNINGORGANIZATION ………………………………………………………….. 86Ionel Gabriel Dobrin - THE ANALYSIS OF COORDINATES SPECIFICTO THE POTENTIAL OF A COMPANY MARKET ……………………... 94Dan Mihai Jitaru - CONNECTION BETWEEN SPORT ANDECONOMICS WITHIN THE EUROPEAN CONTEXT ............................... 99Adrian Nicolae Mateia, Radu R. Şerban - QUANTITATIVE ASPECTS OFPRODUCTION MANAGEMENT …………………………………………. 104Melania Elena Miculeac - EXTENSIVE USAGE ANALYSIS OF THEHUMAN RESOURCES EXISTING AT COMPANY LEVEL ..................... 110Aurel Mihuţ - ROMANIAN ECONOMY IN THE EUROPEAN CRISIS …. 116Alina Nistorescu - BUSINESS EMAIL EXCHANGES AND THE USE OFPOLITENESS FORMULAS IN ENGLISH AND ROMANIAN .................. 122Cosmina Dema Poruţiu - CONCEPTS REGARDING CONSUMER’SAND MARKETING SPECIALIST’S BEHAVIOUR IN TIME OFDEPRESSION ................................................................................................. 129


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Rada Dănuţ - QUALITY OF THE FINANCIAL ACCOUNTINGINFORMATION FROM THE PERSPECTIVE OF THE CORPORATEGOVERNANCE ……………………………………………………………. 133Doina Rada - CREATIVE ACCOUNTING AND TAX DODGING ............. 141Alexandra Doroş - THE IMPACT OF NEW CHANGES IFRS ON THEACCOUNTING OF CREDIT INSTITUTIONS …………………………… 147Narcisa- Mihaela Stoicu - THE MANAGEMENT OF COMMERCIALCOMPANIES ……………………………………………………………….. 156F. Marcu, L. Lazăr, I. Timar, A.Timar - STATISTICAL STUDY OFMEDICAL RECOVERY AT THE REHABILITATION HOSPITAL INBĂILE-FELIX ……………………………………………………………… 162Nicoleta Luminiţa Jurj, Georgeta Burtică, Elena Săvescu, Florin Dumescu,Ladislau Klein - LAW CAPACITY WASTEWATER TREATMENTPLANTS .......................................................................................................... 167Sorin Fildan - PROFESSIONAL CATEGORIES ………………………….. 177Instrucţiuni pentru autori ................................................................................. 183


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Index de autori

Apan Rodica Diana 15Blaj Sorin 37Bratu (Simionescu)Mihaela 43Burtică Georgeta 167Cechin Crista Persida 59Cordovan Silviu-Sorin 73Dema Poruţiu Cosmina 129Dobrin Ionel Gabriel 94Doroş Alexandra 147Dumescu Florin 167Dumescu Timeea Maria 59Feieş Gheorghe Claudiu 65Fildan Sorin 177Gurzó Imre 1Jitaru Dan Mihai 99Jurj Nicoleta Luminiţa 167Klein Ladislau 167Lazăr L. 162Marcu F. 162Mateia Adrian Nicolae 104Miculeac Melania Elena 110Mihuţ Aurel 116Molnár István 1Munteanu Nicolae-Eugen 80Neagu Olimpia 25Negrilă Ovidiu 73Nistorescu Alina 122Popescu (Stîngaciu)Ana-Maria 80Rada Dănuţ 133Rada Doina 141Săvescu Elena 167Socoliuc Marian 65Stoicu Narcisa- Mihaela 156Şerban Radu R. 104Ştibli Florin 86Teodoru Mircea 32Timar A. 162Timar I. 162Virag Nicolae Paul 65

Studia Universitatis “Vasile Goldiş” Arad Seria Ştiinţe Economice Anul 21/2011 Partea I

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SOME THOUGHTS ABOUT THE QUESTION OF"HUNGARY AND EU MEMBERSHIP"

Imre Gurzó, István MolnárSzent Istvan University Faculty of Economics, H-5600 Bekescsaba, Bajza utca 33, Hungary

AbstractThe paper presents the main features of the policies which were followed by the left-liberalgovernments between 2002-2010. It sketches the state of the economy in Hungary inspring 2010, the most important measures taken by the Orbán government and thechallenges, open questions and problems which need to be solved. It describes the mostimportant political, economic, business, social, institutional and regional effects ofHungary’s EU membership, and in the end tries to sum up some important questions aboutthe possible future.Keywords: economic mistakes, needed reforms, political, economic, social, institutionaland regional effects of EU membership

1. IntroductionWhen Hungary entered the EU, Hungarians had characteristic expectations

from the EU. It was believed that EU integration should:a./ open up the world, including Hungary (the Community should integrate

and help us),b./ be competitive on international level, which can give advantages for

Hungary too,c./ be purposeful and future oriented, which can help us compete with the

other innovation hubs (USA, Japan and China)d./ express solidarity, which would help increase the living-standard, social

cohesion, which decrease the regional differences.

The overwhelming majority of Hungarians did not question the necessityof EU-membership. This was the only way to modernise the country. Hungariansociety was, and is even today, very uninformed about the EU. The propagandabefore 2004 gave mainly silly slogans about the Community. For example:

a./ we have to enter the EU because we have always belonged to Western-Europe,

b./ we have to belong to one of hubs of economic innovation in the worldeconomy, no other choice but the EU,

c./ we have to separate from the Russian sphere of influence,d./ if we are in the EU one will have new business opportunities (e.g.: you

also can open a café in Vienna!).


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A big mistake of the political elite was not to prepare the population forEU-membership.

But we can put forward another question too: "What did a commonWestern European citizen know about Hungary?" Definitely very little. A commonWestern European citizen knew mainly stereotypes about Hungary. For example:

a./ Hungarian revolution (1956): a huge riot against the Soviet Unionb./ Hungary was the most cheerful communist barrack (Kadar-period)c./ An indebted underdeveloped country with an odd language, culture,

identityThe real problem was that not only the average person, but also the

Western European political elite did not have an accurate understanding of us. Thisis still true today (see the current propaganda against Hungary in the internationalmedia). We can go on to ask: is it not high time to write common European schoolbooks about the history, geography, culture and society of the different Europeancountries?

2. Main features of the policies of left-liberal governments (2002-2010)The biggest problem was that the left-liberal governments did not have a

vision as to what kind of country they wanted to build. The way of thinking of thegoverning forces was the following:

a. lack of long-term thinking, short-term attitude. Consequence: "ad hoc"politics.

b. instead of cooperation there was opposition against political rivals.Consequence: "cold war" between the two political sides.

c. instead of a good economic policy, there was distribution without aneconomic basis (distribution from credits). Consequence: quick and sharp rise instate indebtedness (state debt in 2002: 52 % of the GDP, in 2010: 80 %).

d. instead of public security there was growing crime. Consequence:growing social tensions, more and more ethnic conflicts.

e. instead of transparent rules, laws and norms, there was growingcorruption, legal gaps, breakdown of social norms, lying and cheating.Consequence: a famous slogan from Tamas Fricz, "Hungary is a country withoutconsequences".

It was very characteristic of the left-liberal use of power too. These werethe following:

a./ constant reform rhetoric without real change,b./ focusing on getting votes from social groups who live off of the state

resources,c./ weakening and deterioration of the state: "outsourcing" of state

functions for their own party’s power interests,d./ obscure and unfair privatisation (only a small social group obtained

favours), narrowing politics down to the question: "who, when, what can I get fromthe state?"


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The consequences of the above were: bad governance, decrease in theprestige of the political class, weak and dysfunctional state, political apathy (notshowing any emotions), and social tensions, crime, corruption, growingdissatisfaction, so that in 2010 the middle-right political forces were swept intoParliament with a two-thirds majority.

3. General state of the Hungarian economy and society in spring 2010,and the measures taken by the Orbán government

Despite the strict measures of the Bajnai social-liberal government theHungarian economy was not able to compete in the world market and was fallinginto a deeper and deeper recession. In spite of high tax-rates, the effectiveness oftax collection was declining, and because of the lack of incentives to work,increasing social expenditures posed an unbearable burden on the state budget. Thegrowing deficit was financed by international credits, state indebtedness wasgrowing dramatically (this fact restricts the opportunities of the government eventoday). The basic fact - which is the starting point for understanding the measuresof Orban's government - was: Hungary was ready to collapse.

After forming the new government, Viktor Orbán and his team started towork with great devotion. The political philosophy of the Orbán government is alsointeresting. Orbán's thesis is the following: the post-communist period needs to endnow after 20 years, and a new period has to be launched. That's why he believes hismain task is to stop the socialist power edifice. Therefore:

a./ real reforms have to be introduced,b./ the new measure of governmental achievement is not the expectation of

big capital, not the pressure of international markets, but maintaining the socialwell-being of the people,

c./ the state has to be strengthened so that it can function,d./ Hungary cannot fall behind in the "modernisation competition",e./ new methods are needed to handle the crisis,f./ instead of marginal reforms we need to make comprehensive reforms.The prime minister also changed his use of power in practice. The main

elements of Orbán's politics:a./ common interests are above the particular, group, private interests,b./ new (non-orthodox) measures are needed, because the old methods

(weakening of the state, inflation, increase in state debt, restrictions) of handlingthe crisis have not been effective

c./ spiritual cross-border union of Hungarians living in the Carpathianbasin (integration of the different parts of the nation)

d./ instead of an ideological way of thinking, a pragmatic but principle-based approach to problems.

The new governing political forces enacted many measures within a shortperiod of time. An important group of them were the economic and financial ones.Concerning these, the goal was to avoid state bankruptcy in the short term andcreate a competitive economy in the middle term. During the summer of 2010 an


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action plan aimed at saving the economy was launched. Within this framework themain measures were the so-called crisis taxes (imposed on banks,telecommunication enterprises, energy sector, multinational commercial firms). Inthe autumn of 2010 reform of pension system was started by nationalising privatepension payments. Then the government published the Széll Kálmán Plan (2011.spring). This plan is a stabilisation and reform programme for the renewal of thestate and the economy, which focuses on the following:

a./ increase in the number of workplacesb./ launch of economic growthc./ decrease in state debt, expenditures, subsidy for public transportd./ end early retirements.A big mistake made by the political elite in the last two decades was

accepting financial dictatorship: there was no business and people friendly taxsystem in Hungary which could help the private sector, SME’s and the civil sphere.

2010. autumn: decision about the tax-system. From 2011 on there wouldbe a flat tax for everyone (the only tax level: 16 %).

Though only a short period has elapsed since it has been in force, we canmention some effects of the new tax-system, which are the following:

a./ a huge (500 billion Ft) hole in the budget, which had to be eliminated,b./ additional income for the elite and middle-class: the government hoped

the extra income would stimulate consumption and launch economic growth. It wasnot successful because people saved the surplus money or they paid back the loanswhich they had taken out to buy flats or houses,

c./ the new tax system increased social differences,and experts say it is a mistake and needs to be changed.It is well-known that Hungarian state debt is high (22 thousand billion Ft,

81 % of GDP). Its term period on average is 4.5 years, the interest rate level onaverage is between 6 and 7 %, and the interest burden is 4.5 % of GDP. Accordingto the participants in the international financial markets, this high indebtedness isrisky, and because of this high risk Hungary has to pay extra charges. The extracharges damage the position of the budget and negatively affect the course of theforint. The aims of the government, which have to be reached:

a./ a balanced fiscal policy with low deficit (under 3 %),b./ step by step structural reforms in the budget so that the high deficit will

not be able to reappear (lower the payments and discover new income resources)c./ reduce the state debt, so that the interest burden can decline.In the new constitution the government instituted an important long term

measure as well: it is obliged to reduce state debt to less than 50 % of the GDP.Prime Minister Orban's government made some changes in the social

sphere too. Unfortunately there has been a serious employment crisis in Hungaryfor a long time. The symptoms of this: low employment rate (just 3.7 millionpeople, 57 %), high unemployment rate (11.6 %, in some small regions 25-40 %),barely 2.7 million people pay taxes, many (about 1 million) people work in the“black economy”. According to the government: work is a money earning activity


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which provides social status and an organised connection with the state at the sametime. Therefore the most important aim is to increase employment. Measures forimproving employment.

a./ favourable taxes for entrepreneurs who create new work-placesb./ special supports for SME’sc./ “Back in the labour force market” programme: under this framework

many tens of thousands of people can get so called “public work” and earn moneyagain.

The catastrophic demographic position of Hungary is worrisome, and it isnot improving. The population is declining by 36,000 people/year. Now thepopulation is 9.9 million, in 2050 the population will probably be 8.3 million. Thegovernment wants to help the families who are raising children.

The government has instituted many measures in the social sphere. Themost important are the following:

a./ support SME's that want to create new work places (special funds forthem), public work projects (2012: 50,000 low-skilled individuals - among themgypsies - will be employed in public work)

b./ raise the minimum wagec./ reform the unemployment benefit and social aid systemsd./ guarantee the pensionse./ reform the system of financing educationf./ re-shape the health-care system (stop emigration of doctors)g./ Roma Integration Planh./ restore the child-care-allowance, tax allowance for people who bring up

children.In the reform process many structural and institutional measures had to be

taken too. First of all we had to have administrative reform. There was a decreasein the number of local governments (small villages and hamlets lost their right toform their own local governments), a bureaucratic simplification and reduction(30,000 people were let go from the administration), a new type of institution wasformed (County Governmental Offices). A distribution of functions between theCounty Governmental Offices and county councils was needed. The Parliamentrestored the district system (it will take effect in 2013). The goal is to create atransparent and people friendly administration (including e-administration). Theresult of these changes is that in 2012 administration payments will be 1 % smallerthan in 2011 (decreasing social payments will reduce the redistribution rate by afurther 1.5 %).

The government took some measures which have regional effects too. Oneof the first measures was the strengthening of public security in underdevelopedsmall regions (police stations). Also there has been a revitalisation of railwaytraffic on the by-lines that were shut between 2004-2010, and an improvement inbus service between small regions and regional centres.

Besides reopening some of them, the government immediately stopped theclosing of elementary schools and post offices in small villages. Also a


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development in cross-border relationships was taking place, and the governmentsupported co-operation between small regions on joint projects (e.g.: wastedeposits, sewage). Up-front financing for projects is provided by the centralgovernment, and fulfills a prerequisite for getting EU funding.

In order for them to run their institutions, the government opened urgentsupplementary resources from the state budget for the most impoverishedsettlements. In the end there was a slight decentralisation in the regional policy: the"mezo regions" got more authority, but the execution of the so called "operativeprogrammes" is still managed by the National Development Agency

4. Challenges, open questions, problems which need to be solvedThere are many obstacles which have to be overcome in the near future.

Among them are political, economic, social, institutional and regional problems.First of all Hungary has to integrate simultaneously:

a./ into European foreign policy: our foreign policy has to be adjusted tothe other EU-members', meanwhile we have to defend the Hungarian minority inways which cause minimum tension in the Carpathian-basin,

b./ into the Europe of political ideas: that means the visions of Hungarianparties have to adjust to the big European ideas and party families,

c./ into the Europe of economy: we have to develop a strong Hungarianeconomy which co-operates with the other national economies,

d./ into European education and science: our educational system has to beEU-compatible. We have to maintain our language and culture, and to show ourcultural values in Europe.

The biggest political problem in Hungary is the unending political "cold-war" amongst the Hungarian parties (a Hungarian "Moncloa-pact is needed).

Further on we have to form a new coherent growth oriented economicpolicy (the "ad hoc" measures have to be stopped). In this framework we have to:

a. solve the competitiveness and structural problems (profitability andcompetitiveness are low, the structure of the economy is not modern enough),

b. create a transparent fiscal policy (stable state budget, low deficit,declining state debt),

c. go on a consistent monetary policy (anti-inflation policy, support of thegovernmental aims) and to solve the "government versus National Bank" conflict,

d. form an enterprise friendly macro economic environment (reform of thejudicial code, deregulation),

e. continue the modernisation of the economy, based on knowledge andqualified human work ("high-tech" branches, support for R+D+I),

f. back selective economic development (special support for a fewimportant branches (e.g.: car industry, electronics, engineering industry, chemicalindustry, agribusiness, tourism),

g. support the enterprises in a more effective way while suppressingcorruption and the black economy.


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Today Hungary suffers many social problems too. One of the greatest isthat the employment rate is low (57 %). Just 3.7 million people work and only 2.7million people pay taxes. We need a significant increase in employment (plan: tocreate one million new work-places within 10 years). Also the struggle againstdiscrimination in the labour market has been a continuing problem for a long time.Carrying out the modernisation of our education system and raising the standard ofour labour force are both inevitable. We can not postpone the "gypsy problems"either. It is necessary to lift the living standard of gypsies (offering them work-places, education for their children) and to strengthen their social inclusion. Thegovernment should continue the, already begun, health-care and social supplysystem reforms.

Many sensitive and unsolved issues exist among the regional problems too.Some of the challenges are:

a. to improve the state of natural and rural environments,b. to continue the so called "pole towns programme" (that means: we have

to continue to strengthen the biggest cities which have a balancing role against thedominance of Budapest in the Hungarian urban system (Miskolc, Debrecen,Szeged, Pécs, Győr),

c. to improve the infrastructure: focusing mainly on the by-roads, thesewage network and water regulation system (New Vásárhelyi Plan),

d. to stop the decline in the overall population and the increasingproportion of elderly people,

e. to solve the common security problems in small villages and hamlets,f. to handle the Gypsy-Hungarian conflicts in the underdeveloped small

regions.

5. Effects of EU membership on Hungary

5.1. Political effectsLet's investigate this question from the point of view of the nation.

Hungarians hoped that membership would bring solutions to the problems ofHungarians who are living as minorities in the neighbouring countries (languageuse, autonomy). The results have been mixed: the Schengen Agreement made iteasier to establish connections, the situation of Hungarians has improved inRomania, Slovenia, Croatia and Serbia but not in Slovakia and Ukraine. Thenumber of Hungarians living in the neighbouring countries is constantly declining,and assimilation is continuing at an accelerated pace.

From the point of view of internal party policy: a democratic politicalculture has been established, political life is more professional and more civilised.The Hungarian parties have integrated into the families of the European politicalparties.

From the point of view of internal party policy we can see a kind ofstabilisation of democratic political culture, political life is more professional andmore civilised. The Hungarian parties have integrated into the European political


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party families. A common negative feature is that the parties keep "labelling" eachother. The labels:

a./ from the left side: if a party belongs to the left side, they see themselvesas representatives of democracy, independence, freedom, and tolerance, but allother parties are extreme, nationalistic, fascist and racist.

b. from the right side: the left-liberal side is cosmopolitan, post-communist, too secular and not patriotic enough.

Unfortunately the Hungarian parties do not have a common vision of thefuture of Europe, because:

a./ the conservatives would like to build a Europe which holds to Christianroots and traditions,

b./ the liberals want to see a Europe which honours personal freedom,c./ the socialists envision a Europe of solidarity, which defends the

working class and poor people.Positive effect: cooperation between Hungary and some Central-European

countries (e.g.: Austria, Poland, Czech Republic, Romania, Slovenia) continues todeepen.

Hungary wants to have a stabilising role in the Carpathian-basin: wesupported all our neighbouring countries for the NATO- and EU-membership (e.g.:Romania, Slovakia, Bulgaria, Croatia and this year Serbia).

Negative effects: Hungary and the other new members are not equal to the"old members", although the restrictions have ended. The so called "two-gearEurope" still exists. That means there is a "development inclination", the developedWestern "plateau" and the underdeveloped Eastern "plain".

Another negative fact is the "double standard": it doesn't strengthen EUpopularity among Hungarians.

An interesting negative consequence of membership: there is a powercentre, Brussels, against which one may complain (similar to the position ofMoscow in the communist period).

In the end overwhelming majority of the Hungarian political elite supportsour EU-membership, but sometimes feels that Brussels interferes too often in ourinternal affairs and that there is too much bureaucracy.

5.2. Economic effectsThe effects are on two levels: macro and micro. There have been many

effects of membership on the macro (country) level. The most important macroeffects in Hungary are the following:

a./ we gained new sources for development,b./ improved the competitiveness of our economy,c./ the country had a higher GDP growth rate than it would have had

without membership (experts claim: +0.8 %/year),d./consumption increased quicker than it would have without membership

(experts say: +0.7 %/year),


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e./ financing the deficit is easier due to the inflow of capital andaccelerating effects of the EU resources,

f./ tearing down the custom-like barriers lifted GDP growth by 0.5 % andimproved the export and import ratio of exchange values by 0.4 %.

An important basic problem is that the left-liberal government did not havea vision as to how it wanted to integrate the country into Europe: twice between2004-2006 the Hungarian convergence programme was not accepted. The EUCommission also made also a serious mistake in accepting the false data given bythe Hungarian government concerning the Hungarian economy and fiscal situation.

Today the Hungarian economy is an integrated part of the EU economy.EU membership reduced economic risk and improved the trust of foreign investors.EU membership is an important defence for us (as the financial crisis and the quickIMF and EU credit proved in 2008). And vice versa as well: changes in the EUeconomy directly affect the Hungarian economy.

Our economic structure is being modernised quicker than if we hadn'tentered the EU. Hungary has to make structural reforms, has to form a morecompetitive economy, one which attracts foreign capital and where the economicclimate is business friendly.

The Hungarian economy is increasingly taking on the character of a marketeconomy. The country is getting a lot of resources for development (agriculturalsubsidies, regional and cohesion resources), and the importance of these aregrowing.

Governmental influence on the economy is smaller than it was before 2004(customs, subsidies, taxes). During these eight years the political elite have learnt:EU-membership forces the government to continue a strict fiscal policy.

The relation between the market and redistribution has changed with ourEU-membership: this proportion was 33:67 in 1989 the rate of the market has beenconstantly growing, especially since 2004. Today the rate of redistribution is stillhigh, 47-48 %, and the aim of the government is for this to sink below 40 %.

An unexpected phenomenon: the inflow of foreign capital did not grow asfast as it was expected to. It is difficult to judge whether it is positive or negative,but it is a fact, Hungary did not enter the monetary integration as Slovakia andSlovenia did. What is sure: we will not have euro before 2018. First the country hasto have a stable budget and a competitive economy, and then it can enter the euro-zone. Today we cannot fulfil the "Maastricht-criteria", because state debt is 80 %of GDP, the inflation rate is 6 %, the national bank's prime interest rate is 7 %.Because of these things the rate of exchange of the forint is not stable and is subjectto strong speculation. Hungary needs a precautionary or stand-by credit agreementwith the IMF and EU.

Hungary has a small open economy for which foreign trade is fundamental.EU membership, a free market, liberalisation, duty free trade have been favourablefor Hungary.

Since EU-membership foreign trade has increased rapidly, and 80 % of ourexports-imports are within the EU. Structural changes: the proportion of services in


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foreign trade is getting higher and higher, and it is remarkable that agriculturalimports have grown more sharply than exports. All the while Hungary has theappropriate natural resources that should enable it to have a large and modernagricultural sector. However, the reason it does not: lack of preparation for EU-membership and efficiency production problems.

EU membership had a good effect on the inflation rate in the first years.Greater market competition reduced price growth, and often the EU duties thatwere used were smaller than the previous Hungarian ones.

Membership improved the conditions of R+D+I, but not by a large enoughamount. The EU should give more money for R+D+I, research and educationinfrastructure.

Effect on agriculture: the profit positions of many farmers improved(thanks to the EU subsidies). On the other hand, these subsidies conserved theproduction structure (the dominance of grain and industrial plants). There was nostructural change. Vegetable and fruit production, which are more profitable,haven't been developed enough, and the profit/hectare has remained small.Consequence: fewer and fewer people can make a living from agriculture and thevillages are becoming impoverished.

Membership brought many economic effects on the micro level too (theenterprise level). First of all the common market had an overwhelmingly positiveeffect on the enterprises, because it

a./ improved the possibility of getting in the market (but the Hungarianfirms have hardly exploited this opportunity),

b./ bettered the conditions for the inflow of capital and the importation oftechnology

c./ strengthened research and development and innovation capacity,d./ deepened the cooperation and strengthened the relationships between

the big multinational companies and small and medium-sized domestic enterprises,e./ has been favourable for a number of enterprises in some sectors (e.g.:

banking, electronics, construction, telecommunications, engineering and the autoindustry).

The negative effects of the common market are thata./ a big share of our domestic market has been taken over by companies

from other countries, and at the same time the Hungarian enterprises have not beenable to expand and get footholds in foreign markets to the same extent as they havedeclined here in our domestic markets,

b./ a lot of enterprises have gone bankrupt in a lot of branches, so withmembership has come a loss of work places,

c./ domestic small and medium-sized enterprises have become defencelessagainst big multinational companies,

d./ it has been unfavourable for a number of enterprises in some sectors(e.g.: animal husbandry, transport, food and textile industries).


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5.3. Effects of the membership on the business cultureThe most important effect of membership was that it enabled the

Hungarian business life to get accustomed to and also take up Western businessculture after a hiatus of 50 years. The self image of the entrepreneurs is "I am verygood at my profession, I have to fight the difficulties to stay alive and win". Theirimage about the world: “the world is a battlefield, which gives opportunities, butholds threats, risks and challenges, and is often hostile.” There are threatsconcerning businesses such as economic problems, possible state bankruptcy,political problems (political extremes), social problems (crime and violence),environmental problems (climate change, destruction of the environment). Themain features of their morality: the majority are honest and are loyal to theircountry, but many of them are not (putting their assets into off-shore enterprises,serving foreign capital at the expense of their country, playing dishonest tricks).

5.4. Social, institutional, educational effects and effects on identityThe Hungarian citizens were not properly prepared for the Union. There

was a lot of false and misleading information given. The negative results of ourmembership are that Hungary's highly educated human capital keeps decreasing.This is due to the young, well-educated work-force leaving the country for WesternEuropean countries. Today a lot of our degree-holding youth is planning to goabroad to work. This is becoming a major problem for a number of professions(e.g., doctors, scientific researchers, and technical engineers). On the other hand, afurther negative effect of this wave of emigration is that the other end of thespectrum, those in the disorderly segment of society who are leaving, are harmingHungary's image abroad. However, the Western countries' fears regarding amassive outflow of the work force from Hungary to the West were unfounded.

Social differences in Hungary, and, as a result social tensions, haveincreased (differences in social status, wealth, living standards and the differencesin the power of separate communities of interests have become significant). After2002 the distribution of resources and wealth has become more uneven: theEuropean market allowed for a fast-paced integration and financial gain for theHungarian elite, whereas most social groups are fighting to avoid decline. An everwidening segment of the middle class is slipping into poverty, leaving a vacuum (ashrinking middle-class). At the same time the elite is living in growing luxury andgaining financially without any real accomplishments that can be observed, andthis social gap continues to widen. Since 2002, with this polarisation, there hasbeen a growth in social prejudice and also increasing intolerance (growingaversions among Hungarians towards gypsies and against the elite and growingaversions among social minorities against Hungarians and against Europe).

There is a peculiar problem in the evaluation of the social groups inmodern society that need aid and receive resources from the state's redistributionsystem. In the modern way of thinking (so also in Hungary) only labour and capitalare seen as valid sources of income. Income received by disadvantaged groups


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through state redistribution is seen by the rest of society as a burden (and theperception remains that these groups are useless parasites).

Hungarian education (including higher education) is being transformed. Itis becoming EU-compatible (Bologna process). The following main processes havebeen put into place:

a./ harmonisation of the Hungarian educational sphere and the EU commoneducation policy,

b./ educational development from EU resources (infrastructure, humanresources),

c./ many more students in higher education, more people take part in lifelong learning,

d./ the standards of higher education have been declining (instead of eliteeducation, there is now mass education),

e./ the consolidation process amongst institutions of higher education hasbeen going on at a snail's pace (there still are too many universities and colleges),

f./ participation in EU-projects (e.g.: Erasmus, Grundtvik, Leonardo,Comenius),

To sum up: the educational system and education itself have started on theway towards EU-integration.

5.5. Regional effectsSharply improved the infrastructure in the country on the macro level (new

highways, a new metro line in Budapest, building up the sewage system and gasnetwork etc.), but the by-road network has been deteriorating.

Another positive effect: tender opportunities for EU money. Today thisalmost is the only way to get money for development for the small regions andsettlements.

Negative result: the difference between the most developed and mostunderdeveloped regions has not been declining but has been growing. There hasbeen no convergence in the development of regions in Hungary. Furthermore, theunderdeveloped regions in Hungary have shown no improvements when comparedto the EU average.

6. Some important questions about the possible futureA serious philosophical problem is the possible European integration

development alternatives. The basis of EU integration: French-Germancooperation. Question: how can they play their roles in the future?

Experts say: there are two possibilities for the further development ofintegration:

a./ A supra-national Europe (a European USA): this solution requiresgrowth in the importance of common institutions, further national functions have tobe settled into Brussels, the euro must be used in all countries and the Pact ofStabilisation and Economic Growth must be put into practice everywhere.


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b./ A Europe of nations: this requires a so called "re-nationalisation"process, the role of common institutions must be weakened and national interestsmust be safeguarded, must be strengthened.

The overwhelming majority of Hungarians would like to see the secondversion.

The EU suffers from some important weaknesses. These are the following:a. democracy deficit: the EU is a non-democratic organisation having

democratic institutions. The following "double-standard" can be seen. Its way ofthinking: "every country is equal, but there are some more equal than the others".

b. too much bureaucracy: the organisation is too bureaucratic, and averagepeople sometimes feel the EU is not for them but for bureaucrats.

c. effectiveness problems: the European Commission does not behave notlike a responsible government, the Parliament is hardly a decision maker, but anorganisation in which party and lobby interests are expressed.

d. personnel problems: it is difficult to find politicians of authority incommon institutions, and the majority of them are not famous and talented enoughor they are technocrats.

e. identity problems: EU institutions are far from the average person, andpeople don't feel that the institutions belong to them. There is not a common"European" feeling or a common "European citizen" identity.

In the last two years Hungary and the EU have been having conflicts. Thebasic situation is the following: the new government wants to put an end to theservile behaviour which was characteristic of the previous governments and have aproactive European policy, but the Brussels' bureaucrats do not want to accept this.The Hungarian government has taken unusual (unorthodox), painful measures(crisis taxes etc.). The bankers and the leaders of multinationals have dislikedthem. These economic interest groups searched for supporters and found them inthe IMF and the EU.

Also the government has made numerous mistakes (e.g.: new regulationson the role of the National Bank, the media law, working age limit for judges). Insome respects the criticisms concerning the activities of the Hungarian governmenthave been justified.

Certain Hungarian political forces have an interest in discrediting thegovernment, and not regarding the damage which they cause to the reputation ofHungary.

Result: unfair charges, lies, false information about the circumstances inHungary, the prestige of Hungary has declined sharply.

Brussels and Strasbourg also have turned out to be very uninformed aboutHungary.

"Double standard" against Hungary.Meanwhile there are hardly any formal judicial processes against Hungary.Hungarians are indignant at the following EU decision: the payment of

cohesion money will be stopped if the government does not fulfil certain demandsof the EU Commission.


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A part of Western media has started to defend Hungary (e.g.: Wall StreetJournal wrote: the "war" against Hungary is meaningless, it is useful only againstthe radical political forces, who are against EU-membership. The reputation of theEU is strongly declining. More and more Hungarians are against the EU.).

At this time financial markets are not showing concern about possible EUsanctions, but things could change.

LiteratureG. Fodor G. 2011: Tíz tézis a második Orbán-kormány első évéről -

Nemzeti Érdek, 2011. Tavasz. V. évf. 1. szám. pp. 7-21.Gurzó, I. – Molnár, I. 2011: Political, Economic and Social Changes in

Hungary (2002-2011) Problems and Progress – in.: Studia Universitatis „VasileGoldis” 2011. Arad Seria Stiinte Economice 21/2011, Arad pp. 83-88

Kumin F. 2011: Új mércék a társadalompolitikában - Nemzeti Érdek,2011. Tavasz. V. évf. 1. szám. pp. 35-41.

Lánczi A. 2011: Az állam újraértelmezése – Nemzeti Érdek, 2011. Tavasz.V. évf. 1. szám. pp. 3-6.

Matolcsy Gy. 2011: Államadósság - Nemzeti Érdek, 2011. Tavasz. V. évf.1. szám. pp. 22-34.


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THE CREDITOR’S FAULT- MEANS OF EXTINCTING THE SURETYSHIP;

SPECIAL FEATURES WITHIN THE BANKRUPTCYPROCEEDINGS

Rodica Diana ApanAssociate professor within the Department of Economical Studies, Faculty of Sciences,

CUN Baia Mare, Tehnical University Cluj Napoca, Romania, [email protected]; [email protected] ;

AbstractA specific means of extincting a suretyship is constituted by the creditor’ act, in this casethe bank, which allowed the loss of the rights and securities he had against the principaldebtor and in which the surety was going to subrogate.The fault of the bank according to the analyzed case-law is that the bankruptcy procedurefor the principal debtor was already opened and thus he was too late in lodging claims anddid not gain the statute of creditor entitled to participate to the bankruptcy proceedings.The surety’s right of recourse against the principal debtor, through subrogation, in order toobtain from him the repayment of the amounts paid to the bank-creditor comes in conflictwith the creditor’s act. Following the non-registration of the bank on the statement of assetsand liabilities of the debtor undergoing bankruptcy, the surety is deprived of the possibilityto legally subrogate to his rights and securities.The extinction of the suretyship consequently acts as sanction for the bank that allowed theloss of the rights and securities it had against the principal debtor and blocked the surety’spossibility to exercise the right of recourse and subrogate to the rights of the bank torecover from the bankrupt debtor the amounts paid to the creditor.Key words: creditor’s fault, bankruptcy, suretyship, the surety’s subrogation to thecreditor’s rights, the surety’s right of regress against the principal debtor.JEL Classification: K

1IntroductionThe present study focuses on the analysis of the case-law related to the

extinction of the suretyship (The New Civil Code hereinafter called NCC, in force since1 October 2010 uses the Romanian term “fideiusune”, which we will use in the presentresearch in order to bring it into line with the new regulations, while the Old Civil Codeuses the Romanian term “fidejusune”) by act of the creditor, within the course of theprincipal debtor’s bankruptcy proceedings and at the same time represents aresearch on the judicial mechanisms that set the surety guarantor within thebankruptcy proceedings, in accordance with the provisions of Insolvency Law85/2006. (Published in the Official Gazette no. 359 of 21.04.2006, version consolidated in7.10.2010, hereinafter called Law 85/2006).




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Beneficium cedendarum actionum validates the right of the surety that paidthe debt owed to the principal debtor, to exercise the right of recourse against theprincipal debtor, through subrogation, in order to obtain from him the refund of theamounts paid to the creditor. If the creditor, through his acts, makes impossible theexercise of these rights by the surety, the surety shall be released from any liability,pursuant to art. 1692 of the Old Civil Code (Hereinafter called OCC; Pursuant to art.3,4 and 5 of Law 71 of 03.06.2011 on the enforcement of Law 287/2009 on the NCC “ Thejudicial acts and deeds carried out, produced or closed before the effective date of the NewCivil Code cannot generate other judicial effects than those provided by the regulation inforce at the moment they were carried out, produced or closed. On the effective date of theNew Civil Code, the judicial acts that are void, voidable of affected by other motives ofinefficiency, provided by the Civil Code of 1864, as well as by other regulations, shallremain under the provisions of the old law, and cannot be considered valid of efficient inaccordance with the Civil Code and with the provisions of this law. The Civil Code appliesto all the acts and deeds carried out, produced or closed after its effective date as well as tothe judicial situations arisen after its effective date.” Therefore, even if the regulations to beapplied in this case are those under the OCC, for the coherence of the doctrinaryundertaking we will also indicate the corresponding texts from the NCC.) “The guarantoris released from his liability at the moment when, by the creditor’s act, he cannotsubrogate to the rights, liens and mortgages of the creditor” (The phrase “by thecreditor’s act” from art. 1682 of the Civil Code suggests the creditor’s fault in losing hisright, preference or security.” in Turcu I. (2006) Treatise on Insolvency, C.H. BeckPublishing House, Bucharest, page 110.) This provision is also contained by art. 2.315of the New Civil Code “The release of the surety by the creditor’s act”, accordingto which “If, following the creditor’s act, the subrogation is not favorable to thesurety, the latter is released of the amount he could not recover from the debtor”.

Actually, in 2008, between the bank and the debtor – Limited LiabilityCompany, a credit contract and addenda were concluded, the duration of the creditbeing 7 years. (Destined for the purchase of a building – land with pavilion for setting-upa service garage; Following the conclusion of addenda to the credit contract the amount ofthe credit remained the same and afterwards the credit was converted into Euros.) Toguarantee the fulfillment of the obligation to repay the credit contracted by theprincipal debtor, different categories of securities have been concluded:

- securities in rem in the form of a mortgage contracts that secure thefulfillment of the principal debtor’s obligation to repay the loan, with twoimmovable properties; (Representing land and building, transformed into businesspremises and a two bedroom apartment transformed into business premises)

- personal securities in the form of two suretyship agreements concludedbetween the bank and each of the two natural persons, shareholders of the principaldebtor and their spouses;

2The suretyship contract and its effects;The suretyship (guarantee) is defined by the doctrine as being a contract

through which a person called surety binds himself before another person’s creditorto honour the obligation of the person he guarantees for, in case the latter does not


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execute it. In this case, the sureties guaranteed before the bank, with all theirpresent and future assets, to exercise the principal debtor’s obligation resultingfrom the credit contract, which is that of repaying the credit contracted by thedebtor from the bank, if the debtor does not honour it. (The means that cover thedebtor’s insolvability risk are sustained by the doctrine: “1) by adding other debtors(personal securities); 2) by first using certain assets to secure the payment of the debt(collateral security)”)

The suretyship contract has an accessory character in relation to theprincipal obligation that the principal debtor has towards the creditor, according tothe principle accesorium sequitur principale. (This results in a series of consequences:- the suretyship will have the fate of the principal obligation as far as the validity andextinction clauses are concerned; - the suretyship cannot exceed the debtor’s debt andcannot be carried out under more costly conditions; - the undetermined suretyship of theprincipal obligation comprises the accessories of that obligation as well as the legal debtcollection fees.) As far as its effects are concerned, the suretyship contract must beregarded from the point of view of the categories of rapports: - one between thecreditor and the surety; - the one between the surety and the principal debtor; - theone between the sureties, hic et nunc we are to focus on the analysis of the first twocategories of rapports as they are relevant for the present research.

(i) The effects of the suretyship within the rapports between the surety andthe creditor, where the surety waives beneficium ordinis seu execussionis benefit ofexcussion, such as in this case, are that the creditor can proceed directly against thesurety to recover the debt, without being conditioned to first proceed against theprincipal debtor. At the same time, assuming that the surety renounced thebeneficium divisionis – the benefit of division, such as in this case, the creditor canproceed against a co-surety to recover the entire debt.

(ii) The effects of suretyship in the rapports between the surety and theprincipal debtor are regulated by the provisions of art.1669-1673 of the OCC andare firstly represented by the right of recourse the surety has against the principaldebtor, to recover from the debtor the amount paid to the creditor, a right providedby art.1669(1) of the Civil Code. The ground of the right of recourse is the totalsubrogation to the right of the paid creditor, provided by art.1670 referred toart.1108 (3) of the OCC. Through subrogation, the surety benefits all rights andsecurities that the creditor had against the debtor. The provision is also containedby art. 2.305 of the NCC, and it is called “the surety’s subrogation”.

3The opening of the bankruptcy procedure against the principaldebtor; the bank’s lodgment of claims outside the term set by the judgment toopen the proceedings;

On 27.07.2010, against the principal debtor and on his demand, thesimplified bankruptcy proceedings (Through Judgment no. 2460/27.07.2010 deliveredin case no.4700/100/2010 on the docket of Maramures Tribunal) were opened, thuscoming under the provisions of the Insolvency Law 85/2006. In accordance with


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the provisions of art. 64, (1) of Law 85/2006, in order to have the creditor’s rightsmet within the proceedings, all creditors, excepting the employees, whose debts areprevious to the date of the opening of the proceedings, shall lodge claims withinthe term set through the judgment to open the bankruptcy proceedings. In this casethe term was set for 24.08.2010.

The bank was notified on 6.08.2010 by the judicial liquidator,about the opening of the bankruptcy proceedings against the principal debtor,pursuant to art. 7 (3) of Law 85/2006, but he lodged his claims to late, on20.09.2010. Consequently, being a debt holder before the opening of theproceedings, the bank was sanctioned for not lodging the claim in due time,pursuant to art. 76 (1) of Law 85/2006, with the lapse of the date for lodgingclaims. As a consequence the bank did not achieve the statute of creditor within thebankruptcy proceedings of the principal debtor.

4 Beginning the forced execution against the sureties, by the bank; Thesureties‘ appeal against the execution is grounded on the extinction of thesuretyship by the bank’s act of not lodging the claims within the bankruptcyproceedings;

Since the bank can no longer pursue against the principal debtor within hisbankruptcy proceedings, they began the forced execution proceedings against allthe sureties, in accordance with the provisions of the Civil Code, by issuingwarrants of forced execution. (The forced execution against sureties – natural persons,who concluded suretyship agreements, guaranteeing the fulfillment of the debtor’sobligation to repay the credit, when the latter does not fulfill it, is carried out separatelyfrom the insolvency proceedings, pursuant to the Code of Civil Procedure. Following theopening of the proceedings, it is not suspended the forced execution of the sureties andmortgage guarantors that guaranteed personally or with their goods the fulfillment of theobligations by the debtor against whom the proceedings were opened, as the provisions ofart. 36 of Law 85/2006 do not apply in this case. Consequently, pursuant to art. 137 (3) ofthe Law 85/2006 “ The debtor’s discharge of obligations does not lead to the discharge ofobligations of the surety or principal co-debtor”.) The appeal against the forcedexecution, filed by the sureties pursuant to art. 399 and the following of the CivilCode was mainly substantiated on the stipulations of art. 1682 of the OCC thatregulates, as indicated ut supra, the extinction of the suretyship by the creditor’sact. Thus, the surety is “released from the liability”, by the creditor’s act, whopermitted the the loss of the rights and securities he had against the debtor and inwhich the surety was to subrogate. (See Judgment no. 2247 of 2.10.2009 delivered bythe High Court of Cassation and Justice, jurisprudenta.org, which sustains that “ Not lastly,the creditor’s duty to realize the “ securities” that existed at the moment of the conclusionof the suretyship contract remain in relation with the surety even when the debtor isinsolvent”.) The doctrine sustains that ad probationem “The surety must preciselyindicate the right, security or lien the creditor has lost and prove that he could havesubrogated in exercising this right and that he counted on the subrogation to thisright of the creditor when he assumed the obligation to guarantee.”


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In this particular case, the bank’s fault, asserted by the sureties in theappeal against the execution, lies in the late lodgment of the claim and they did notobtain the statute of creditor within the bankruptcy proceedings of the principaldebtor. The consequence of the bank’s act is that the sureties are deprived of thepossibility of legally subrogating to the rights and rank the bank should hold withinthe principal debtor’s bankruptcy proceedings, and at the same time they aredeprived of the possibility to exercise their right of recourse against the principaldebtor, to recover from him the amounts that they will pay to the bank.

In case that the bank would have participated as creditor in the bankruptcyproceedings of the principal debtor, and considering that it would have had thestatute of a surety creditor, the loan being secured with securities in rem, theywould have been second in the ranking for the distribution of the amounts obtainedfrom the sale of the debtor’s assets. In consequence, it is obvious that the securitiesin rem of the credit, instituted on the principal debtor’s immoveable assets have notbeen preserved by the bank within the bankruptcy proceedings.

Moreover, following the realization within the bankruptcy proceedings, ofthe immovable assets owned by the principal debtor, which constituted the securityof the credit, and following the distribution of the amounts made in theproceedings, the amounts that resulted from the realization of the two mortgagedbuildings that were distributed to the creditors entitled to participate in theproceedings, even if they did not have immovable collateral securities constitutedin their favor on these assets. Therefore, as follow up of the realization of themortgaged immovable assets within the bankruptcy proceedings, the bank did notcollect any amount to cover the loan granted to the principal debtor.

5 The ranking of the sureties within the insolvency proceedings of theprincipal debtor;

There are only two judicial mechanisms that rank the sureties within thebankruptcy proceedings, in accordance with Law 85/2006:

a) the lodgment of the surety’s claim and its registration on the temporarypreliminary list, under the suspensive condition to make the payment, pursuant toart. 3 (16) corroborated by art.64 (4)(5), in relation to art. 72 of Law 85/2006;

b). the registration of the surety’s claim on the list of claims, in the amountor part of the amount he paid to the creditor, pursuant to art. 71 of Law 85/2006.

Having in view the incidence of the first mechanism in the analyzed case-law, we shall focus on detailing it.

(i) The judicial mechanism of the temporary registration of the surety’sclaim under the conditions mentioned ut supra, in relation to the fact that Law85/2006, in art. 71, specifically stipulates only the registration of the surety’s claimin the amount or part of the amount paid to the creditor is a creation of the case-law, (See Judgment 574/2008 delivered by the Bacau Court of Appeal, onhttp://www.avocatura.com/speta-166447-faliment, on the temporary registration of thebankrupt debtor’s guarantor on the preliminary list of claims.) and Law 85/2006 permits

http://www.avocatura.com/speta-166447-faliment


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it. The surety’s claim and its registration on the temporary, preliminary list ofclaims, as debt under the suspensive condition to make the payment to the creditor,(In accordance with the provisons of art. 3 (16) of the Insolvency Law 85/2006 amendedand supplemented, “the preliminary list of claims comprises all the claims arisen before thedate of the opening of the current proceedings, that are due, coditioned or disputed,accepted by the judicial administrator after being verified) pursuant to art. 3 (16)corroborated by art. 64, (4)(5), in relation to art. 72 of Law 85/2006 (The temporaryregistration of the mortgage guarantor that secured with the immovable assets he owned thefulfillment of the bankrupt debtor’s obligation to repay the loan, in case no. 7435/100/2011on the docket of Maramures Tribunal), is to be lodged before the date set by thejudgment to open the proceedings. In accordance with the provisions of art. 3 (16)of Law 85/2006 „the preliminary list of claims comprises all the debts arisen beforethe date of the opening of the current proceedings, whether they are due,conditioned or disputed, accepted by the judicial administrator after they areverified. Consequently, the surety’s debt, after being verified by the judicialliquidator, shall be temporary and conditionally registered on the preliminary list ofclaims against the debtor’s asset, following that as soon as the payments to thecreditor have been made, the surety’s claim gains a final character.

The grounds of the registration are also represented by the provisions ofart. 1673 (2) of the OCC, according to which the surety, without having been paid,can claim indemnity from the debtor when the latter is bankrupt or insolvent. Thisprovision is also comprised by art. 2.312 of the NCC, where it is called“anticipated recourse”.

We consider that by applying this judicial means, the surety creates thepremise for recovering from the bankrupt debtor, within the proceedings, theamount he will pay to the creditor but in practice, resorting to this mechanismhappens rather rarely. That is because Law 85/2006 specifically stipulates the caseof the lodgment of claims by the surety, without having paid the amount or part ofit to the creditor, so that the claim is temporary and conditionally registered on thepreliminary list.

(ii) In accordance with the stipulations of art.28 (1)(c) of Law 85/2006, thedebtor’s application to open the insolvency proceedings shall be accompanied by alist containing the creditors’ names and addresses, regardless of the character oftheir claims: firm or conditioned, liquid or not, due or not, challenged forcancellation or not, mentioning their amount, cause and ranking rights. As long asthe stipulations of art.28 (1)(c) indicate that the list containing the creditors’ namesand addresses shall comprise the claims “regardless of their character”, includingthe conditioned claims, to render these stipulations efficient means to comprise thebankrupt debtor’s sureties in this list as well, a situation that is not practiced. Thisis because Law 85/2006 does not specifically stipulate the case of comprising thesurety and his claim in the list of creditors and their debts.

(iii) We ascertain that in both cases that we identified at points (i) and (ii),the regulations they are grounded on, respectively those under art. 3 (16) and art.28 (1)(c) of Law 85/2006 employ the reference to the criterion of the statute of


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claims to determine the creditors and their claims - firm or conditioned, liquid ornot, due or not, challenged for cancellation or not.

Consequently, because reffering to the criterion of the statute of the claimto determine the creditors and their claims has a limited efficiency, we consideradding a second criterion: the exemplifying and not limitative enumeration of thoseclaims that can be placed in the categories provided by art. 3(16), respectively art.28 (1)(c), as a remedy to be imposed within the New Insolvency Code. (See:http://www.juridice.ro/172515/insolventa-va-fi-reglementata-de-codul-insolventei.html)This enumeration is to comprise the claim of the surety who guaranteed thefulfillment of the obligation of the bankrupt debtor, in case he does not honour it.

For reasons of legislative coherence of the new regulation, theexemplifying and not limitative enumeration would be more adequate to becomprised in the The Manual for good practice in insolvency, which contains thiskind of examples and which requires update once the New Insolvency Code entersinto force.

(iv) The statute of sureties of the principal debtor – LLC, is mainly held byits associates, who are usually managers as well. Consequently, the associates willbe informed on the opening of the proceedings against the principal debtor and ofthe date established through the judgment to open the proceedings. In case thestatute of surety of the principal debtor is held by persons outside the company, andhere we refer to natural persons in particular, the legal regulations that provide themeans through which these persons, as creditors, become informed of the openingof the proceedings and the due date for lodging claims temporary andconditionally, have limited effects.

In order to comply with the provisions of art. 61 (1) the judicialadministrator/liquidator shall send notifications to all the creditors found on the listthat was lodged by the debtor, and the creditor included on the list shall be notifiedof the opening of the insolvency proceedings against the debtor and the due datefor the lodgment of claims, in compliance with the provisions of the CivilProcedure Code, namely he will be informed by sending the notification withreceipt to his registered office. This way we consider that it would also be efficientto inform the surety of the opening of the bankruptcy proceedings.

It is true that the notification of the opening of the proceedings is publishedin the Bulletin of Insolvency Proceedings, according to the provisions of art. 7, (3)for the creditors that could not be identified on the list and thereby the notificationprocedure is considered fulfilled. However, the possibilities of the surety – naturalperson, to become informed through this means of the opening of the proceedingsand apply in due time for the registration of his claim, are reduced. Or, not lodgingthe claims before the due date, as far as the respective claims are concerned, leadsto the lapse of the right to be registered on the list of creditors as provided byart.76,(1) of Law 85/2006.

By not including the surety on the list of creditors and claims, lodged bythe debtor within the insolvency proceedings, it is rendered inefficient the verystipulation that is supposed to ensure the creditors’ protection in general, by

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creating the possibility to inform them of the opening of the proceedings inaccordance with the Civil Procedure Code. (Judgment no. 538/2011 of theConstitutional Court, published in the Official Gazette no. 11 of 06.01.2012 on the rejectionof the plea of unconstitutionality of the provisions of art. 7 (3) of Law 85/2006 oninsolvency proceedings, consider that " ..it is impossible to communicate the summonswithout knowing the name of the party to be summoned” and the creditor’s name andregistered office or residence shall be indicated on the list provided by art. 28 (1))

(v) Regulating as explained at point (iii), by decreasing the source ofambiguities in the indicated legal texts, the surety is to benefit, previous to themaking any payments from the amount owed to the creditor, of two degrees ofprotection of the ranking and of exercising his rights within the insolvencyproceedings, which this time we find to be provided by Law 85/2006, but onlygenerally, regarding any creditor. Or, within the insolvency case, in the stage ofthe lodgment by the debtor of the list of creditors and claims or in the stage ofdrawing up the preliminary list, it is necesary to ensure, especially for the surety,efficient legal means of exercising the right of recourse he has against the principaldebtor to recover from him the amount that he is to pay to the creditor. As a matterof fact, are rare the cases like the one presented here, in which the surety is„released of the guarantee” by the creditor’s act who allowed the loss of the rightsand securities he had against the debtor and in which the surety was to subrogate.

6 The sureties’ undertakings; The course to follow;In this case, the sureties’ approach within the bankruptcy proceedings

against the principal debtor was that of lodging claims within 15 days of thebeginning of the bank’s forced execution against them, as provided by the CivilProcedure Code. (The solution is confirmed by the case-law, for the mortgage guarantorof the bankrupt debtor in Judgment 574/2008 delivered by the Bacau Court of Appeal, onhttp://www.avocatura.com/speta-166447-faliment, (accesed on 30.03.2012)) The suretiesalso applied for reinstating within the time limit for declaration of claims,motivating that this justifies a present, legitimate interest to temporarily lodgeconditional claims only from the beginning of the forced execution against them.

Practice offers us a new perspective over the surety’s ranking within theinsolvency proceedings, under the aspect of the due date before which the claimsare to be registered on the debtor’s statement of assets and liabilities.

In the first case analysed at point a. the surety was to be included on thecreditors’ list and notified according to the Civil Procedure Code, and then he wasto lodge claims within the time limits established through the judgment to open theproceedings. In the second case the surety was to register his claims on the debtor’sstatement of assets and liabilities after the initiation of forced execution againsthim, as proceeded in the presented case. The motivation for lodging the claimswithin the proceedings, after the initiation of forced execution against the suretieswas that their actual, lawful interest in lodging claims arises only on the date of theinitiation of the forced execution.

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As observed by the doctrine, „the interest should arise when the respectiveproceedings are initiated; a past or possible interest, simply hypothetical cannotjustify legal action” or Pas d’intérêt, pas d’action. From this point of view thesurety shall register his claims on the debtor’s statement of assets and liabilitiesonly after the initiation of forced execution against him.

However we asses that considering the features of the insolvencyproceedings, especially their concurent characteristic, the surety can lodge claimswithin the time limits established through the judgment to open the proceedings,even if the forced execution measure was not initiated against him. By acting thisway the surety preserves, right from the first measures taken within theproceedings, his right of recourse against the principal debtor, by subrogation, inorder to obtain the repayment of the amounts paid to the creditor.

In this case, the claims lodged by the sureties were rejected and hence notregistered by the judicial liquidator on the list of claims. He mainly motivated thatbecause the bank was late in lodging their claim they did not obtain the statute ofcreditor within the bankruptcy proceedings of the principal debtor andconsequently the sureties’ claim cannot be registered on the list of claims. Pursuantto art. 73(1), the sureties appealed against the liquidator’s decision on theregistration on the list of claims, and the appeal will be judged by the syndic. Theparticular aspect of this case, related to the act of the bank that led to the extinctionof the suretyship, is thus to be analyzed by the law court.

7 ConclusionsRanking the surety within the insolvency proceedings, as indicated ut

supra, is necessary so that he is not restricted in exercising his right of recourseagainst the principal debtor to recover from him the amount that is to be paid to thecreditor.

But the judicial mechanism analyzed at point a). represents a creation ofthe case-law, as indicated ut supra. In consequence, mainly de lege ferenda, itsregulation needs to be extended under the aspect of the terms and conditions thatset the grounds of the surety’s rights, so that it ensures the protection and actualexercise of his rights within the proceedings.

The adequate ranking of the surety wihtin the proceedings tends to havethe following finality: the bankruptcy procedure closes with the debtor’sderegistration from the trade registry, hence at the moment when the surety willhave paid the debt to the bank, there will not be any means of subrogating to therights of the paid creditor and recovering the amount from the debtor. The judicialmechanisms presented in detail at points a) and b) eliminate the surety’s risk of notbeing reimbursed in case he exercises his right of recourse against the principaldebtor to recover the amount paid to the creditor, after the liquidation of thebankrupt debtor’s assets.

The surety’s right of recourse against the principal debtor, throughsubrogation, in order to obtain from him the repayment of the amounts paid to thecreditor comes in conflict with the creditor’s act. In this case, following the non


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registration of the bank on the statement of assets and liabilities of the principaldebtor undergoing bankruptcy, the surety is deprived of the possibility of legalsubrogation to the bank’s rights and securities. Therefore, we consider legitimateand well-grounded the sureties’s application for the law court to ascertain theextinction of the suretyship by the creditor’s act.

Bibliography:Deleanu I. (2005), Treatise on Civil Procedure, C.H. Beck Publishing

House, Bucharest;Pop L. (2006), Treatise on Civil Law. The obligations, C.H. Beck

Publishing House, Bucharest;Statescu C. & Barsan C. (1999), Civil Law. The general theory of

obligations, All Back Publishing House;Turcu I. (2006) Treatise on Insolvency, C.H. Beck Publishing House,

Bucharest;Turcu I. (2009) The Insolvency Law. Commentary. 3rd edition, C.H. Beck

Publishing House, Bucharest;Law 85 of 2006 on Insolvency, published in the Official Gazette no. 359 of

21.04.2006, version consolidated in 07.10.2010;


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ROMANIA AND EUROPE 2020: HOW FAR WE ARE?

Olimpia Neagu”Vasile Goldiş” Western University, [email protected]

Postdoctoral student of the Romanian Academy of Bucharest

AbstractThe Europe 2020 strategy, launched in 2010 by the European Commission, continues the2000 Lisbon Agenda, by upgrading its targets and completing them with new ones(regarding the green economy and inclusiv growth). The aim of the paper is to analyze thesituation of Romania, by discussing the values of the eight statistical indicators measuringthe EU 2020 targets and by formulating suggestions and proposals for policy makers.Key words: Lisbon strategy, Europe 2020 Strategy

IntroductionThe Lisbon strategy represented an ambitious reform agenda launched in

March 2000, with the goal to raise the EU's competitiveness and boost economicgrowth in the knowledge-based economy challenged by the United States andJapan. Its programme integrated economic and social as a tenet of innovation-driven and sustainable growth.

In 2010 the European Commission adopted a Europe 2020 Strategy.Europe 2020 offers a vision of the social market economy of Europe for the 21stcentury. It addresses three mutually reinforcing priorities:

– Smart growth: building an economy based on knowledge and innovation;– Sustainable growth: promoting greener and more competitive economy

with more efficient use of resources;– Inclusive growth: promoting economy with high employment rates,

leading to social and territorial cohesion.The Europe 2020 strategy continues the Lisbon-type reforms and develops

innovative elements in order to upgrade its governance dimension, whoseweaknesses were revealed during the economic crisis, adding to the social andeconomic goals, environmental policy targets.

Europe 2020, a strategy for jobs and smart, sustainable and inclusivegrowth, is based on five EU headline targets which are currently measured by eightheadline indicators.

The EU 2020 targets are:-75 % of the population aged 20-64 should be employed;-3% of the EU's GDP should be invested in R&D;-Reduction of the greenhouse gas emissions by 20% compared to 1990;-Increase in the share of renewable energy sources in final energy

consumption to 20%;



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-Share of renewables in gross final energy consumption,-20% increase in energy efficiency,-The share of early school leavers should be under 10% and at least 40% of

30-34 years old should have completed a tertiary or equivalent education,-Reduction of poverty by aiming to lift at least 20 million people out of the

risk of poverty or social exclusion.Romania will have to commit to national targets in all these areas.The paper aims to analyze the situation of Romania, by discussing the

values of the eight statistical indicators measuring the EU 2020 targets and byformulating suggestions and proposals for policy makers. The source of data isEUROSTAT.

Analysis of the situation in Romania

1.Employment

52,0

54,0

56,0

58,0

60,0

62,0

64,0

66,0

68,0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

years

Em

ploy

men

t rat

e(%

)

EU-27

RO

Figure 1 Dynamcs of the rate of employment in the EU and Romania, 1999-2009

For 1999-2001 the rate of the employment in Romania was higher than theaverage of the European Union. After 2001, Romania is registering loweremployment rates as the average of the EU, the gap being ascending during 2001-2009.

Table 1Evolution of the gap between the rate of employment and the EU 2020

targetYear 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

RO 6,8 7,0 7,6 12,4 12,4 12,3 12,4 11,2 11,2 11,0 11,4

As we can see in the Table 1, in 1999, Romania was closer to the EU 2020target as in 2009, the gap to the target is ascending from 6,8 %, in 1999, to 11,4%,in 2009. The explanation consists on the massive flows of migration of theromanian labour force to other European countries, such as Italy, Spain, France andGermany, with a maximum level in 2002-2003. As consequence, the rate of


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employment evolved inversely than the EU's average between 2002 and 2005.Starting with 2006, the trend is ascending, in line with the EU's average.

In order to achieve the EU 2020 target, Romania has to have a annualgrowth rate of employment of 1 % for the period of time 2010-2020. This is veryunlikely assumption due to the fact that in 2009, the annual employment change(in % compared with previous year) was -2% and a second reason is thecontinual decrease of the employed population and the massive migration of theskilled labour force outside the national borders.

2. Investment in R&DThe Gross Domestic Expenditure on R&D (GERD) is the statistical

indicator of EUROSTAT showing the magnitude of the investment in R&Dactivities in the European countries, as a % of GDP.

Table 2Evolution of the investment in R&D in EU and Romania,

1995-2010 (% of GDP)1995 1996 1997 1998 1999 2000 2001 2002

EU 1,8 1,75 1,78 1,79 1,84 1,86 1,87 1,88

RO 0,75 0,68 0,57 0,49 0,4 0,37 0,39 0,38

2003 2004 2005 2006 2007 2008 2009 2010EU 1,87 1,83 1,83 1,85 1,85 1,92 2,01 2

RO 0,39 0,39 0,41 0,45 0,52 0,58 0,47 0,47

The investment in Romania is under the EU's average and very far fromthe 2020 target. Romania is among the countries with the lowest rate ofinvestments in this field, of only 0.58% in 2008. The situation worsened in 2009,when public expenditures returned to the pre-boom level of 0.2% GDP. The publicfunds for research are used ineffectively, as they fail to create a spreading outeffect in the private sector. Also, there is a weak link between academic researchand industrial applications. In EU, on the other hand, the main contribution comesfrom the business enterprise sector and, unlike Romania, the private non profitsector also invests in R&D.

Romania is unable to reach the target inspite of the efforts of romanianauthorities to stimulate the research and to benefit of the romanian researchersworking abroad. One of the recent measure of the romanian scientific authority(National Council for Scientific Research) is to stimulate foreign researchers tocoordinate romanian research teams in projects financed by the romanian statebudget. The measure is ment to stimulate the openness of the romanian research tothe international research networks and to contribute to the european research area.

3. Greenhouse gas emissionsIn the aftermath of the Copenhagen stalemate, and in light of the need for

sustained economic growth in Europe, Europe 2020 strategy gives a new direction.


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In this new direction, the green house gas emissions have to decrease by 20%compared to 1990. The EUROSTAT indicator measures trends in anthropogenic(man-made) emissions of six greenhouse gases (GHG), weighted by their globalwarmingpotentials.

Table 3 (1)The evolution of the greenhouse gas emissions, base year1990 (%)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999EU 100 98 95 93 93 94 96 94 93 91RO 100 80 75 74 72 75 78 70 63 56

Table 3(2)2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU 91 92 91 93 93 92 92 91 89 83RO 57 59 62 64 64 62 64 62 61 52

As we can see in the Table 3, Romania reduced his gas emissions in 2009,to a 52% level compared to 1990's level. Greenhouse gas emissions are much lowerthan at the beginning of transition, but the main reason for that was the de-industrialization process which occurred since the early nineties.

4.Share of renewables in final energy consumptionTable 4

The share of renewables in gross final energy consumption, as %2006 2007 2008 2009 TARGET

EU 9 9,9 10,5 11,7 20RO 17,2 18,4 20,5 22,4 24

As we can notice in the Table 4, Romania has a good position, the target of20% of the share of renewables in gross final energy consumption is alreadyreached. But, the level of investments in green energies in Romania is very lowcomparatively with countries as Estonia, Latvia or Lithuania. Romania has a highershare of renewable energy sources (RES) in total consumption, and the good newsis that the trend is upward.

The bad news is that the relatively high potential of renewable energy intheory can not be paralleled in practice due to technological limitations, economicefficiency, dispersed location of resources and environment restrictions(GEAReport, 2010).

Similar to most of the New Member States, Romania scores badly in termsof energy intensity of the economy, indicator that monitors the decoupling ofenergy use from GDP growth and shows the extent to which energy is being usedmore efficiently in the creation of wealth. However, the trend is downward,Romania having made significant improvements in the last 5-6 years. Yet, we are


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still employing 4 times more energy to produce a unit of GDP compared to EUaverage. This could be a proxy for energy efficiency, which refers to the increasingthe performance of energy production and reducing the waste of energy during thetransport, deposit, and distribution stages, and optimizing the energy consumption.The governmental program to reduce heat wastes by improving the isolation ofresidential buildings is a major step forward and we expect that enhancedinvestments in this program should yield immediate results in terms of energysaving. (GEA Report, 2010)

5.Early leavers from education and trainingThe early school leavers also represent a target for the Europe 2020

Strategy. The percentage of the population aged 18-24 with at most lowersecondary education (and no further education or training) is targeted to decreasebelow 10%. In 2010, the share of early school leavers was 14.1% in the EU and18.4% in Romania.

Table 5Dynamics of early leavers from education and training, 2000-20102000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TARGET

EU 17,6 17,2 17 16,5 16 15,8 15,5 15,1 14,9 14,4 14,1 10

RO 22,9 21,7 23 22,5 22,4 19,6 17,9 17,3 15,9 16,6 18,4 11,3

Romania could not reach the target set up for 2020, the gap in 2010, beingof 8,4%, which cannot be recovered during 10 years, only with an annualdecreasing rate of 0,84%.

6.Tertiary educational attainmentTertiary educational attainment is measured by the share of population

aged 30-34 who have successfully completed university or tertiary education. Aswe can see in the Table 6, Romania is far from the EU's average and it is veryunlike to recover the gap until 2020.

Table 6Tertiary educational attainment, in EU and Romania

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TARGET

EU 22,4 22,8 23,5 25 26,9 28 28,9 30 31,1 32,3 33,6 40

RO 8,9 8,8 9,1 8,9 10,3 11,4 12,4 13,9 16 16,8 18,1 26,7

7.People at risk of poverty or social inclusionThe fight against social exclusion is one of the EU’s social policy goals.

The target set in Europe 2020 Strategy aims that 20 million less people should be atrisk of poverty by 2020. Measured as the share of persons with an equivaliseddisposable income below the risk-of-poverty threshold, which is set at 60% of thenational median equivalised disposable income (after social transfers), the indicatorreaches 23% in Romania, the second highest in the EU.


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Table 7People at risk-of-poverty or social exclusion (1000 persons)

2007 2008 2009 2010RO 9904 9418 9112 8890

The number of people at risk-of-poverty decreased in Romania during2007-2010, but Romania remains one of the countries with avery high degree ofincome inequality. Part of it can be explained by the flat tax fiscal policy.

The rise of inequality and social exclusion in times of economic growthshould be a serious cause of concern, particularly the economic crisis that followedthe boom most likely deepened inequality and social exclusion. It is the job of thegovernment to design mechanisms and to promote those engines of growth whichwill prevent further worsening of these indicators. An economic growth that leavesmost of the people out, an economic growth that fails to reduce inequality and toincrease social cohesion, has little value and it is not desirable(GEA Report, 2010).

CONCLUSIONS AND POLICY PROPOSALSEurope is facing a new world with increasing competition, complex global

challenges and internal economic and social difficulties. The Lisbon Strategy wasthe tool designed to modernise Europe through introducing structural reforms toprepare our continent for new challenges. The Lisbon Strategy’s successor: Europe2020 put in the front of EU leaders other challenges for a new direction to guideEurope towards greener, smarter and more sustainable growth.

For Romania, the most problematic targets of the Europe 2020 Strategy arethose related to the “smart growth” objective. The investments in research,development and innovation are very low. It is recommended that the NationalCouncil of Research, comprising business and academic representatives, tostimulate the mobility of the romanian researchers and the link between industryand universities and to allocate the public money for R&D.

The government should focus on specific sectors which provide a basis forfuture growth. Setting up the appropriate framework and incentives for investmentsin physical infrastructure and the energy sector should be a priority. This wouldalso be in line with the EU proposals. The poor state of physical infrastructure hasnegative spillover effects in the economy, imposing large costs on economicagents. As well, Romania should also raise its capacity to attract EU funds, in alleconomic sectors.

The objective regarding “sustainable growth” will also need substantialefforts from the Romanian authorities. As GEA Report stated, it is recommendedthe creation of a public holding company comprising only the producers of energyfrom renewable sources, as a mean to increase awareness on this subject and tocreate positive synergy and coordination effects. It will be useful, as well, theacceleration of investments aiming at rehabilitating buildings in order to increaseenergy efficiency.


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Regarding the “inclusive growth” objective, in order to increase theemployment rate, Romania needs policies targeted at improving the labour supplyincentives of some special categories of workers: the youth, older workers, andfemales. Such measures would include more flexible work arrangements (part-timeand temporary contracts) improved job search assistance and counselling. Financialincentives to encourage workers to stay longer in employment should beconsidered. Retraining and skills upgrading programs should be made available toolder workers and long term unemployed and the performance of the schemesshould be monitored, in terms of achieving the objective of bringing people backinto work. Regarding education, it is necessary to adapt the quality and therelevance of education to the needs of the labour market through a reformation ofthe education system ( improvement of the effectiveness of public spending oneducation, aligning curricula with the demand for graduates skills, expanding theuse of long life opportunities).Acknowledgement

This paper is financially supported through the project “Post-doctoralstudies in economics: continuous training programme for elite researchers –SPODE, grant contract POSDRU/89/1.5/S/61755, financed by European SocialFund through the Human Resources Development Operational Sectoral Programme2007-2013.

ReferencesEuropean Commission (EC), 2010, Europe 2020: a strategy for smart,

sustainable and inclusive growth, COM (2010) 2020, Communication from theCommission, Brussels, 3.3.2010

European Policy Center, 2010, Europe 2020: delivering well-being forthe future Europeans, Challenge Europe, Issue 20, March 2010

European Commission, 2011, Employment and Social Development inEurope 2011, Directorate General for Employment, Social Affairs and Inclusion,Brussels, 2011

Group of Applied Economics, 2010, Romania and EU 2020 Strategy,Group of Applied Economics (GEA) Report

(http://www.gea.org.ro/documente/en/lisabona/2010/Romania2020.pdf)accessed 17 April 2012

EUROSTAT(http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/)

http://www.gea.org.ro/documente/en/lisabona/2010/Romania2020.pdf


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THE COMPANY'S PROMOTIONAL POLICYAND THE CONSUMER'S BEHAVIOR

Mircea Teodoru“Vasile Goldis” Western University, Satu Mare Branch, Faculty of Economic Sciences, 26,

Mihai Viteazul street, 440030 – Satu Mare, e-mail: [email protected]

AbstractThe promotion is the most striking marketing area and the most active intervention in theprocess of reaching the buying decision by the consumer. The publicity means thecommunication with the consumers and their determination to test certain products; themethodology of this area is based on modifying the consumers’ attitude.Key-words: (mixed-marketing, promotional message, publicity, communication, theconsumer’s attitude)

IntroductionMarketing is that function of a company that identifies the client’s needs

and desires, determines the markets that can be served best and conceives adequateproducts, services and programs to these markets. These products will be sold veryfast if the client’s needs are identified and products of adequate superior quality arecreated, if they are distributed and promoted efficiently. (M. Teodoru, 2004)

So, the study of the consumers’ behavior and the determination of thepotential answer to the activities of the company is essential to have success inmarketing.

Literature review. DiscussionsThe understanding of the consumers and the orientation towards them is

important for any company that follows the success in a competing environment.These intentions though do not lack complications. The following

problems can appear in reality, because the consumers:- are very different one from the other;- act rather emotionally than rationally;- manifest themselves differently in different moments of time;- respond differently to the same stimulus in different moments of time;- can be convinced – by the company or the competitor- in other words

they learn, changing their attitudes;The mixed-marketing expresses the choosing, dosage and combining

activity as coherent as possible, performed by the commercial administrators. Thecomponents of the mixed-marketing are, as one knows, four: the product, the price,the emplacement (the distribution) and the promotion.



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In the system of the market relations, the marketing activities of themodern company cannot be limited to the production and distribution of goods andservices. A permanent and complex communication with the external environmentby means of careful information of the potential consumers and the intermediates isnecessary, that is the deployment of a promotional policy is necessary. Thiscommunicational effort is meant to influence the buying and consumption behaviorand the support of the selling process.

The promotion policy is the one that stays at the basis of the sellingconception, a form of the marketing philosophy regarding the consumers. Thisconception says that the consumers won’t buy enough products of a company if itisn’t especially concerned with the selling and promoting on a large scale. Thisconception is valid in the case of not searched for goods that the consumers don’tnormally think to buy: encyclopedias, burial places, stays in less known resorts.

In this order of ideas, one can also name the election and publicitycampaigns for a certain less-known candidate.

The company orientated towards sales has especially in view the results onshort term – profits by immediate sales. Why? Because the clients usually appealjust once to the goods and services of the company. That’s why the company has toidentify the potential clients, the disentanglement being based on the highlightingof the advantages offered by the product or the service. (Ph. Kotler, 2005)

The promotion is used to furnish pieces of information: the buyer getspieces of information about new products, that can be useful for him, and thesellers can inform their potential clients about the offered products or services.

Clients need to be reminded of the advantages of the products to preventthem from changing their preferences, especially when the competition productsrenew themselves.

The companies make tests to compare the products, they developadvertising campaigns based on the results of the tests that claim that their productis better than the competition one and they use advertisements that belie the test ofthe others, leading at the neutralization of unfavorable pieces of information thatappear as hits from the public that holds and spreads disadvantageous pieces ofinformation, applying the rumor technique.

The marketers distinguish four categories of activities within thepromotion: the publicity, the promotional activities, the public relations public andthe personal selling (Jim Blythe, 1998):

1. The Publicity is the paid and impersonal communication with themarket; its impersonal nature is extremely useful for the sensitive products thatpeople are not willing to talk about in public; many consumers attach a certainprestige to the product that is advertised in the mass-media due to the simple factthat it is known nationally. Its disadvantage is that if the message causes confusionin the mind of the audience, there is no possibility to give supplementaryexplanations; it is difficult to personalize (for example, in the direct sale, themarketer knows what the client likes and dislikes and prepares an individualized


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presentation, an impossible thing in the advertisement); the publicity is also noteffective and motivating in the buying actions as the direct sales are.

In most of the advertisements, the message with simple facet is used, onlythe positive aspects of the products being revealed and not the negative ones. Thiscan determine the consumer not to be confident as the message is distorted. On theother hand, many publicity specialists believe that the double facet message isrisky, because the argumentation of the positive aspects can be insufficient and so,the consumers can ignore it, retaining only the negative aspects. There are casesthough in which this type of advertisement is used.

For example, if the public already has a critical attitude with regard to theproduct, the marketing specialist has nothing to lose in accepting that there also arenot wanted implications and he can launch an offset, taking advantage of the factthat he can listen directly to the clients’ observations; and if he has to deal with anintelligent public, the marketer will win credibility with the help of his sincerity.The researches in the field demonstrated that the approaches with double facet takeshape in advertisements that remain memorized for a longer time.

2. The Promotional Activities consist of a diverse ensemble of specifictools meant to stimulate the faster or of a bigger volume acquisition of someproducts or services by consumers or industrial clients.

The promotion of sales includes specific tools, meant for the consumers(samples, coupons, sending back the money in case of dissatisfaction, reduction ofprices, gifts, awards, rewards for the trusty clients, free sampling of the products,guarantees, demonstrations, contests), for the business partners (discounts forpublicity, sponsorships) and for the sales forces (gratifications, contests, meetings).The promotion of sales generates interest and emotion, allowing the access to themarket.

The free samples are useful to familiarize the consumer with the product;many such samples are at the limit of the expiration notice. Such promotionalactivities are efficient when the consumer is asked to describe his own experiencein using the product or to fill in a questionnaire on this theme. This is a form ofactive conditioning that can be efficient in the marketing of hard-to-sale products.

The promotion of sales is also extremely efficient in the phase of theadoption of the product, but it can be used in any stage of the life cycle of theproduct. The promotional activities are meant, in this case, to test the capture of theconsumer’s attention and interest; the product itself should create the desire torepeat the buying process. The model called of hierarchy of effects starts byknowing the product, a free sample being offered. If the product is new, thesupervision of the free samples towards the innovative clients is important as theycan influence the attitude of the target-market on long term.

3. The Public Relations are a form of personalized communication, notpaid to a third party, with individuals and parties interested in the activity of thecompany. The interested ones can be the owners, the employees, the localcommunity, the beneficiaries, the suppliers, the Government.


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The advantages given by the public relations are the relatively reducedcosts and the perception of the message as being veracious, because the opinions ofsome persons outside the company, apparently not interested, are considered asbeing very veracious. The disadvantages consist in the lack of control and thelimited life of the message; first of all, not all the opinions expressed in the mass-media are favorable and, secondly, the messages cannot be repeated because theywouldn’t be perceived as having a disinterested character anymore.

The purpose of the public relations is the creation of some favorableattitudes to the companies and institutions and they are based extensively on theemotional side. The public relations of the companies can be:

- Reactive, responding to the clients’ complaints and to the negativepublicity;

- Proactive, by organizing public meetings or press campaigns tohighlight the image of the company.

The public relations function through the modification of firm convictionsof the public with regard to the companies or institutions. In the case of the reactivepublic relations, they will try to offer offsets to those who formulate theaccusations; in the case of the proactive ones, the creation of a favorable opinion tothe consumers is attempted through a positive transformation of the perception ofthe own activities.

So the companies call in to attractive cognitive aspects to shape theattitudes of the consumers, usually using the press campaigns; the press articleshave more chances to be read and believed by the consumers than theadvertisements, because they appear within the news and in other backgrounds ofinformation.

The intention of the responsible actors in the field of public relations is notto develop a favorable tendency to the product, but they only pursue the affirmationof a positive feeling, of cognitive emanation, as far as the company is concerned.

4. The Personal Sale is based, exclusively, on the direct interpersonalcommunication. A person holds a presentation in front of another person or of agroup, the audience can be made up of the individual consumers, the organizationalclients or the marketing intermediates, in this form of promotion.

The advantages that it offers are: the direct feedback and the possibilitythat the clients can see the product functioning, a fact that facilitates theunderstanding of its usefulness.

The disadvantages would result in the high cost of a personal contact andthe lack of consistency, due to the fact that not all sales agents transmit the messageidentically, as the same agent does not transmit it identically from one presentationto another.

The sales agent usually begins by determining the consumer’s needs, thenhe presents a possible way to solve the problem and, finally, he invokes a suitableclosure to conclude the sale. He uses a series of techniques to drive the consumer toformulate a decision to buy, such as asking questions to activate the consumers’


36

needs; the agent will avoid questions with a negative reply, even if the answer isnot directly linked to the object of sale.

Concluding remarksEverybody admits that the persuasion is the purpose of any promotional

demarche. The posters, the advertisements broadcast on television or at radio, theflyers or the prospects are unavoidable. Contrary to the opinion that too muchinformation kills the information, the simple effect of exposing the people tostimuli is enough to change their judgments. This effect called of the simpleexposition was shown by an American researcher – Zajonc. He demonstrated thatthe frequency of the exposition on the judgment influences the evaluation made bythe consumer, which is not linked only to the intrinsic properties of the product.The influence of the repeated exposition consists in the consumer’s familiarizationwith the product which generates the preference. The effect was proved by variouswith the help of some specific stimuli – music, wrappers - the strategic importanceof a simple repeated presentation of the same information being pointed out.(Nicolas Guéguen, 2006)

The sales agents cannot determine the consumers to buy products that theydo not want but, still, they can try to offer new pieces of information to changeattitudes, and then to coach their client up to the final, by the process of reaching adecision.

The studies are concentrated in two big directions (I. Cătoiu, N.Teodorescu, 2003):

1. The taking into account of the consumers’ opinions and suggestions inthe complex activities to create the publicity supports (TV spots, publicityinsertions at radio/written press).

2. Commensurate the consumers’ perceptions and reactions at variouspublicity spots.

Amongst the questions that the company has to ask:- What kind of publicity will sensitize the consumers?- What will encourage them to buy?- How can their necessities be activated and how can we offer them a

credible way to satisfy them?

Bibliography:Blythe J. - Comportamentul consumatorului, Ed. Teora, Bucureşti, 1998Cătoiu I., Teodorescu N. – Comportamentul consumatorului, Ed. Uranus,

Bucureşti, 2003Guéguen N. – Psihologia consumatorului, Ed. Polirom, Iaşi, 2006Kotler, Ph. (coord) – Principiile marketingului. Ediţie europeană. Ed. Teora

Bucureşti, 2005Teodoru M.C., Comportamentul consumatorului, Ed. Casa Cărţii de

Ştiinţă, Cluj-Napoca, 2004


37

CRISIS EFFECTS ON THE FISCAL REVENUES INROMANIA AND EUROPEAN UNION STATES

Sorin Blaj"Drăgan" European University of Lugoj, Faculty of Economic Sciences,Ion Huniade Street, No. 2, Lugoj, Romania, [email protected]

Abstract:The financial and economic crisis has affected the majority of the European Union memberstates, the main effect being the reduction of fiscal revenues. The most important goal ofthis paper is to identify the way in which the financial and economic crisis has affected thefiscal revenues in Romania and the European Union member states, between 2008 and2010 and which were the main categories of fiscal revenues affected by the crisis. As aconsequence, the majority of the European Union states has adopted anti-crisis fiscalmeasures to change the main taxes: corporate tax, income tax, value added tax and excises.Keywords: financial and economic crisis, fiscal revenues, anti-crisis fiscal measures.JEL classification: E6.

1. IntroductionThe financial and economic crisis has considerably reduced the economies

of European Union states, the effects of this reduction being seen immediately inthe size evolution of fiscal revenues.

As a consequence, the majority of the European Union member states hasadopted between 2008 and 2011, fiscal measures to reduce and counteract thenegative effects of fiscal revenues reduction and of budgetary deficits reduction,respectively deepening.

The fiscal measures aimed at direct taxes, especially income tax andcorporate tax, as well as at indirect taxes, representative being the value added taxand the excises.

2. Theoretical research. Revision of specialty literature.The subject regarding the financial and economic crisis has been widely

debated in Romania, regarding its effects on the level of fiscal revenues(Braşoveanu, Obreja, 2011), as well as regarding the optimum fiscal measures tocontract it (Zai, 2012), even if the specialty magazines have not written as it wasexpected to.

Abroad, the most comprehensive studies in this area were done by theEurostat and European Commission specialists (Wahrig, Gancedo Vallina, 2011and Wahrig, 2012).



38

3. Applied research. Statistical analysis3.1. Analysis of the evolution of fiscal revenues in Romania, between

2006 and 2011According to the Ministry of Public Finances, the fiscal revenues of

Romania have been affected by the financial and economic crisis as it follows:Table no. 1.

The evolution of fiscal revenues in Romania, between 2006 and 2011Millions of RON

Categories ofrevenue

2006 2007 2008 2009 2010 2011

TOTALREVENUES

106,975.3

127,108.2

165,546.6

157,243.9

168,598.5

181,566.9

Fiscal revenues96,773.

8115,20

8.8143,85

4.6134,94

2.6138,75

7.3155,32

4.3

Direct taxes21,748.

229,448.

936,635.

434,344.

733,127.

234,454.

8

Corporate tax 7,938.910,558.

313,059.

410,640.

910,115.

110,309.

1

Income tax 9,763.814,374.

918,500.

418,551.

417,956.

819,076.

4Property taxesand duties

2,544.4 2,944.9 3,253.9 3,377.7 3,801.5 3,976.4

Indirect taxes42,044.

246,916.

958,211.

452,737.

759,932.

970,232.

1Value addedtax

27,763.0

31,243.2

40,873.6

34,322.4

39,246.0

47,917.4

Excises10,588.

112,511.

813,646.

015,581.

217,378.

919,104.

8Customs duties 2,596.2 855.7 962.3 655.5 574.0 673.7Contributionsto socialsecurity

32,981.4

38,843.0

49,007.8

47,860.2

45,697.2

50,637.3

Non-fiscalrevenues

7,230.1 8,090.115,889.

116,633.

819,717.

418,216.

9Sums from theEuropeanUnion

– – – 2,099.0 5,394.1 6,108.8

Source: Bulletin of the Ministry of Public Financeshttp://www.mfinante.ro/execbug.html?pagina=buletin

The years when the revenues were more reduced than in year 2008, the lastyear of economic growth before the crisis, are marked in bold letters.

The public revenues realised between 2006 and 2011 show us without anydoubt that Romania registered serious budgetary problems in 2009 and 2010,especially due to the reduction of revenues from direct taxes on work, the mostaffected being the revenues from tax corporate and contributions to social

http://www.mfinante.ro/execbug.html


39

security. The only exception were the revenues from the income tax, whichmanaged to maintain approximately equal values during the two years, even in thecondition of reducing the number of employees in that period and maintaining the16% flat tax.

In what concerns the direct taxes, if the revenues from excises registereda growth in each year from the analyzed period, due to the increase of excisesvalue, especially at tabacco products and energetic products, the revenues fromthe value added tax registered significant reductions in 2009, as well as in the firstsemester of 2010, fact which determined the Romanian Government to take thedecision of increasing the standard value added tax from 19% to 24%, beginningwith 1st July 2010.

It is worth to notice the fact that this level places Romania on the ”podium”of the European Union states with the highest level of standard value added tax,after Hungary, with 27%, respectively Denmark and Sweden, with 25%.

The effect? The returns from the value added tax recovered in the secondsemester of 2010, even if they did not reach the level from 2008, the increase beingeven more obvious in 2011.

In 2011, only the revenues from corporate tax were kept at a level loweredthan in 2008, sigh that the real economy, the private sector, still suffers and wouldneed a fiscal measure which reduces the level of corporate tax, the 16% level beingtoo high for the Romanian companies to support. There are external signals on thismatter, even to Romania’s neighbouring countries, Serbia, Bulgaria and Hungaryhaving a more reduced level of corporate tax, of only 10%, Hungary reducing itslevel on January 1st, 2011. It seems that the level of 10% for the corporate taxwould be the most appropriate for Romania too, in order to be competitive in theregion from the fiscal point of view.

3.2. Analysis of the evolution of fiscal revenues in the European Unionstates, between 2006 and 2011

According to Eurostat, the fiscal revenues from the European Union stateswere affected by the financial and economic crisis as it follows:

Table no. 2.The evolution of fiscal revenues in the European Union states, between 2006

and 2011Billions of EUR

State 2006 2007 2008 2009 2010UE 15Austria 111.5 118.5 125.1 121.7 125.0Belgium 148.7 154.9 161.1 156.1 164.4Denmark 110.5 113.2 114.3 108.9 114.3Finland 72.8 77.5 79.9 74.1 76.2France 824.8 852.1 870.5 830.9 859.8Germany 924.7 971.3 994.2 966.3 977.7


40

Greece 69.8 76.6 79.7 75.9 75.4Ireland 59.3 62.1 56.0 47.9 46.6Italy 626.6 668.5 676.9 657.6 662.7Luxembourg 12.4 13.7 14.3 14.4 15.3UnitedKingdom

746.7 778.1 710.7 572.3 636.0

Netherland 214.9 225.6 237.2 223.1 232.2Portugal 57.2 60.7 61.8 58.1 60.1Spain 370.2 399.9 368.3 331.5 346.3Sweden 155.1 161.6 156.5 137.8 160.6UE 12Bulgaria 8.1 10.3 11.4 10.1 9.9CzechRepublic

41.8 47.4 53.2 47.5 50.5

Cyprus 5.2 6.4 6.6 6.0 6.2Estonia 4.1 5.1 5.2 5.0 4.9Latvia 4.9 6.5 6.8 5.0 5.0Lithuania 7.1 8.6 9.9 7.9 7.6Malta 1.8 2.0 2.0 2.1 2.1Poland 91.9 108.3 124.6 98.7 112.6Romania 28.5 37.2 40.3 32.8 34.3Slovakia 13.1 16.1 19.0 18.2 18.7Slovenia 12.0 13.1 14.0 13.4 13.5Hungary 33.5 40.3 42.7 36.8 36.7

Source: Total tax revenue by country, European Commission, Eurostat:http://epp.eurostat.ec.europa.eu/statistics_explained/images/b/be/6_Total_tax_revenue_by_country_%28millions_of_eur_%25_of_GDP%29.PNG

From the 27 member states of the European Union, only two, Luxembourgand Malta, did not register reductions in the level of the fiscal revenues in 2009 and2010, while still two states, Belgium and Denmark, succeeded that after thereduction in 2009, to overcome in 2010 the level of revenues from 2008. The restof 23 states registered in 2009, as well as in 2010, fiscal revenues more reducedthan in 2008 or 2007.

The state from the European Union the most affected by the financial andeconomic crisis, in what fiscal revenues are concerned, was United Kingdom. Evenif apparently United Kingdom was avoided by the crisis or at least there was not amajor impact at the level of specialty literature, the reality shows us that the fiscalrevenues were reduced with more than 25%, more exactly 26.4%, between 2007and 2009, United Kingdom being one of the four European Union states which feltthe crisis from 2008, beside Ireland, Spain and Sweden.

United Kingdom was the state which registered the biggest reduction offiscal revenues in relative value (26.4%), as well as in absolute value 205.8 billionsof EUR).

http://epp.eurostat.ec.europa.eu/statistics_explained/images/b/be/6_Total_tax_revenue_by_


41

The declaration of the new general secretary of the United KingdomTreasury, David Laws, about the letter left by his predecessor, Liam Byrne, isrepresentative for measuring the value of the budgetary deficit registered by UnitedKingdom:

"When I arrived at my desk on the very first day as chief secretary, I founda letter from the previous chief secretary to give me some advice, I assumed, onhow I conduct myself over the months ahead.

Unfortunately, when I opened it, it was a one-sentence letter which simplysaid: Dear chief secretary, I'm afraid to tell you there's no money left, whichwas honest but slightly less helpful advice than I had been expecting."

The main fiscal measures adopted by the member states of the EuropeanUnion, between 2007 and 2011, were:

• In the case of income tax:– 5 states decreased the level of the maximum marginal rate of income tax:

Denmark, Finland, Lithuania, Poland and Hungary, with the observation thatHungary adopted the 16% flat tax, as Romania did;

– 7 states increased the level of the maximum marginal rate of income tax:France, Greece, Ireland, Luxembourg, United Kingdom, Portugal and Spain.

• In the case of corporate tax:– 7 states decreased the level of corporate tax: Finland, Luxembourg, United

Kingdom, Sweden, Czech Republic, Slovenia and Hungary;– 5 states increased the level of corporate tax: France, Greece, Germany,

Netherland and Portugal.• In the case of contributions to social security:– 3 states decreased the level of contributions to social security: Austria,

Belgium and Czech Republic;– 6 states increased the level of contributions to social security: Finland,

Luxembourg, Estonia, Latvia, Romania and Hungary.• In the case of value added tax:– no state decreased the level of standard rate of value added tax;– 18 states increased the level of standard rate of value added tax: Finland,

Germany, Greece, Ireland, Italy, United Kingdom, Netherland, Portugal, Spain,Czech Republic, Cyprus, Estonia, Latvia, Lithuania, Poland, Romania, Slovakiaand Hungary.

• In the case of excises:– all European Union member states increased the value of excises between

2008 and 2012.

4. ConclusionsIt can be appreciated that the most appropriate fiscal solution to be adopted

by the European Union states, in order to counteract the negative effects generatedby the financial and economic crisis in what fiscal revenues are concerned, was to


42

increase the main indirect taxes, respectively the standard rate of value added taxand the excises.

As a proof, the number of European Union member states which chose toadopt this fiscal measure between 2007 and 2012 raised to 18, two thirds of them.Regarding the excises level, the majority of the European Union states increasedtheir level between 2007 and 2012.

In exchange, the fiscal measure of increasing tax on work, income tax,corporate tax and contributions to social security, the main direct taxes,respectively the main social contributions practiced by the European Union states,was counterproductive, not bringing the expected results, namely, the increase offiscal revenues from these taxes.

Bibliography:Braşoveanu Iulian Viorel, Obreja Laura – Efecte ale crizei economice

actuale asupra variabilelor fiscale în ţările Uniunii Europene, Economie teoretică şiaplicată, Volumul XVIII (2011), No. 2(555), pp. 127-138:http://store.ectap.ro/articole/562_ro.pdf;

Zai Paul – The Economic Crisis and Fiscal Trends in EU Member States,Transylvanian Review of Administrative Sciences, No. 35 E/2012, pp. 256-268:http://rtsa.ro/en/files/TRAS_35E_16_ZAI.pdf;

Wahrig Laura – Tax revenue in the European Union, Statistics in focus,Economy and finance, Eurostat, European Commission, 2/2012:http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-002/EN/KS-SF-12-002-EN.PDF;

Wahrig Laura, Gancedo Vallina Isabel – The effect of the economic andfinancial crisis on government revenue and expenditure, Statistics in focus,Economy and finance, Eurostat, European Commission, 45/2011:http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-11-045/EN/KS-SF-11-045-EN.PDF;

Tax reforms in EU Member States 2011. Tax policy challenges foreconomic growth and fiscal sustainability, Directorate-General for Economic andFinancial Affairs, Directorate-General for Taxation and Customs Union, EuropeanCommission,5/2011:http://ec.europa.eu/economy_finance/publications/european_economy/2011/pdf/ee-2011-5_en.pdf

Monitoring tax revenues and tax reforms in EU Member States 2010. Taxpolicy after the crisis, European Commission, Working Paper No. 24/2010:http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info

Realitatea.net, Marea Britanie a rămas fără bani în Trezorerie, 17 mai2010: http://www.realitatea.net

Buletinul Ministerului Finanţelor Publice: http://www.mfinante.roTotal tax revenue by country, European Commission, Eurostat:

http://epp.eurostat.ec.europa.eu/statistics_explained

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-11-045/EN/KS-SF-

http://www.mfinante.ro

http://ec.europa.eu/economy_finance/publications/european_economy/2011

http://store.ectap.ro/articole/562_ro.pdf

http://rtsa.ro/en/files/TRAS_35E_16_ZAI.pdf

http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info

http://www.realitatea.net

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-002/EN/KS-SF-


43

IMPROVING THE ACCURACY OF MACROECONOMICFORECASTS MADE BY NATIONAL COMMISSION OF

PROGNOSIS AND INSTITUTE OF ECONOMICFORECASTING FOR ROMANIA

Mihaela Bratu (Simionescu)Academy of Economic Studies,Bucharest, Faculty of Cybernetics, Statistics and Economic

Informatics, [email protected]

Abstract.In this article, the accuracy of forecasts for inflation rate, unemployment, exchange rate andGDP index provided by Institute of Economic Forecasting (IEF) and National Commissionof Prognosis (NCP) was assessed for the forecasting horizon 2004-2011. The hypothesisthat combined forecasts is a suitable strategy of improving the predictions accuracy wastested. Only for the unemployment rate the combined forecasts based on IEF and NCPevaluations performed better than the initial forecasts. For inflation and exchange rateDobrescu model of IEF provided better predictions, but the combined ones were moreaccurate than NCP expectations. The Dobrescu model predictions combined with ARMAstatic respectively dynamic forecasts and NCP estimations combined with ARMA staticprognosis, respectively Dobrescu forecasts using EQ scheme for unemployment on ahorizon of 2 years (2010-2011) improved the accuracy of forecasts made by bothinstitutions, the combined predictions based on Dobrescu predictions and ARMA staticones using OPT scheme being the most accurate, according to U1 Theils’ statistic.Key words: macroeconomic forecast, combined forecasts, accuracy, error, static/dynamicforecast, predictionJEL CLASSIFICATION: C51, E24, E31

1. IntroductionIn addition to economic analysis, the elaboration of forecasts is an essential

aspect that conducts the way of developing the activity al macroeconomic level.But any forecast must be accompanied by macroeconomic explanations of itsaccuracy. The purpose of this evaluation is related to different aspects: theimprovement of the model on which the forecast was based, adjustment ofgouverment policies, the planning of results. Basically, accuracy evaluation in thiscontext refers directly to the degree of trust confered to the prediction. Althoughthe literature on forecasting methods and techniques used in describing theevolution of an economic phenomenon is particularly rich, surprisingly, fewresearchers have dealt with the methods used to improve the measurement offorecast uncertainty. The aspect is important, because the macroeconomicpredictions must not be easily accepted, taking into account the negativeconsequences of macroeconomic forecasts failures, consequences that affect the



44

state policies. The decisions of economic policy are based on these forecasts.Hence, there is an evident interest of improving their accuracy.

Bratu (2012) recommended some empirical strategies used to improve thepredictions accuracy. Combined forecasts are utilized in order to increase thedegree of accuracy. These forecasts can be built using linear combinations, wherethe coefficients are identified using the previous predictions and forecasts madestarting from the correlation matrix. The regression models could also be used forlarge data sets of forecasted and registered values. We can also keep the value of anaccuracy indicator registered in the past for the next forecasts.

2. Combining forecasts- strategy to improve the forecasts accuracyCombined forecasts are an important technique used to improve the

forecasts accuracy.Clark and McCracken (2009) showed that the combined forecasts of

recursive predictions and rolling ones improved often the accuracy by minimizingthe mean squared forecast error.

Wallis (2011) analyzed the effects of experts’ data on the combinations ofpoint forecasts and the properties of strategies of combining predictions. Fordensity forecasts the logarithmic method provided better results than the simplelinear one.

Genrea, Kenny, Meylera and Timmermannb (2013) made forecastscombinations starting SPF predictions for ECB and using performance-basedweighting, trimmed averages, principal components analysis, Bayesian shrinkage,least squares estimates of optimal weights. Only for the inflation rate there was astrong evidence of improving the forecasts accuracy with respect to the equallyweighted average prediction.

We checked this hypothesis of improving the accuracy using combinedpredictions for the forecasts based on the most used combination approaches:

• optimal combination (OPT), with weak results according to (Timmermann,2006, p. 9);

• equal-weights-scheme (EW);• inverse MSE weighting scheme (INV).

(Bates et al., 1969, p. 17) considered two predictions p1;t and p2;t, for thesame variable Xt, derived h periods ago. If the forecasts are unbiased, the error iscalculated as: tiptiXtie ,,, −= . The errors follow a normal distribution of

parameters 0 and 2i . If is the correlation between the errors, then their

covariance is 2112 ⋅⋅= . The linear combination of the two predictions is a

weighted average: tpmtpmtc 2)1(1 ⋅−+⋅= .The error of the combined forecast

is: temtemtce 2)1(1, ⋅−+⋅= .The mean of the combined forecast is zero and the

variance is:


45

12)1(222

2)1(21

22 ⋅−⋅⋅+⋅−+⋅= mmtmmc . By minimizing the error

variance, the optimal value for m is determined

( optm ):

12222

21

1222

⋅−+

−=optm .The individual forecasts are inversely

weighted to their relative mean squared forecast error (MSE) resulting INV. In this

case, the inverse weight ( invm ) is:22

21

22

+=invm . Equally weighted combined

forecasts (EW) are gotten when the same weights are given to all models.

3. The assessment of forecasts accuracy

In literature, there are several traditional ways of measurement, which canbe ranked according to the dependence or independence of measurement scale. Themost utilized measures of forecasts accuracy, recalled by (Fildes &Steckler, 2000,p. 8), are:

• Mean error (ME)

),(1

01

kjTen

MEn

jX += ∑

=

• Mean absolute error (MAE)

),(1

01

kjTen

MAEn

jX += ∑

=

• Root Mean Squared Error (RMSE)

∑=

+=n

jX kjTe

nRMSE

10

2 ),(1

These measures of accuracy have some disadvantages. For example,RMSE is affected by outliers. If we have two forecasts with the same meanabsolute error, RMSE penalizes the one with the biggest errors.

• Mean absolute percentage error

The percentage error is given by: 100⋅=t

tt X

ep

The most common measures based on percentage errors is the meanabsolute percentage error (MAPE), which is:


46

MAPE = average ( tp )

• Mean relative absolute error

It is considered that*t

tt e

er = , where *

te is the forecast error for the

reference model.The mean relative absolute error (MRAE) is computed as:

MRAE= average ( tr )

• The relative RMSE

The relative RMSE is calculated as:

bb

RMSEwhereRMSE

RMSERMSErel ,_ = is the RMSE of “benchmark model”

U Theil’s statistic is calculated as U1 and U2 and it is used to makecomparisons between forecasts.Notations used:r- the registered resultsf- the forecasted resultst- reference timee- the error (e=r-f)n- number of time periods

∑∑

∑

==

=

+

−=

n

ttt

n

t

n

ttt

fr

fr

U

1

22

1

1

2

1

)(

A value of 1U closer to zero implies a higher accuracy.

∑

∑−

=

+

−

=

++

−

−

=1

1

21

1

1

211

2

)(

)(

n

t t

tt

n

t t

tt

r

rrr

rf

U

If 2U =1=> the same accuracy for the two predictionsIf 2U <1=> the prediction to compare more accurate than the naive oneIf 2U >1=> the prediction to compare more accurate than the naive one .


47

Recent studies target accuracy analysis using as comparison criteriondifferent models used in making predictions or the analysis of forecasted values forthe same macroeconomic indicators registered in several countries.

Ericsson (1992) shows that the parameters stability and mean square errorof prediction are two key measures in evaluation of forecast accuracy, but they arenot sufficient and it is necessary the introduction of a new statistical test.

Considering the AR (1) process, which is represented as y t = βy t-1 + u t,

Hoque, Magnus and Pesaran (1988) show that for small values of β the predictionmean square error is a decreasing function in comparison with the number offorecast periods.

Granger and Jeon (2003) consider four models for U.S. inflation: aunivariate model, a model based on an indicator used to measure inflation, aunivariate model based on the two previous models and a bivariate model.Applying the mean square error criterion, the best prediction made is the one basedon an autoregressive model of order 1 (AR (1)). Applying distance-time method,the best model is the one based on an indicator used to measure the inflation.

Ledolter (2006) compares the mean square error of ex-post and ex anteforecasts of regression models with transfer function with the mean square error ofunivariate models that ignore the covariance and show superiority of predictionsbased on transfer functions.

Teräsvirta, van Dijk and Medeiros (2005) examine the accuracy offorecasts based on linear autoregressive models, autoregressive with smoothtransition (STAR) and neural networks (neural network-NN) time series for 47months of the macroeconomic variables of G7 economies. For each model is used adynamic specification and it is showed that STAR models generate better forecaststhan linear autoregressive ones. Neural networks over long horizon forecastgenerated better predictions than the models using an approach from private togeneral.

Heilemann and Stekler (2007) explain why macroeconomic forecastaccuracy in the last 50 years in G7 has not improved. The first explanation refers tothe critic brought to macroeconometrics models and to forecasting models, and thesecond one is related to the unrealistic expectations of forecast accuracy. Problemsrelated to the forecasts bias, data quality, the forecast process, predicted indicators,the relationship between forecast accuracy and forecast horizon are analyzed.

Ruth (2008), using the empirical studies, obtained forecasts with a higherdegree of accuracy for European macroeconomic variables by combining specificsub-groups predictions in comparison with forecasts based on a single model forthe whole Union.

Gorr (2009) showed that the univariate method of prediction is suitable fornormal conditions of forecasting while using conventional measures for accuracy,but multivariate models are recommended for predicting exceptional conditionswhen ROC curve is used to measure accuracy.

Dovern and Weisser (2011) used a broad set of individual forecasts toanalyze four macroeconomic variables in G7 countries. Analyzing accuracy, bias


48

and forecasts efficiency, resulted large discrepancies between countries and also inthe the same country for different variables

In Netherlands, experts make predictions starting from the macroeconomicmodel used by the Netherlands Bureau for Economic Policy Analysis (CPB). Forthe period 1997-2008 was reconstructed the model of the experts macroeconomicvariables evolution and it was compared with the base model. The conclusions ofFranses, Kranendonk and Lanser (2011) were that the CPB model forecasts are ingeneral biased and with a higher degree of accuracy.

Clark and Ravazzolo (2012) compared, in terms of accuracy, the forecastsbased on Bayesian autoregressive model and Bayesian vector autoregressive onewith volatility that is variable in time. The most important macroeconomicvariables were chosen for USA and England, the results showing a better accuracyof predictions based on AR and VAR with stochastic variance.

Clements and Galvao (2012) proved using empirical data that a mixeddata-frequency sampling (MIDAS) approach can improve the accuracy of inflationand GDP growth predictions at short horizons (less than one year).

Many studies in literature refer to the combining of two methods based onthe same model (such as eg bayesian mediation model), but French and Insurapoint out that a combination between model predictions and expert assessmentswas rarely proposed.

4. Evaluation of macroeconomic forecasts accuracy in RomaniaIn this study we evaluate the accuracy of forecasts made by principal

institutions in Romania for some important macroeconomic indicators: Institute forEconomic Forecasting (IEF) and National Commission of Prognosis (NCP). Thevariables for which predictions were made are: inflation rate, unemployment rate,GDP index and average exchange rate (RON/EUR).

We consider the values of forecasted indicators of National Commission ofPrognosis for 2004-2011. Some of the indicators mentioned above are calculatedfor the forecasts. The values of ME show the underestimation tendency of inflation.Moreover, MAE has the same value, showing the persistence of thisunderestimation.

ME indicator shows an underestimation of the values that were forecastedusing Dobrescu model for the annual inflation rate, unemployment rate andexchange rate (RON/EUR). We got an overestimation of the forecasted values forGDP deflator and GDP index. The low value of RMSE indicates a small variabilityin errors data series.

For unemployment and export rate the value of U1 statistic is the nearest to1, fact that indicates a high accuracy. For the inflation rate and index of privateconsumption the predictions have a very low degree of accuracy.

The forecasts for inflation, unemployment and average exchange rate arebetter than those based on a naïve model, unlike the ones for GDP index.


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The error represents only 0,7% from the registered value of exchange ratewhile MAPE for unemployment rate is very high with a deviation of 184,21% fromthe real value.

Table 1Indicators of forecasts accuracy in 2004-2011

Indicators forpredictions basedon Dobrescumodel Inflation rate

Unemployment rate

GDP index Exchange rateRON/EUR

RMSE 0,0282 0,2367 0,1446 0,0307

ME 0,0075 0,0958 -0,1215 0,0078

MAE 0,0231 0,0971 0,1252 0,0276

MAPE 0,0212 1,8421 0,1057 0,007

MASE0,1680 0,7614 0,9808 0,1995

U10,013 0,7338 0,0664 0,0039

U20,7389 0,1561 1,4298 0,0973

Source: processing of data provided by IEF

Indicators forNCP predictions Inflation rate

Unemployment rate

GDPindex

Exchange rateRON/EUR

RMSE 0,0171 0,0223 0,1467 0,0611

ME -0,8287 0,0198 -0,1163 -0,0182

MAE 0,1006 0,0198 0,1228 0,0502

MAPE 0,1499 0,3962 0,1213 0,0133

MASE0,14206 0,2862 1,759 0,0067

MRAE*0,3627 0,4624 -0,7273 -0,0067

U10,1186 0,1641 0,6311 0,0078

U20,4014 1,9491 0,9671 0,2098

Rel_RMSE* 0,6063 0,0942 1,0145 1,9902Source: processing of data provided by NCP* Compared to Dobrescu model


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The positive value of ME indicator shows an underestimation of NCPunemployment rate of 0,0198 percentage points, for the rest of the variables beingoverestimated. The errors variability is low, the RMSE having values less than 0,15percentage points. The labour market reacted immediately at the crise from 2009by increasing the unemployment rate, but also by the moderation of salaries annualrate of growth.

The accuracy of forecasts based on Dobrescu model is low for all theanalyzed variables, but the predictions for the inflation rate and unemployment rateare better than those based on naive models. Excepting the forecasts for GDPindex, the values for MASE suggest better predictions than those based on therandom walk. The lowest value according to the real value was registered for theexchange rate, the deviation being 1,33% from the effective value. The highestvalue is got for the unemployment rate, with a gap weight of 39,62%, the value ofMAPE.

NCP provided forecasts with a higher degree of accuracy than those gotusing Dobrescu model for the following indicators: inflation, unemployment andexchange rate.

For inflation, which recorded only positive rates of growth in the analyzedperiod, naive model have to extrapolate the latest trend. If Moore had proposed thecomparison to projections based on an extrapolation method, the development ofVAR and ARIMA models, impose their use as benchmark models. A value of Uless than one indicates lower forecast errors than those from the naïve model. Thesame conclusion is reached when it is calculated the scale error proposed byHyndman and Koehler.

The data series for the annual inflation rate has two unit roots, applying atransformation to get a stationarized data series (ri). The Box-Jenkins procedurewas used for 1990-2009 and the transformed inflation rate follows an ARMA(1,1)process: tttt sriri +⋅+⋅= −− 11 918,0_059,1 . For 1990-2010 we got the followingmodel: tttt sriri +⋅+⋅= −− 11 9996,0_04,1 .

Table 2One-year-ahead predictions based on ARMA models and accuracy

indicatorsYear Inflation rate (%) Unemployment rate (%)2010 3,153 6,1872011 9,847 5,892

Accuracy indicators– one-step-ahead forecasts Inflation rate Unemployment rateRMSE 0,0353 0,0065ME -0,0055 0,0006MAE 0,0349 0,0065


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MAPE -0,1077 -0,0041MASE 7,275 1,3593MRAE* 4,7368 0,6506U1 0,2666 0,0537U2 14,0884 0,4076Rel_RMSE* 1,2542 0,2324

Source: processing based on own modelsCompared to Dobrescu model

On horizon 2010-2011, the ARMA model generates an overestimationof the inflation rate and an underestimation of the unemployment rate. Theaccuracy is rather low, the inflation forecasts being better than those based on anaïve model. The unemployment rate predictions based on a MA(1) modelhave a higher accuracy than those based on a naïve model or those got usingDobrescu model, fact described by the values less than 1 for MRAE andrel_RMSE. The random walk process determined better predictions thanARMA models.

Figure 1Short run forecasts of the inflation rate (2004-2011)

0

2

4

6

8

10

12

14

16

2004 2005 2006 2007 2008 2009 2010 2011

inflation rate predictedusing Dobrescu model

inflation rate predicted byNCP

registered inflation rate

Source: processing data provided by IEF and NCP

The graphic above shows that until 2007 the NCP provided more accurateinflation rate forecasts while after the mentioned year the predictions based onDobrescu model were better.

The data series for the unemployment rate has two unit roots, applying atransformation to get a stationarized data series (ru). Unemployment rates from1990 to 2009 in Romania follow a MA(1) process:


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19244,056,11_ −⋅++= tt eentunemploymer . For 1990-2010 we got the followingmodel: ttt eeentunemploymer +⋅++= −1947,0536,7_ .

We used two forecasting techniques: ex-post (used for dynamic forecasts)and ex-ante forecasts used for static forecast. Dynamic forecast (forecast dynamics)forecast the value in period t + 1 only based on data up to time t, then, for allperiods that are already projected using data from period t + 1. Static forecast(forecast still) makes forecasts based only on registered data.

A dynamic forecasting was made in EViews for horizon 2010-2011. Theex- post technique was applied first, using the first 19 values of the unemploymentrate for the model and the rest for prediction. Ex-ante technique of forecasting isbased on all values.

Eviews Program displays a set of indicators to evaluate the modelreliability:

o RMSE (Root Mean Squared Error), which must have a small valueas possible;

o MAE (Mean Absolute Error) ;o MAPE (Mean Absolute Percent Error), which, in this case, has a

relatively low value;o Theil's inequality coefficient (takes values in (0,1), a value close to

0 indicating a good adjustment; in this case has a low value, so, theadjustment is very good);

o Bias Proportion has to be small (in this case is quite large);o Variance Proportion has to be as small; in this case is rather close

to 0;o Covariance proportionate is desirable to be as large as possible; in

this case it is 0 for the dynamic prediction and close to 0 for thestatic one.

To make a comparison of forecasts characteristics, the loss-function valuesare analyzed- root mean squared error (RMSE), which calculates the forecastdeviation from the actual values recorded. It is estimated that a prediction is muchcloser to the real evolution as much as RMSE value is lower. Static forecast issuperior to the dynamic one for unemployment rate which follows a MA (1),because of the lower value of RMSE.

Table 3Dynamic and static predictions in EViews and accuracy indicators

Unemployment rate (%)

Year Static forecasts MA (1) Dynamic forecasts MA(1)

2010 5,7 5,8

2011 7,3 7,5


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Accuracy indicators–one-step-aheadforecasts Static forecasts Dynamic forecasts

RMSE 0,0164 0,0173

ME -0,004 -0,0055

MAE 0,016 0,0165

MAPE -0,1017 -0,1278

MASE 3,3333 3,4375

MRAE* 2,3784 2,6491

U1 0,1298 0,1352

U2 1,0538 1,1171

Rel_RMSE* 0,585048 0,616978Source: processing based on own modelsCompared to Dobrescu model

Figure 2Dynamic and static prediction in Eviews (2010-2011)

Dynamic prediction

-15

-10

-5

0

5

10

15

90 92 94 96 98 00 02 04 06 08

RS_SF

Forecast: RS_SFActual: RS_SForecast sample: 1990 2009Included observations: 18

Root Mean Squared Error 8.006178Mean Absolute Error 7.433333Mean Abs. Percent Error 94.44444Theil Inequality Coefficient 1.000000 Bias Proportion 0.862019 Variance Proportion 0.137981 Covariance Proportion 0.000000

Static prediction


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-12

-8

-4

0

4

8

12

16

90 92 94 96 98 00 02 04 06 08

RS_SF

Forecast: RS_SFActual: RS_SForecast sample: 1990 2009Included observations: 18

Root Mean Squared Error 4.405615Mean Absolute Error 4.015810Mean Abs. Percent Error 49.57959Theil Inequality Coefficient 0.366694 Bias Proportion 0.830870 Variance Proportion 0.039856 Covariance Proportion 0.129274

The static forecast is slowly superior to the dynamic one. Analyzing thevalues for U1, U2 and rel_RMSE, we got that the predictions based on randomwalk and Dobrescu model have a higher degree of accuracy.

We combined the forecasts based on Dobrescu macromodel with thosebased by NCP and we made comparisons using U1 and U2 indicators for 2004-2011. The predictions were built using the three scheme and the accuracymeasures are presented in Table 4.

Table 4U1 and U2 statistics for combined forecasts (2004-2011)

Variable Scheme U1 U2

OPT 0.0875 0.7559

INV 0.0831 0.6255

inflation rate EW 0.0936 0.8479

OPT 0.1665 1.4467

INV 0.1601 1.3688

unemployment rate EW 0.1621 1.3934

OPT 0.0672 1.8367

INV 0.0672 1.8367

GDP index EW 0.0672 1.8367

OPT 0.0068 0.1788

INV 0.0045 0.1133

exchange rate EW 0.0061 0.1581Source: own calculations using Excel


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In the category of combined forecasts, those based on INV scheme are themost accurate for all the selected variables. The predictions for inflation rate andexchange rate are better than the naïve ones. The combined forecasts are betterthan NCP ones for the inflation rate and the exchange rate, but Dobrescu modelprovided more accurate predictions for these variables. For the unemploymentrate, the combined forecasts were the most accurate for the horizon 2004-2011.For the GDP index the predictions of the two institutions are better than thecombined ones.

The predictions based on Dobrescu model and NCP expectations for theunemployment rate using the three schemes are denoted by C1, C2 and C3.Comparisons are made with the accuracy of the two institutions predictions. Forthe forecasts of the unemployment rate (2010-2011) made using Dobrescu modelthe U1 value is 0.122 and U2 is 1.391. the values of the two statistics for NCPforecasts are 0.117, respectively 1.327, with a slow superiority of NCPexpectations. The values of U1 and U2 used in making comparisons are presentedin Table 5.

Table 5U1 and U2 statistics for combined forecasts of unemployment rate

(2010-2011)

Type of combined forecast Scheme U1 U2

OPT 0.1177 1.3224

INV 0.1183 1.3421

Dobrescu predictions+ NCP forecasts EQ 0.1166 1.3224

OPT 0.1044 1.1780

INV 0.1055 1.1832

Dobrescu predictions+ ARMA static forecast EQ 0.1080 1.1780

OPT 0.1087 1.2482

INV 0.1096 1.2347

Dobrescu predictions+ ARMA dynamic forecast EQ 0.1133 1.2482

OPT 0.1188 1.2553

INV 0.1172 1.3267

NCP predictions+ ARMA static forecast EQ 0.1146 1.2553

OPT 0.1181 1.3102NCP predictions+ ARMA dynamic forecast

INV 0.1172 1.3273


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EQ 0.1188 1.3102

OPT 0.2363 1.4576

INV 0.1463 1.6848

C1+ ARMA static forecast EQ 0.1321 1.4576

OPT 0.2179 1.5277

INV 0.1492 1.7260

C1+ ARMA dynamic forecast EQ 0.1372 1.5277

OPT 0.3179 1.4421

INV 0.1417 1.5982


OPT 0.2712 1.5151

INV 0.1456 1.6524

C2+ ARMA dynamic forecast EQ 0.1378 1.5151

OPT 0.2823 1.4462

INV 0.1428 1.6215


OPT 0.2487 1.5184

INV 0.1464 1.6721

C3+ ARMA dynamic forecast EQ 0.1376 1.5184Source: own calculations using Excel

The combined predictions of Dobrescu model forecasts and NCP valuesand each of these predictions combined with static/dynamic ARMA predictionsgenerated more accurate values than the predictions provided by the Institute ofEconomic Forecasting. C3 predictions and the combined ones of NCP andARMA static forecasts in the equally weighted scheme are better than the NCPexpectations and even better than Institute of Economic Forecasting results. TheDobrescu predictions combined with ARMA ones in the two variants (static anddynamic) improved the accuracy of the two institutions predictions.

The combined forecasts based on Dobrescu predictions and ARMA staticones using OPT scheme improved the most the accuracy of initial expectations ofthe unemployment rate for 2010-2011. However, all the forecasts are lessaccurate than the naïve ones, because of values greater than one for U2 statistic.

ConclusionsForecast performance evaluation is an important indicator of the extent to

which projections made accomplished their purpose to be closer as much aspossible of the registered values. Forecasts accuracy in Romania for someimportant macroeconomic indicators was evaluated for each an institution


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specialized in the elaboration of forecasts, and comparisons were made showingthe superiority of forecasts made by National Commission of Forecasting.

In conclusion, macroeconomic forecasts evaluation is necessary to informthe public about the way in which state institutions predicted the economicphenomenon. Further, according a certain degree of reliability by studying theresults, in the future the public attention will focus on a particular institution inaccord with the criterion of forecasts accuracy.

The research should continue in order to find the better strategy to improvethe forecasts accuracy. The combined predictions are a suitable strategy ofincreasing the accuracy only for some cases. The unemployment rate combinedforecasts performed better than the predictions provided by NCP and IEF on thehorizon 2004-2011. The inflation rate and exchange rate combined predictions arebetter only than the NCP expectations.

The Dobrescu model predictions combined with ARMA staticrespectively dynamic forecasts and NCP estimations combined with ARMA staticprognosis, respectively Dobrescu forecasts using EQ scheme for unemploymenton a horizon of 2 years (2010-2011) are very good strategies of improving theaccuracy of predictions made by both institutions. The combined forecasts basedon Dobrescu predictions and ARMA static ones using OPT scheme improved themost the forecasts accuracy.

Finally, assessing and improving the forecasts accuracy is an importantproblem for researchers. The combined predictions are a possible strategy ofgrowing the accuracy, but this should be tested on the real data. However, there isno guarantee that a specific combined forecast will continue in the future toprovide the best accuracy.

ReferencesBratu M. (2012), ”Strategies to Improve the Accuracy of Macroeconomic

Forecasts in USA”, LAP LAMBERT Academic Publishing,http://www.amazon.com/Strategies-Improve-Accuracy-Macroeconomic-Forecasts/dp/3848403196

Clark T., McCracken M. (2009), Improving forecast accuracy bycombining recursive and rolling forecasts, International Economic Review, 2009,vol. 50, issue 2, pages 363-395

Clark T.E., Ravazzolo F. (2012), The Macroeconomic ForecastingPerformance of Autoregressive Models with Alternative Specifications of Time-Varying Volatility, FRB of Cleveland Working Paper No. 12-18

Clements M.P., Galvao A.B. (2012), Macroeconomic Forecasting withMixed Frequency Data: Forecasting US output growth and inflation, The WarwickEconomics Research Paper Series (TWERPS) from University of Warwick,Department of Economics, no. 773

http://www.amazon.com/Strategies-Improve-Accuracy-Macroeconomic-


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Dovern, J. and Weisser J. 2011. Accuracy, unbiasedness and efficiency ofprofessional macroeconomic forecasts: An empirical comparison for the G7.International Journal of Forecasting, 27 (2), p. 452-465.

Fildes R., Steckler H. (2000). The State of Macroeconomic Forecasting.Lancaster University EC3/99, George Washington University, Center forEconomic Research, Discussion Paper No. 99-04

Genrea V., Kenny G., Meylera A., Timmermannb A. (2013), Combiningexpert forecasts: Can anything beat the simple average?, International Journal ofForecasting, Volume 29, Issue 1, January–March 2013, Pages 108–121

Gorr, W. L. 2009. Forecast accuracy measures for exception reportingusing receiver operating characteristic curves. International Journal ofForecasting, 25 (1), p. 48-61.

Granger, C. W. J. and Jeon, Y. (2003). Comparing forecasts of inflationusing time distance. International Journal of Forecasting, 19 (3), p. 339-349.

Heilemann, U. and Stekler, H. 2007. Introduction to “The future ofmacroeconomic forecasting”. International Journal of Forecasting, 23(2), p. 159-165.

Ruth, K. 2008. Macroeconomic forecasting in the EMU: Does disaggregatemodeling improve forecast accuracy ?. Journal of Policy Modeling, 30 (3), p. 417-429.

Teräsvirta, T., van Dijk, D. and Medeiros, M.C. 2005. Linear models,smooth transition autoregressions, and neural networks for forecasting,macroeconomic time series: A re-examination. International Journal ofForecasting, 21 (4), p. 755-774.

Wallis K.F. (2011), Combining forecasts - forty years later, AppliedFinancial Economics, 2011, vol. 21, issue 1-2, pages 33-41

http://www.cnp.ro/ ( National Commission of Prognosis)http://www.insse.ro/ (National Institute of Statistics)http://www.insse.ro/ (Institute of Economic Forecasting)

http://www.insse.ro/

http://www.insse.ro/

http://www.cnp.ro/


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CONSIDERATIONS REGARDING THE REFORM OFTHE EUROPEAN FINANCIAL SUPERVISION SYSTEM

Persida Cechin Crista, Timeea Maria Dumescu"Drăgan" European University of Lugoj, Faculty of Economic Sciences,

Ion Huniade Street, No. 2, Lugoj, Romania,[email protected], [email protected]

AbstractFinancial stability has a crucial role in the financial system and in the economy as a whole,as shown by the current worldwide economic crisis. Therefore, in order to protect thefinancial system and to ensure financial stability, the identification of the main risk andvulnerability sources is of utmost importance. All involved parties, as well as financialinstitutions and supervision authorities need to be informed about the risks.Banks, insurance companies and other financial institutions represent the first line ofdefence against financial crises. These institutions are responsible for maintaining theirviability and solvency, as well as for checking the debtors’ credit worthiness and formanaging the undertaken risks.Keywords: financial stability, banking system, financial supervision, bridge bank.JEL Classification: G21

INTRODUCTIONThe global financial crisis revealed significant breaches in the regulation

and supervision of the international financial system. The international financialsystem’s increased vulnerability to risk was caused, among other factors, by thedeepening of financial markets due to the use of complex instruments, thedevelopment of financial institutions with increased transnational activity and theincreased interconnectivity of financial institutions.

The idea of a new structure for the financial supervision system wasdetermined by the 2008 financial crisis which highlighted the flaws of the systemas a whole, as well as the impossibility of precisely identifying the risks beforethey occur and the connections between institutions and markets. These problemsjeopardise the stability of the financial supervision system. The need for a micro-and macro-prudential approach of financial supervision determined the need for aredesigned architecture of the financial supervision system’s institutionalframework.

The measures adopted by public authorities for the prevention andminimisation of financial crises represent the second line of defence. Thesemeasures refer to:




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Prudential regulations which have to be respected by financial institutionsin order to ensure an effective risk management and the security of clients’ funds,but also to release the necessary information in order to promote market discipline; Prudential supervision, i.e. ensuring that the regulations are respected by

financial institutions; Financial stability monitoring and evaluation, which helps identify the

vulnerabilities and risks which affect the entire financial system.Despite all the above mentioned measures, should the financial institutions

face any difficulties, the intervention of public authorities might be required.The European Central Bank (ECB) overtook the task of the EU member

states’ former central banks. The ECB has broad autonomy, since its Articles ofIncorporation do not include the ability to monetise the budget deficit of themember states’ governments. The independence of the ECB is also suggested bythe relatively low political influence governors have on the central bank. (Cechin-Crista D., 2009).

The ECB and the European System of Central Banks (ESCB)systematically monitor the cyclical and structural evolution of the Eurozone/EUbanking and other financial sectors in order to identify any vulnerability and tocheck the system strength.

This evaluation is performed together with the national central banks andwith the EU supervision authorities, by means of ESCB’s Banking SupervisionCommittee.

The ECB performs the financial stability monitoring and evaluation onseveral levels: Financial Stability and Supervision (as coordinator), Economics,Market Operations, International and European Relations, Payments and MarketInfrastructure.

Based on its competence in the domain, the ECB is often required to assistEU and national authorities to design and define financial regulations andsupervision requirements applicable to financial institutions. The ECB sometimesoffers to contribute to the discussions. Regardless whether the ECB is consulted ornot, it must ensure that financial stability is taken into account.

The European Central Bank: Is consulted regarding European and national law proposals on financial

stability and supervision; Takes part in European and international specialist committees such as: Basel Committee on Banking Supervision; European Banking Committee (EBC); European Securities Committee (ESC); Committee of European Banking Supervisors (CEBS); Committee of European Insurance and Occupational Pensions

Supervisors (CEIOPS).


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PROMOTING COOPERATIONCentral banks, especially the European Central Bank (ECB) and the

European System of Central Banks (ESCB), and the EU supervision authoritiescollaborate mainly through ESCB’s Banking Supervision Committee (BSC). TheBSC was formed in 1998 to support the ESCB in fulfilling its mission of prudentialsupervision and financial system stability. The members of BSC are highrepresentatives of the ECB and of the ESCB central banks, as well as of nationalbanking supervision authorities of the EU countries in which the central bank is notresponsible for ensuring banking supervision.

Cooperation and frequent information exchange are crucial for maintainingfinancial stability, both in normal market conditions and in the case of financialcrises. Ministries of Finance are also involved in these exchanges when managingand solving a crisis. To ensure a solid base for cooperation, all authorities havesigned a memorandum of agreement. The agreed procedures are constantly revisedand tested by the simulation of financial crises and other such activities.

PROPOSALS ON THE MODIFICATION OF THE EUROPEANFINANCIAL SUPERVISION SYSTEM

As a reaction to the global economic and financial crisis (Larosière GroupReport Recommendations), a new design of EU financial supervision wasnecessary, i.e. the creation of a European Financial Supervision System.

The European Financial Supervision System consists of:- European Systemic Risk Council (ESRC);- European Banking Authority (EBA);- Committee of European Insurance and Occupational Pensions Supervisors

(CEIOPS);- European Securities and Markets Authority (ESMA);- Joint Committee of the European Supervisory Authority;- National Supervision Authorities.

The European Systemic Risk Council (ESRC) is responsible for the macro-prudential supervision of the EU financial system.

National authorities, mostly central banks, were forced to continue theprocess of enhancing the national banking system safety devices, which includedaligning their systems to the European developments in the domain.

The banking system’s safety device comprises a series of mechanismsmeant to counter-balance the informational inefficiency of some banking marketcomponents. Since this inefficiency is mostly noticed in periods of highuncertainty, the safety devices aims at neutralising the unfavourable effects onfinancial stability which can be caused by certain elements of market participants.

Should the prevention and early intervention measures adopted by the ECBfor avoiding bank account risks prove to be insufficient, financial stability is to beensured by means of contingency plans. Such contingency plans specify when thebanking supervision authority has to intervene and describe the politics andprocedures to be used for helping banks whose problems could generate a global


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banking crisis. Such a solution has to ensure that the bank’s exit from the market iswell managed in order not to affect financial stability.

The evolution of the prevention and management of financial crises at aEuropean level led to measures by the European Commission. The Commissiondrafted a set of documents regarding an EU framework for transnational crisismanagement in the banking sector and published the results of the publicconsultations on the issue.

There are increased discussions in the EU about possible mechanisms forsplitting the fiscal burden among member states in the situation of a transnationalcrisis, as well as about the organisation and functioning of transnational stabilitygroups.

A new part of the international supervision activity takes place by means ofthe Committee of European Banking Supervisors (CEBS). A priority in 2010 wasthe transformation of CEBS into a new structure, the European Banking Authority(EBA), as a measure to reform the European supervision system. RegulationNo.1093/November 2010 of the European Parliament and of the Council createdthe legal framework of EBA, assigned additional responsibilities and clearlydefined its legal prerogatives.

Financial supervision authorities work together with the new Europeansupervision authorities to ensure financial stability at credit institution level and theprotection of financial service users.

NATIONAL CONCERNS REGARDING FINANCIAL STABILITYAs an active participant in the European Commission debates, including

the debates on law proposals regarding bank deposit guarantees, the National Bankof Romania (BNR) attempted to ensure financial stability by taking several actions.One particular action led to the increase of the guaranteed level to 100,000 euro(equivalent amount in lei) and to the enhancement of the Bank Deposit GuaranteeFund (FGDB) financing policy. By means of the attracted resources, the Fund hasone of the highest levels of guarantees in the EU, as compared to other such Funds.It is foreseen that during the next 4 years the level will reach 2% by raising thecontribution rates from 0.2% to 0.3% and by fulfilling the relevant conditions setforth in the multilateral preventive financial arrangement between Romania, on theone hand, and the EU, the International Monetary Fund and the World Bank, on theother hand.

At the end of 2011, the National Bank of Romania requested the EuropeanCentral Bank to issue a notice regarding a Government Emergency Ordinance billto modify and amend the Government Emergency Ordinance no. 99/2006regarding credit institutions and asset adequacy and Government Ordinance no.39/1996 regarding the creation and functioning of the Bank Deposit GuaranteeFund.

This Government Emergency Ordinance bill regarding the creation andfunctioning of the Bank Deposit Guarantee Fund refers to the National Bank of


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Romania and to the regulations applicable to financial institutions, should theyhave a substantial influence on the stability of financial institutions and markets.

This Emergency Ordinance bill aims at improving the supervisionmeasures at the level of the Romanian banking system.

1. This bill provides the supervision authority with the instruments neededto manage financial stability threats generated by the deterioration of the financialsituation of authorised credit institutions or of the groups they belong to. For thisreason, the introduction of stabilisation measures for credit institutions issuggested, in addition to the already applicable special administration procedure.

2. The bill introduces stabilisation measures in the legal frameworkregarding the activity of credit institutions and financial investment servicescompanies which function in Romania: Total or partial asset and liability transfer of a credit institution to one or

more eligible institutions; Designating the Bank Deposit Guarantee Fund as a delegated administrator

and, should it be the case, as a shareholder of the problematic credit institution, byincreasing the credit institution’s registered capital and subscribing the new sharesissued by the Fund. The Fund must transfer the received shares in a timeframe ofmaximum two years after the receipt of the shares; Asset and liability transfer of a credit institution to a bridge bank created

for this purpose, should the above mentioned measures be impossible to apply orbe insufficient for removing the financial instability threat.

The Bank Deposit Guarantee Fund is a public legal entity meant to ensurethe financing of the stabilisation measures. The Fund uses the financial resourcesof the Bank Restructuring Fund; when these resources are insufficient, the Funduses its own financial resources. This financing cannot exceed 0.5% of the totalvalue of the guaranteed deposits, since this would expose the Fund to additionalrisks.

Should the financial resources of the Bank Deposit Guarantee Fund proveto be insufficient, the Fund may access loans offered by the Ministry of PublicFinance. Such loans are granted by the Ministry in 15 work days after the date ofsolicitation by the Fund.

The conditions for granting such a loan are established in a GovernmentResolution. According to the legislation applicable to credit institutions and underthe prudential supervision of the National Bank of Romania, bridge banks arecreated to function as a bank for maximum two years (this period can be extendedshould there be serious reasons).

A bridge bank ensures the prudential continuity of the banking serviceswhich are associated to the assets and liabilities transferred for the later sale to aneligible third party. The bridge bank takes over the rights and obligations resultedfrom the contracts of the credit institution from which the transfer was performed.

The sale of the bridge bank is performed based on a Resolution of theNational Bank of Romania using:

a) Share sales;


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b) Asset sales with the acceptance of liabilities.3. The legal framework of the Bank Deposit Guarantee Fund in the

Romanian banking system is also modified in order to be compatible with theintended stabilisation measures and with the additional granted competences: theFund can become the delegated administrator and the shareholder of a creditinstitution under the incidence of stabilisation measures; in the case of a bridgebank, the Fund is its sole shareholder and acts as a supervisory board.

In the above mentioned cases, the Bank Deposit Guarantee Fund financesthe stabilisation measures with the previous consent of the National Bank ofRomania. The Ordinance bill also modifies the status of the special fund. Thisspecial fund was originally created to offer compensation to those affected by thespecial administration procedure measures. The status change allows the financingof stabilisation measures and renames the special fund: Bank Restructuring Fund.

CONCLUSIONSThe reform of the financial system regulation framework as proposed by

the new supervision system aims at promoting a stronger and more reliable bankingsector. This goal is achieved by applying measures meant to improve its ability toabsorb financial and economic shocks, regardless of their originating source, aswell as to reduce the risk of the financial sector problems entering the realeconomy.

The new standards also aim at improving risk management, enhancingbank transparency requirements and solving systemic problems of banks withintense transnational activity. The measures of the new supervision system mainlyrequire banks to apply stricter standards regarding capital adequacy, liquidityrequirements and leverage ratio. All these reforms aim at increasing financialsystem benefits by reducing the frequency and intensity of economic crises and,implicitly, the economic costs of such crises.

BiblioraphyCechin-Crista D., Cechin-Crista P. (2010) – Operaţiunile instituţiilor de

credit, Timişoara: Editura Solness;Cechin-Crista D., (2009) – Teorie si politică monetară, Lugoj: Editura

Nagard;Cerna S., (2008) – Stabilitatea financiara, Timişoara: Editura Universităţii

de Vest;Donath L., Cechin-Crista P., (2006) – Elemente de management a

riscurilor bancare, Timişoara: Editura Mirton;Internet: http://www.bnro.ro.

http://www.bnro.ro


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CONTRIBUTIONS TO IMPROVE ACCOUNTING ANDFINANCIAL REPORTING OF EXPORTS OF GOODS

AND SERVICES

*Nicolae Paul Virag, **Gheorghe Claudiu Feieş, ***Marian Socoliuc*Vasile Goldis Western University Arad, e-mail : [email protected],

**West University of Timisoara, Faculty of Economics and Business Administration,***Ştefan cel Mare University Suceava, of Economics and Public Administration, Suceava

AbstractForeign trade is a form of foreign economic activity and simultaneously a form of trade ingeneral. Basic forms of trade determines the existence of their methodology to account forflows. At the first level of imports and exports accounting methodology is based on generalpatterns of purchases and sales records locally, but is supplemented with specific elementsof the tax, customs and currency. This paper proposes an approach to exports of goods andservices in terms of accounting and taxation.Key words: export, taxation, export of goods on commission

IntroductionForeign trade is a traditional form, the ancient international business,

which now continues to maintain the most important positions in general complexinternational economic relations. he international practice shows that everycountry, regardless of its geographical and economic size is required to participatein the world economy and well-sized foreign trade can become a real catalyst forgrowth.

In this paper we propose to address in terms of accounting and tax, exportsof goods and services.

1. Accounting and taxation of exports of goods and servicesExports of goods and services includes all transactions whereby goods and

services produced, processed or manufactured in the country are sent (billed) by abeneficiary from a third country not a member of the European Union. Whenconsidering how to achieve export can be: himself and the commission.

Economic factors that determine the dynamics of imports and exports aremostly of circumstantial nature. Exchange rate fluctuations and inflation affect thetraded goods level. Imports have relatively normal behavior economically.

In terms of their registration in accounting and tax implications of exportoperations are affected by:

- Exchange rate of the currency is settled;- Regulations on the tax deductibility of exchange rate differences;



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- Criteria for recognition in the financial statements of the exchangedifferences.

Exchange differences apear during the settlement of claims and liabilitiesin foreign currency at different rates from those that were initially recorded duringthe period or to those that have been reported in previous annual financialstatements must be recognized as income or financial expenses the period in whichthey appear.

When claims or liabilities in foreign currencies are settled during thefinancial year in which they occurred, all the exchange difference is recognized inthat period. If claims or liabilities in foreign currencies are settled in a subsequentfinancial year, foreign exchange differences are recognized in each year up to yearsettlement occurs and is determined by taking account of changing exchange ratesincurred during each financial year.

For assets and liabilities in lei of which settlement is made on the rate of acurrency, any exchange differences arising from the evaluation are recorded infinancial income or expenses as appropriate.

Monetary items denominated in foreign currency (availability, credit, bankdeposits, receivables and liabilities in foreign currency) should be evaluated andreported using the exchange rate communicated by NBR and valid at the time eachfinancial year. Exchange differences between the date of registration or reportingand year-end rate recorded in the positive financial income, financial expenses thatunfavorable.

An important aspect to be analyzed through the relationship accounting -taxation is the taxation of value added tax.

According to the Tax Code (Law no. 571/2003 with subsequentamendments) are exempt from VAT, input tax deduction opportunity followingoperations:

- Supplies of goods dispatched or transported outside the Community bythe supplier or other person on his behalf;

- Supplies of goods dispatched or transported outside the Community bythe purchaser not established in Romania or other person on his behalf with someexceptions;

- Delivery of services directly related to export of goods or goods placedunder warehousing VAT or customs suspension regime;

- Delivery of transport services and transport related accessories export ofgoods;

- Delivery of services in Romania on movable property acquired orimported, placed under the inward customs and transported outside the Communityby the service provider or customer, if it is not established in Romania, or byanother person on behalf any of them.

Are treated as supplies and exempt from tax also the goods transportedoutside the Community in Romania even without a transaction where goods aredispatched or transported outside the Community by the supplier or another person


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on his behalf provided that the contractual provisions to provide that transportationis the responsibility of the supplier.

Tax exemption is justified by the exporter with the following documents:invoice, customs declaration for export, transport document, other documentsproving effective implementation of export such as purchase order, sale or contractof insurance documents.

Accounting for operations for exports is based on the modalities of that: ontheir own and in charge.

If the export on their own entities have a producer or entity specialized inforeign trade. They either produce the goods they sell to export or resell goodsbought for export.

From an accounting perspective is applied to connection costs withrevenues. For tax purposes, expenses related to importation of goods, as well ascustoms fee and duties include the acquisition cost of imported goods.

In export operations selling price is formed according to the conditions ofdelivery that:

- FOB (free on board) Romanian port of loading: external price includesonly the price of goods for export. (Net FOB) and any services and foreign interest(gross FOB): Pext = PNF + Sv + Db ext.

- CAF (cost and freight): external price includes: the price of goods andtransportation costs along the outside: Pext Ch tr + ext = pmf.

- CIF (cost insurance freight) foreign port of unloading: external priceincludes: the price of goods, transport and insurance costs to go outside: P ext =pmf + ASIG Ch Ch tr + ext ext.

CIF and CAF conditions include the external price of three components:- Price of the goods (Account 707 "Income from sale of goods")- The value of external services: transportation, insurance, fees (account

708 "Miscellaneous Revenue")- Foreign interest (account 766 "Interest").example:Company "A" supplied goods in the U.S. in terms of delivery CAF worth $

100,000. Transportation costs are $ 4,000 along the external (not included in thevalue of the goods). Exchange rate (Leu - dollar) when billing is 3.10 Euro / $. Thecollection rate is 3.30 USD / $. Cost of goods sold is 240,000 lei. External providerpayment is made at a rate of 3.20 lei / $.

Preliminary calculations:Val. goods in USD: $ 100,000 x3, 1 Euro / $ = 310,000 lei.Expenditures in domestic transport: 4000 x 3.1 = 12,400 leiThe amount charged in USD: 104,000 x 3.3 lei / $ = 343,200 lei.


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Solution:- Record export of goods sold:__________________________ X ____________________________4111 "Customer" =% 322.400 707 "Income from the sale of 310.000

goods " 708 "Revenue 12.400

different "__________________________ X ____________________________

- Low cost management of goods sold:__________________________ X ____________________________ 607 "Expenditure on goods" = 371 "Goods" 240,000__________________________ X ____________________________

- Collection of the value of goods sold:__________________________ X ____________________________ 5124 "Balances with banks in =% 343.200 currency "4111" Customer " 322.400 765 " 20.800 income differences

quotation "__________________________ X ____________________________- Receive invoice for transport along the external (quotation 3.1):__________________________ X ____________________________

624 "Expenditure on transport = 401" Suppliers "12,400 of goods and people "__________________________ X ____________________________

- Pay External transport provider (currency 3.2):

__________________________ X ____________________________ % = 5124 "Balances with banks 12.800

401 "Suppliers" currency " 12.400 665 "Expenditure differences being" 400__________________________ X ____________________________

Tax implications for this example are generated by exchange ratedifferences recorded between the time that billing and collection of payment.

2. Accounting and taxation of exports of goods on commissionEntities wich make operations of export commission, have the

intermediaries role by selling goods to external (outside the European Union) ontheir behalf but the risk entities producing goods for export, for a fee.


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Intermediate entities in charge of export contracts with the entitiesproducing goods and with external partners and service entities.

The contracts of commission is not the transfer of ownership of goods butprovision of specialty services on the conclusion and implementation of exportcontracts for a fee.

The commission contracts established mandate and financial obligations,creating the legal premises on settlement services.

In terms of financial, property settlement occurs on the reverse flow ofmovement of goods that:

- To collect goods from external customers to external price agreedconverted into lei at the exchange rate of the day;

- Is paid net FOB value less foreign producing establishment noted thecommission rate at the date of receipt, showing the foreign exchange accounts;

- External service providers are paid.If the external billing date pre-calculated costs were at record actual

expenses and adjustment is carried out with entities producing, being rendered intheir account.

In terms of accounting methodology the main problem that occurs relatesto highlight the costs and revenue accounting entity's own foreign trade.

Own expenses relating to: wages staff, depreciation of property, domestictransport costs over time, energy, water, etc., including currency revaluation losses.

Revenues include: income from commissions withheld or collected frommanufacturing units and favorable exchange rate differences.

Example:Company "X" exports goods made on commission, in the U.S. who know

the following:- On 05.04.N, external customer is invoiced goods provided the CIF value of $82,000;- Transport along the external value of the external charged $ 2,000;- Export entity fee is 10% of net FOB foreign;- On export entity 06.04.N settlement documents filed by the bank and collectingthe exportation currency - on 08.04.N is settled with the external entity producingand transport;- Costs incurred in producing entity account are: customs fee 400 lei and bankcharges 200 lei lei;- Expenses incurred by the entity's own export are: salaries of personnel involved8000 lei and 2000 lei equipment depreciation.The period of the contract, exchange rate leu - dollar had the following evolution:- The 05.04.N: $ 1 = 3 lei- The 06.04.N: 1 USD = 3.1 RON- The 08.04.N: 1 USD = 2.9 RON


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The external invoice can be determined:- CIF external value: $ 82,000 x 3 Euro / $ = 246,000 lei- External transport value: $ 2,000 x 3 Euro / $ = 6,000 lei- Foreign FOB value: $ 80,000 x 3 Euro / $ = 240,000 lei.

External transport is performed by a specialized entity is exempt fromVAT.

Export accounting entity will be the following accounts:- Invoicing of goods to external customers:__________________________ X ____________________________ 4111 "Customer - external" = % 246000 401.01 "Suppliers - producers' 240000 401.02 "Suppliers - carriers" 6000__________________________ X ____________________________

- Registration fee due to an exporter: $ 80,000 x 10% x 3lei / $ = 24000 lei.__________________________ X ____________________________ 4111 "Customer" = 704 'Income from provision 24000

services "__________________________ X ____________________________

- Record expenses incurred in producing entity account:__________________________ X ____________________________

471 "Prepayments" = % 600 447 "Special funds - 400

commissions and fees " 5121 "Accounts in domestic banks' 200__________________________ X ____________________________

- Customs fee payment:__________________________ X ____________________________ 447 "Special funds - = 5121" to bank accounts in lei " 400 commissions and fees "__________________________ X ____________________________

- Billing costs in the accounts of production:__________________________ X ____________________________ 4111 "Customer" = 471 "Prepayments" 600__________________________ X ____________________________

- Record receipt of goods from the foreign partner (at the rate of 3.1 USD / $)__________________________ X ____________________________5124 " Balances with banks = % 254200currency "4111" Customer " 246000


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765 ' income differences course " 8200__________________________ X ____________________________

- Registration deductions related to producing unit (24 000 + 600)__________________________ X ____________________________ 401 "suppliers – manufacturers = 4111 " Customer "24600__________________________ X ____________________________

- Registration of debt settlement to the establishment of production ($ 80000 x 2.9lei / $ = 232000-24600 = 207400 lei.)

401 "suppliers - manufacturers'

24.600 232.000

207.400

__________________________ X ____________________________ 401 "suppliers - manufacturers' = % 215400 5124 "Balances with banks 207400

currency " 765 ' income differences 8000 course "__________________________ X ____________________________

- Registration of debt settlement provider to:__________________________ X ____________________________ 401 "suppliers - carriers" = % 6000

5124 ' Balances with banks 5800 currency " 765 "Income differences 200 course "__________________________ X ____________________________

- Record export entity's own costs:__________________________ X ____________________________ Expenditure on salaries = Wage Obligations 8000 Depreciation and amortization = Depreciation 2000__________________________ X ____________________________


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Fiscal implications drawn from this example are generated by thatspending, revenues recorded by the entity exporting and foreign exchangedifferences recorded.

ConclusionsIf the export on their own entities have a producer or entity specialized in

foreign trade. They either produce the goods they sell to export or resell goodsbought for export.

From an accounting perspective is applied to connection costs withrevenues. For tax purposes, expenses related to importation of goods, as well ascustoms fee and duties include the acquisition cost of imported goods.

Tax implications that arise from expenses, revenues recorded by the entityexporting and foreign exchange differences recorded. Another tax advantage is interms of exemption from VAT, with the deduction for export operations.

AcknowledgementsThis article is a result of the project „Doctoral Programme in Economics at

European Knowledge Standards (DOESEC)" . This project is co-funded by theEuropean Social Fund through The Sectorial Operational Programme for HumanResources Development 2007-2013, coordinated by The Bucharest Academy ofEconomic Studies in partnership with West University of Timisoara

BibliographyAna Stoian, Contabilitate şi gestiunea fiscală, Biblioteca digitală ase,

http://www.biblioteca-digitala.ase.roDorel Mateş, Contabilitatea evenimentelor şi tranzacţiilor între standarde,

directive şi reglementări fiscale, Editura Mirton, Timişoara, 2009Emanuel Ştefan Marinescu – Analiza eficienţei economice şia a

competivităţii comerţului exterior românesc prin casele de comerţ din România,EIRP Proceedings, Vol 1 (2006)

Hlaciuc E., C.C Mihalciuc – Organizarea contabilităţii financiare aentităţilor economice, Ed. Didactică şi Pedagogică RA 2008, pag. 549

Răilean V., Studeonov C. Particularităţile comerţului exterior al unei ţărimici în tranziţie: exemplul Moldovei. Chişinău: IIM, 2000

*** OMFP 3055/2009, M. Of. 766/2009*** Legea 571/2003 – privind Codul fiscal, art. 143 şi 144

http://www.biblioteca-digitala.ase.ro


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MODELS OF INSTITUTIONAL ORGANIZATION OFFINANCIAL MARKETS AND BANKING IN EUROPE

*Silviu-Sorin Cordovan, **Negrilă OvidiuUniversitatea Babeş-Bolyai Cluj-Napoca, Doctoral Studies, FSGEA,

* e-mail: [email protected]** [email protected]

AbstractThe current crisis has led to interpretations in terms of models of organization andregulation of financial and banking system in each region and worldwide. Banking systemsin developed countries, characterized by diversity, concentration of financial intermediationactivities, enhancing restructuring operations, the availability for foreign relations will splitbanking systems in two models: the banking systems of continental Europe, which are lessspecialized and copied on the American model bank , applied in Japan, based on theprinciple of strict specialization of institutions. This article analyzes the banking systemsin Europe and the perspective from these systems.Keywords: concept of convergence, contamination risks, integration models, models ofbanking systems, settlement systems

The current crisis has led to many interpretations in the patterns oforganization and regulation of the banking system in each country, region andglobally.

Analyzing the institutional and regulatory framework in the U.S. the focusof possible causes have been sufficient to trigger a global crisis, Nouriel Roubini(Roubini et all., 2010) for example take the positive role models, such as the UKFinancial Services Authority, for the following reasons:

- takes care of regulating banks, insurance, securities, derivatives,even mortgages;

- managers of various departments are under the same managementstructure, which prevents arbitrage and compliance on all regulatory chosen.

A number of issues remain open, considers Roubini:- the paradox of choice or chosen paradox (regulation of the

chosen), a vicious circle which meets direct choise of the banks, gravitating toagencies who promise the most least method rigorous regulatory and agencies willsee their remit as start narrow, and a regulator is not regulating because losesreason to be. Following reasons appear like a consequence for "indulgence" soregulators can attract more financial institutions in their sphere of influence;

- deliberate shift financial activity of organisational structuresfrom more strictly legislated in some less regulated, parallel banking systeminstitutions that look like banks, but are not regulated as banks. Any new




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regulations should be applyed from one end to another system, all instituions thatraise not only seismic risk but even significant systematically financial firms. Aselective aplication of law would be a mistake because financial intermediationwill moove to many larger institutions and smaller institutions and regulated firmsto less regulated;

- reducing the principle of self regulation, the idea that regulatorscan establish some general principles by which financial institutions can find theirway to comply. In addition any latitude of interpretation of the regulations shouldnot belong to market operators but should belong regulators.

Starting on the above ideas to meet the following European models oforganization of banking systems we can find next classification:

Model 1 - Full IntegrationThis model features a full institutional integration between the autority

prudential regulator prudential regulatory authority, central bank and the regulatorof securities markets. This model allows taking decisions for a complete set ofmacro-prudential instruments by an internal committee of an organization, such asfor example the central bank's executive board and such decisions are fully bindingon the line throughout the market. For monetary policy decisions IMF recommendsa separate committee.

In Europe, the Czech Republic has long been the only example of fullintegration. Ireland has recently made the transition to full integration modelabandoning the strong separation between central bank and the authority regulatingthe financial integrity - that characterized his model. Belgium has proposedswitching to this model during 2011 in the process of dismantling the macro-prudential Council.

Model 2 - Partial IntegrationThis model is characterized by strong institutional integration between the

central bank and prudential regulatory authority, the latter as a department orbranch/subsidiary of the central bank, while the securities market authority isseparated from the central bank.

This model is widespread in Europe, but there are differences in howmacro-prudential decisions are taken, there are three options at national level:

- the first approach - the governor of central bank presides over aboard comitee responsable for macro-prudential decisions, represented by centralbank officials, including Supervisor of prudential regulation and oversight, andcoordinator of separate authority of the securities market. It is the direction towardsthe model choosed by the UK and is going for Romania as chosen full model;

- the second approach - the above mentioned Comitee is not chairedby central bank governor but by the Minister of Finance / Head of Treasury.Applicable to countries like France, Greece, Italy and Portugal;

- the third approach, implies the coordination between regulators,oversight is more informal and there is no committee / board decisions responsable


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for macro-prudential decisions. It is the case for the other European countries suchas Holland, which is based on strong institutional integration between central banksand prudential regulators.

Model 3 - Separation / SegregationIn this model there is a separation between central banks and prudential

regulators and the securities market, the last two being sometimes integrated in oneregulatory authority. This segregation Favors decisions by consensus and further beimplemented into practice the recommendations of a council. Coordination ofmacro-prudential policy can sometimes involve the central bank. In other cases, inpractice, the separation imposes a stronger role for the Ministry ofFinance/Treasury who often occurs to mediate positions between different points ofview. In Europe there is no example of such a model, where policy coordination isdone by the central bank. Hungary, Poland, Denmark and Austria have recentlyestablished a Council for macro-prudential decisions chaired by the Ministry ofFinance / Treasury. Estonia, Finland, Germany, Luxembourg, Latvia, Sweden donot have any formal Council.

Integration of the Romanian banking system in the European bankingsystem

There are authors who say that money markets and government bond markets aremarkets that integrates the fastest, yet few are evidence for a similar process forintegration of banking and particularly that of retail.

In assessing the state of integration of banking systems there have beenseveral approaches:

- direct measurement of cross-border operations (especially forretail) (Gual, 2004, Perez et all., 2005) - data that is tracked by the Bank forInternational Settlements. In general, these flows are less than 1% of total loans.Although cross-border flows of retail are not a prerequisite for the integration ofbanking systems, this level of this flux can be considered a premise of a weakintegration;

- addressing cross-border banking mergers (Kohler, 2007, Kohler,2009) - actually defined by the absence of such offers in comparison to the numberof domestic mergers;

- another approach is to integrate the analysis from interest rateconvergence study. Some authors (Adam et all. 2002) have analyzed this issue interms of corporate and mortgage loans, studying the convergence of interest ratesover a period of five years. Other authors (Affinito and Farabullini 2009) showsthat in the euro area "price" has higher dispersion than in Italy and concluded that"the euro area prices appear different because national banking products appeardifferent or because they are differentiated by national factors". But some authors


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consider that dispersion in interest rates may be completely independent of bankingintegration (Gropp et all. 2009);

- the most recent approaches analyzing the integration are thoseconsidering the convergence of bank profitability (Gropp et all., 2009). In fact,worldwide, some authors consider profitability and capitalization of banks not onlyas a factor for integration but also tools that provide a stable and safe situation(Blejer, 1998).

Common to these approaches is the concept of convergence. It can holdtwo approaches:

- convergence is a dynamic process which is based on theapplication of socio-economic policies aimed at reducing disparities betweenregions and countries in a given space. This can be done primarily through theimplementation of structural policies in order to achieve strong growth parametersin the peripheral regions (so called not because of geographic location but throughthe endowment with economic performance factors and their use) which haveundergone a decline economic or failed to achieve performance economic of thearea they belong;

- addressing the increasing convergence by linking similarities andeconomic performance of regional and national economies in a given space.

In most cases the convergence is seen as a precondition for integration,because as long as structures can implement policies converge the integrativeprocess, its strategies and creating common functional institutions are more easilyachieved.

This convergence can be achieved in several ways, in 1995 Grossman andHelpman highlighted the role of integration in stimulating economic growth,process where by elimination of barriers, allows access of peripheral economies todeveloped markets, and therefore eliminate the redundancy and make possible thetransfer of technologies and innovations from developed areas to the peripheralareas.

Challenges of integration of banking systemsClearly evident during the last four years, was the uncertainty which

dominated the financial markets.As such it can raise two major problems:- contamination due to cross-border systemic risks but in parallel

with- stability of national banking systems.What can be observed, and going over the various theories is that the

banking and financial integration has advanced greatly in EU countries, especiallyfollowing the adoption of a common regulatory framework for banking, but whichled to greater interdependence between banking systems of many European Unioncountries, which creates cross-border systemic risks much higher than in the past.


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Based on those assumptions it is natural to put the question to what extentwe can discuss about the stability of the Romanian banking system in the EUintegration process.

A stable banking system, ensuring effective and sustainable nationaleconomy mobilization of cash money, directing them towards efficient financialactivities, is an important precondition for economic development. The stability ofthe banking system is much more visible in terms of financial instability andbanking system flaws, vulnerability to changing economic environment, herebybanks and banking crises are more evident in similar periods as of recent crisis.

As is shown by the current crisis, financial stability plays a key role in thefinancial system and economy as a whole. Given the increasing number of largefinancial institutions currently active in one or more countries or one or morecontinents, global financial stability has become even more important. Globallyconsidered (Nier, 2009) that the depth and extent of the financial crisis has givennew impulses to authorities to rethink existing financial stability frameworks,which should begin review of reconnecting with concrete financial objectives, thisshowing a retrospect to collective failure and is necesary to find a solution to thegoal of reducing systemic risk.

Bank for International Settlements and the Basel Committee on BankingSupervision have jointly created in 1999 the Financial Stability Institute (FSI) toassist financial sector supervisory authorities around the world in improving andstrengthening their financial systems.

FSI objectives are:- to promote supervisory standards and practices globally to support

the implementation of these standards in all countries;- to provide with the latest market information, practices and

techniques to oversight authorities, to help them adapt to rapid innovations in thefinancial sector;

- to assist oversight authorities in developing solutions to multiplechallenges by sharing experiences in seminars, forums and conferences;

- to assist oversight authorities in hiring practices and provide toolswhich will allow them to meet daily and tackle more ambitious objectives.

The main activities of FSI:- organize events for the financial sector supervisory authorities,

such as conferences, summits and seminars;- provide on-line tools (FSI Connect), learning and source of

information for financial sector supervisors;- Offer publications - occasional papers and a newsletter quarterly.Considering that the first line of financial stability defense is given by the

international financial banking practice, one can raise two issues:- how we define the banking system?;- how do we ensure stability in financial stability?The banking system is defined by some Romanian authors (Kiriţescu et

all., 1998) as a "banking unit", representing all the operations and assets and


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liabilities transactions made by different categories of the bank, with private,domestic capital or joint combinations of those, practicing within a country area.

ConclusionsAnalyzing banking systems in developed countries, characterized by

diversity, concentration of financial intermediation activities, enhancedrestructuring operations, the flexibility of communications with the Foreign, someRomanian authors (Dardac et all., 2006) examine the banking systems in terms ofwork organization of bank activity and degree of specialization, distinguishingbetween the two banking systems:

- banking systems of continental Europe, which are less specializedand universal bank model works;

- american model, applied in Japan, based on the principle of strictspecialization of institutions.

The current crisis has amplified a rich debate about which system is moreviable European or American, putting into question the viability of the euro area inits current form. Skeptics underlines the fragility of the euro area, including lack offiscal union and stating that a fully federal system like the U.S. could have helpedto prevent some distinctive features of the crisis in the euro area (egdisproportionate level debt countries). Question remains whether this is evidencethat the euro is not viable without the federalism fiscal architecture (Harjes et all.,2011)?

References:Adam, Klaus, Jappelli,Tulio Menchini, Annamaria, Padula, Mario and

Marco Pagano, 2002, Analyse, compare and apply alternative indicators andmonitoring methodologies to measure the evolution of capital market integration inthe EU, Economic Studies on the Internal Market, European Commission,Brussels.

Affinito, Massimiliano and Fabio Farabullini, 2009, “An empiricalanalysis of national differences in the retail bank interest rates of the euro area”,International Journal of Central Banking, forthcoming.

Blejer, Mario I., 1998„Central Banks and Price Stability: Is a SingleObjective Enough?”, IMF, Journal of Applied Economics, Vol.1, No.1/1998,pag.105-122.

Dardac N., Barbu T., 2006, „Monedă, bănci şi politici monetare”, EdituraDidactică şi Pedagogică R.A., Bucureşti.

Gropp, Reint and Kashyap, Anil, 2009, „A new metric for bankingintegration in Europe”, Working Paper 14735, National Bureau of EconomicResearch.

Grossman, Gene M. and Helpman Elhanan, 1995, „Trade Wars and TradeTalks”, Journal of Political Economy 103, pag.675-708.

Gual, Jordi, 2004, “The integration of EU banking markets” CEPRWorking paper No 4212.


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Kiriţescu C., Dobrescu E., 1998, „Băncile – mică enciclopedie”, EdituraExpert Bucureşti, pag.494.

Köhler, Matthias, 2007, “M&A control as barrier to EU Banking marketintegration”, Centre for European Economic Research (ZEW), August.

Köhler, Matthias, 2009, “Transparency of Regulation and Cross-BorderBank Mergers”, International Journal of Central Banking, forthcoming.

Nier, Erlend W., 2009, “Financial Stability Frameworks and the Role ofCentral Banks—Lessons from the Crisis” IMF Working Paper No. 09/70(Washington: International Monetary Fund).

Perez, Daniel., Salas-Fumas, Vincente, and Jesus Saurina, 2005, BankingIntegration in Europe” Bank of Spain Working Papers No 0519.

Roubini, Nouriel and Mihm Stephen, 2010, “Economia crizelor, curs-fulger despre viitorul finanţelor”, Ed.Publica. Bucureşti.


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SMART, SUSTAINABLE AND INCLUSIVE GROWTHFOR 2014-2020

*Ana-Maria Popescu (Stîngaciu), **Nicolae-Eugen Munteanu*Faculty of Economics and Business Administration, 9, Leandrului Street, bl.15, ap.9,

300287, Timisoara, România, [email protected];**Faculty of Economics and Business Administration 9 A, Martir Ioan Stanciu Street, sc.

A, ap.2, 300737, România, [email protected]

AbstractStarting with general information about the EU multiannual financial framework and theEuropean Union’s budget, the research paper attempts to respond to some questions ofgeneral interest regarding the activities financed through EU budget, the potential causesfor a low absorption rate of funding in the current financing period and concludes withsome measures needed to be taken to strengthen the absorption of funding for the nextfinancing period, 2014-2020. Based on the main theme of the Europe 2020 strategy, smart,sustainable and inclusive growth, the article attempts to outline the important role of EUallocations for the period 2014-2020 for funding the growing number of policy in whichEU can be more effective in the current context, after the economic and financial crisis. Thepaper presents the objectives of the Europe 2020 strategy and the targets for 2014-2020.Keywords: multiannual financial framework, budget, smart growth, sustainable growth,inclusive growthJEL Classification: F 36, H 70, O 10, O 20, O 40

RezumatPornind de la informatii generale cu privire la cadrul financiar multiannual si bugetulUniunii Europene, lucrarea incerca sa raspunda la unele intrebari de interes general cuprivire la activitatile finantate prin bugetul Uniunii Europene, la posibilele cauze pentru orata scazuta de absorbtie a fondurilor in perioada de finantare curenta si incheie cu unelemasuri necesare a fi adoptate pentru a consolida absorbtia fondurilor in urmatoareaperioada de finantare, 2014-2020. Bazat pe tema principala a strategiei Europa 2020, ocrestere inteligenta, durabila si incluziva, articolul incerca sa sublinieze rolul important alalocarilor Uniunii Europene pentru perioada 2014-2020 in vederea finantarii numarului totmai mare de politici prin care Uniunea Europeana poate fi mai eficienta in actualul context,dupa criza economica si financiara. De asemenea, articolul prezinta obiectivele StrategieiEuropa 2020 pentru perioada 2014-2020.

IntroductionThe European Union resources allocated to promote economic and social

development, focused on reducing the disparities between countries and regionsand poverty, come from three sources: the EU budget, the European DevelopmentFund and the European Investment Bank.




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The EU budget is funded from the EU’s own resources (99%) and otherresources (1%) and is based on the principal that total expenditure must equalrevenue. The EU budget is annual and according to the budgetary principle ofannuality, expenditures and revenues are planned and authorized for one year.There are three types of own resources which contribute to the financing of EUbudget: traditional own resources consisting of customs duties on imports fromoutside the European Union and sugar levies (EU governments keep 25% to coverthe costs of collecting), own resources from VAT, own resources based on GNI.The budget has also other sources of revenue: taxes on EU staff salaries,contributions from non-EU countries to certain programmes, penalties oncompanies for breaching competition laws, etc. T

The European Development Found is not funded by the European Union’sbudget, but by the Member States through direct contributions agreed innegotiations. This fund is renewed every 5 years, the next renewal will be in 2013.The EDF is not included in the EU budget, therefore it is not subject to theprinciple of annuality. Each EU country contributes to the EU budget with apercentage of its VAT and 1% of its GNI.

The multiannual financial framework defines the maximum amountsavailable for each spending area of the EU budget. The annual budget of the EUmust comply with the multiannual financial framework. The multiannual financialframework is not the budget of the EU for seven years, but a mechanism forensuring that EU spending is predictable and subject to strict budgetary discipline.

2. Data and Methodology2.1 Objectives and targets of the Europe 2020 StrategyThe new strategy will develop an economy based on knowledge and

innovation, will promote a more efficient, greener and more competitive economyand will deliver social and territorial cohesion through employment and skills andpoverty reduction.

The Europe 2020 strategy was needed to help the countries come out fromthe economic and financial crisis and transform their economies into smart,sustainable and inclusive growth (Figure 1)

Figure 1Priorities of the Europe 2020 Strategy

Source: Self processing

Europe 2020 Strategy

Smart Growth Sustainable Growth Inclusive Growth


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The three priorities of the Europe 2020 Strategy comprise its objectives:innovation, education, employment, climate energy and social inclusion. For 2014-2020 the Europe 2020 strategy is focused on increasing employment rate of thepopulation aged 20-64 from 69% to 75%, reducing greenhouse gas emission with20%-30% compared to 1990 levels, reducing poverty by 25%, investing in researchand development and higher educational levels by reducing the dropout rate to 10%from 15% and increasing the number of population having completed tertiaryeducation from 31% to 40%. These targets are related to each other but it ispossible that this approach does not fit to all countries of European Union becauseeach Member State is different and there are disparities between them. Therefore,these targets are a general approach for 2014-2020.

To achieve these targets, requires that each of them to be included innational strategies and adjusted to each country. The Member States will need toreform the national and regional research, development and innovation systems, tostrengthen the cooperation between universities, to reinforce the research andbusiness and to implement joint programming and enhance the cross-bordercooperation. It is necessary for the next financing period to ensure efficientinvestment in education and training systems at all levels, to target public fundingon areas not fully served by private investments, to develop strategies for reducingthe gas emission, to present proposals for modernizing and decarbonising thetransport sector, to improve the business environment for innovative SMEs.

In combating poverty and social exclusion, each Member State mustimplement measures addressing the specific groups at particular risk (minorities,one-parent families, Roma, people with a disability, homeless) and to ensureadequate income support and access to health care.

2.2 EU commitments appropriations for 2014-2020The commitment appropriation for 2014-2020, as stated in the Multiannual

Financial Framework, comprises allocations for regional convergence, transitionregions, competitiveness regions, territorial cooperation, Cohesion Fund, outermostand sparsely populated regions and for the Connecting Europe facility (Figure 2).


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Figure 2Commitment appropriations, 2014-2020 (million EUR prices)

Source: Self processing based on data from http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SPLIT_COM:2011:0500(01):FIN:RO:PDF

The commitment appropriations for transition regions addresses to allregions with a GDP per capita between 75% and 90% of the EU-27 average. TheConnecting Europe facility was created to accelerate the infrastructuredevelopment that the European Union needs and to provide better access to theinternal market. Some of the infrastructure projects of EU will pass throughneighbourhood and pre-accession countries, the cross-border cooperation beingvery important in this matter.

The EU allocations finance the common policies of the Member States,supports the development of the less developed countries in order to eliminate thedisparities through countries and regions, facilitate cooperation and joint solutionsto problems that cannot be solved by Member States acting alone, respond tocommon challenges as environment, climate and demographic change and culture.

For the period 2007 – 2013 an amount of approximately 348 billion EUR(Figure 3) is being invested in order to achieve the harmonious development of theEuropean Union and its regions through a higher competitiveness especially in lessdeveloped regions, expanding employment and improving people’s well-being andprotecting and enhancing the environment.

http://eur-


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Figure 3The allocations for 2007-2013 and 2014-2020 (million EUR prices)

Source: http://ec.europa.eu/health/programme/docs/maff-2020_en.pdf;http://ec.europa.eu/budget/biblio/documents/fin_fwk0713/fin_fwk0713_en.cfm#alloc

For the period 2014-2020 the proposal of European Commission is basedon smart, sustainable and inclusive growth, which includes economic, social andterritorial cohesion. Comparing with the allocations for 2007-2013, the totalestimated allocations for 2014-2020 increased with 7,92%. An amount of 376billion EUR (Figure 3) is estimated to be invested in research, innovation,education and SME development.

ConclusionsSince the projects financed through the allocations for 2007-2013 are still

in the implementation phase, ex-post conclusions on the success and the realimplementation of activities cannot be presented yet. Nevertheless, it is known thatthe absorption rate in EU programmes is not the expected one. Some answers tokey questions related to the allocations from the EU budget, might be presented:

What exactly the budget of European Union finances?The European Union budget does not fund interventions that the Member

States could not finance by them, but activities needed to be financed in order forthe European Union to function, or activities that can be done more effectively andeconomically through a collective funding.

What are the main causes for a reduced absorption of EU funds in thecurrent financing period?

Causes can be multiple and specific to each programme and to eachcountry participating in a certain programme. Generally, many countries had

http://ec.europa.eu/health/programme/docs/maff-2020_en.pdf

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difficulties in absorption the EU funds in a limited period of time. Another causefor unused allocations at the end of the present financing period, are the delays inthe preparation of the projects or in spending the amounts. The fiscal situation of acertain Member States could make more difficult to allocate funds for national co-financing.

What measures will be taken in 2014-2020 to strengthen absorption offunding? The European Commission proposed several measures for 2014-2020: toestablish at 2,5% of GNI the limits for cohesion allocations; to reduce the effort ofthe national budgets by temporary increasing the co-financing rate by 5% to 10%,in case a Member State is receiving financial assistance; to include certainconditions in the partnership contracts regarding the improvement of administrativecapacity.

AcknowledgmentsThis work was co-financed from the European Social Fund through

Sectorial Operational Programme Human Resources Development 2007-2013,project number POSDRU/107/1.5/S/77213 „Ph.D. for a career in interdisciplinaryeconomic research at the European standards”.

This article is a result of the project “Creşterea calităţii şi a competitivităţiicercetării doctorale prin acordarea de burse". This project is co-funded by theEuropean Social Fund through The Sectorial Operational Programme for HumanResources Development 2007-2013, coordinated by the West University ofTimisoara in partnership with the University of Craiova and Fraunhofer Institutefor Integrated Systems and Device Technology - Fraunhofer IISB."

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LEADERSHIP: HOW TO CREATE A WINNINGORGANIZATION

Ştibli FlorinUniversitatea Tehnică Cluj Napoca, [email protected]

AbstractThe purpose of this paper is to present the importance of the leaders skills. Leaders haveinfluence over other people to accomplish an objective and directs the organization in away that makes it more cohesive and coherent. Those who seem to be "natural leaders" andeffectively inspire groups without really knowing the strategies or tactics used areconsidered charismatic leaders. This charismatic leaders seems to have some skills thatother not poses. In our view, contributing to the developing the skills for leaders.Keyword: change, leader, leadership, organization, skill.

In theory, leadership is the ability to influence other's behavior, that isbringing all the way the order established in a human group in an organizationprofessional or otherwise, or in a public institution. For this, it uses cognitivemodels of motivation: each individual is working according to its capabilities andperception was. Here are involved motivational functions of context which shouldfacilitate the goals and overcome obstacles.

There are various definitions of leadership, but most most of them arebased on a traditional approach, in which power is rather downward direction (topdown). In our view of itself and of itself, this approach creates often barriersbetween decision makers and people who should keep the decisions taken. He alsoholds, opportunities for collaboration and participation among different groups orbodies within the organization or institution.

Hence, development, implementation and development of a new approachon leadership. Individuals, but groups are called increasingly more to worktogether to achieve common goals rather than each separately, as was where once.

Today, leadership is defined more as the art of lead people to the tasksvoluntarily which affect the motivation necessary for them to devote efforts toachieve common goals. Leadership is not is attributed to a person. It is the result ofa dynamic there among members of a team. So he is assigned between differentmembers of a team, depending on skills, motivations and actions, and this, invarious moments of a project. Thus, each has the opportunity to put in value ashead of the momentum. Able to work in synergy is strongly felt. Indeed, goodleaders are not all roads, but and concerted efforts made by both the individuals,and organizations. However, human communities, is meet people who play thelead. These come both from private sector and public sector. They are foundbetween Others, including board members, people business committee of parents,



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volunteers. So, leadership is the fruit of a collaborative effort and cooperation. Itis an essential component of achieving and success project undertaken.

Leadership, highly complex concept calls the many values, dependsheavily on context. It appears that There is a recognized and universally accepteddefinition of it. Actually, We are now a different set of qualities which, combining,forming what is called leadership. People with these qualities are consideredleaders in according to their effectiveness in a given situation, are appreciatedsubordinates, equals and / or senior, as "good" or "bad".

Leadership includes not only the unique, but also the ability to lead others.A leader group / organization will be a leader if not virtually nothing to influenceand inspire subordinates. In reality, leader becomes a leader only when it isaccepted or recognized as such by subordinates, or to "charisma" to either for highcompetence in a particular field of activity.

Therefore, leadership requires more than skills in management or legalauthority.

The need for environmental analysis organization in a dynamic vision,comprehensive, to achieve a convergence of developments, along with signaldifferences between its components, derived from its effect of favoring or blockingof microeconomic activities, the intensity ratio of the organization and itsenvironment, which, in turn, influence the design and performance managementopen valued by potential foreign and domestic.

The attitude adopted by the organization to the external environment isvaried: some of them consider that the environment is uncontrollable, that is afactor which only need to adapt passively accepting the de facto situation, withouttrying to change, management of such organizations consider environmentalfactors and develop strategies to avoid those dangers and the opportunities arisingin this environment, other companies, rather than monitor and react toenvironmental change occurred, take aggressive action to influence factors in theirspecific environment.

Postbirocratic organization needs a new alliance between the rulers and theruled. Organizations today are developing into federations, networks, groups,international teams, systems, temporary, ad hoc forces, modules, matrices, almostanything but pyramids with their management system oriented from top to bottom.The new leader will encourage the common sense and make disciples price thosebrave enough to say no. It does not terminate the management, but rather requiresleaders need to use a new form of subtle influence that they are effective. The newreality is that intellectual capital (brain power, knowledge and human imagination)replaced capital as critical factor of success, and they will be forced to acquire awhole new set of skills that are not understood and taught in our business schools,which is why are not implemented.

The new leader is a pragmatic dreamer, a person with an original vision,but realistic. Ironically, the leader will be able to carry out his dream unless otherswill be allowed to be exceptional in their work. Usually, the leader is making


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others recruiting them both tangible and alluring vision that I see and prospectiveemployees as are persuaded to sign employment contracts.

Inevitably, the leader must invent a driving style that suits the group.Standard models, especially command and control, simply does not work. Groupleaders must act decisively, but never arbitrary. Must make decisions withoutlimiting the autonomy perceived by other participants. Creating and maintaining anatmosphere in which others should be able to leave its mark on the universe is theleader's creative act.

Warren Bennis (Brown et all., 2008) argues that the four skills willdetermine the success of the new leadership:

The new leader to understand and implement the power ofappreciation

New leadership always reminds employees what is important The new leader generate and maintain trust The new leader and those led by him are close.

Management Specialists Robert Goffee and Gareth Jones (Goffee, Gareth,2000) have the following skills of leaders:

Selective leaders reveal their weaknesses. By exposing a certaindose of vulnerability they can expose their approach andunanitatea.

Leaders rely heavily on intuition to determine the exact and thecoordination of their actions. Their ability to collect and interpretdiscrete data, non helps to know when and how to act.

Leaders lead their employees with what we call tough empathy.Empatisize personal and realistic leaders inspired people and isconcerned mostly with the work that one out employees.

Leaders reveal their characteristics that distinguish them. They putstressed on what you do unique. You can be in the top position notto have these qualities, but few people will want to be led by you.

The desire to understand, define, and explain the essence of leadership tointerested researchers and scholars most of the twentieth century. In their efforts todefine as "fair and accurate" hundreds of studies have been published only inrecent decades. Many of these explanations have focused on a single person andthe qualities and skills of his / her. Scientist are trying to identify what socialskills, traits, behaviors, sources of power of the situation determines how effectivea leader will be able to influence others. Contrary to popular belief, the term"leadership" is a new addition of English. In fact, the word did not come into usebefore the end of the nineteenth century. Although the words "lead - the lead" and"leader - leader" has a history much longer, they usually refer only to authoritarianfigures. The birth and evolution of the idea of "leadership" is a concept morecomplex than the idea of single leader. In fact, contemporary definitions oftenreject the idea that leadership depends on the capabilities, behavior, style andcharisma of the leader. Today, scholars discuss the basic nature of leadership interms of "interaction" between people involved in the process: both leaders and


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subordinates. Thus, leadership is not the work of one person, but can be defined asa "collaborative endeavor" among group members. So the essence of leadership isthe leader, but the relationship.

Robert E. Palmer (Palmer, 2008) Professor of Management maintains thatwhatever organization to be a lead, a good leader needs to dominate and toimplement the following basic principles of a good leadership:

Demonstrate personal integrity at all times that his leadership isessential. Not that you will have to believe that the leader isalways right, both in the public and private.

Do not forget that leadeship principles are always the same, buttheir application is different in different contexts.

In normal times, more mature take advantage of opportunities forchange, rather than focus on the most difficult areas.

In times of crisis, should learn to take difficult decisions, evenwithout consensus and without explanation, to avoid the dangersthat threaten the organization.

Human potential issue of people they follow, it must be theultimate goal of the leader. This does not help her, but theorganization as a whole.

In today's global market, encourage innovation throughout theorganization, which means to listen to employees and providethem the freedom to experiment, to fail and to seek new productsand services that could compete in a competitive landscaperapidly changing.

to mobilize the way it is, discovering which are the goals, desiresand needs. To inform them that intentionate to help them achievethem. At the same time, and achieve the objectives of theorganization, to align them with specific goals of those whofollow them through a strategic plan.

Have a good trial. Tribute is the most important and essential partof a leader. Even if it is something innate, can increase withexperience.

To convey to trust those who follow them. Just as teachers totheir students, leaders must know how to convey to the greatexpectations they have from those who are, because they candevelop certain they will meet.

To pay attention to possible planning and implementation ofremuneration appropriate to better motivate those who followthem.

Not to remove too much knowledge of his thoughts are. It isimportant that they understand their goals so you can follow.

To maintain communication, fundamental requirement for aneffective organization. Leaders must know how to communicatetheir objectives clearly to all members.


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A leader is the symbol of the organization and, therefore, lies in aplane different from the others. You should be aware of what isappropriate and inappropriate in his behavior.

Leadership is the main element of differentiation within anorganization. The most modern formulation, marketing,entrepreneurial management tools are important, but, ultimately,leadership is what separates successful organizations from thosefaced with failure.

Leadership principles presented are valid for a wide variety oforganizations, from factories with high technology companies and foundations toartistic background, governments, armies, collective companies, servicecompanies, financial institutions, educational and others.

All companies today seek excellence: this means recognition, marketposition, quality certification. To achieve this level requires an appropriate driver,the one true leader. Why should this approach? Why not be enough manager tomake order in things and to be guided by conventional methods of management?Very simple: I wanted not want the business world is dominated by a struggle,often located at the boundary of chaos. Thus, uncontrollable factors such as chance,appear more often. Therefore, regardless of the apparent stability of the activemarket, companies should always have at least a backup plan. Work beginning ofXXI century must not only be hard, better, further, but smart, different and clever.

The link between achieving excellence and leadership is given Figure. 1:

Figur nr. 1. – The diamant model of leader

Source: Koestenbaum Peter, Liderul – faţa ascunsă a excelenţei, Ed. Curtea Veche,Bucureşti 2006, pg.36

Thus, to achieve excellence, there are four strategies that the leader mustapply:

• Vision, which requires a broader view, the overall long-term and oftenfrom different perspectives. This can be seen by critics as a waste of time because

Excelence

Vision

Reality Ethics

Courage


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the leader is no longer centered on current problems but becomes "dreamer" infact, trying to capture as many variations situational is beneficial as it leads to rapidaction when the event . Furthermore, it develops a certain type of thinking, whichallows the generation of situations and solutions in a time of increasingly short.Thus, a generation and analysis of the situation can only be one possible design. Reality, which means react to facts and not illusions. Should be a clear

demarcation between vision and illusion. Vision put their mark on thecircumstances and evidence, with a high probability of realization, whilethe illusion is harmful because it entails a distortion of reality. The currentmarket leader who has illusions of scale will bring disaster.

Ethics, which requires attention to human problems. This type ofinvolvement should be viewed with caution: there are cases where leadersin the desire to be sensitive to people's problems (or because native hasthis tendency, either because they were instructed to do so) allocates toomuch time to this issue. The consequence: a reduction in yield alone, andsometimes dominate the company and the employees. It should be setlimits on the application of ethics to achieve excellence.

Courage involves risk taking, initiative supported continuity. Couragemeans to get up from a less favorable situation, to look at things calmlyand take it again with confidence. It can complement the other threeelements: a leader requires courage, vision, reality and application ofethics.

A leader is a person of impeccable character, a completely trustworthyindividual. Leaders are open minds - good listeners, well aware that travelers donot have all the answers.

In Koestenbaum's (Koesterbaum, 2006) view, the implementation modelfor diamond leader, played in Fig. 1 leads to excellence. The model is based onfour elements: vision, courage, ethics and reality. Ethics leader primarily involves acertain level of ethics at the individual level. It is hard to conceive of a person whois ethical only in labor relations. In general ethics link to behavior, the beliefs,values what the "baggage" of any moral person. The leader can improve byfollowing some paths lead you to completing his ethical character. Important is it torecognize the role of ethics and to show readiness to learn. Methods were in themiddle people, team and given them confidence. Thus, placing value on people,their opinions in anticipation of the future every employee can become a leader.Change is in November and the desire to live better, more harmonious, in a worldfairer, cleaner, quieter.

According to John W. Gardner (Gardner, 1993), believes thatunderstanding the context in which the leader is his most important attribute or"core leadesrhip. Effective leaders not only motivates those who are, but they buildconfidence and inspire them to become leaders themselves.

Ultimately, a change that transforms organization success will depend onthe vision of its leader is about the development of a strategic plan. This process ofstrategic plan, in its simplest form, comprises several basic steps: knowing how to


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listen, to formulate a strategic plan, to ensure that it is suitable for implementationteam, to constantly communicate its content so that all members of the organizationhave a clear idea about it, to align individual employee goals with strategic planobjectives, to measure results against plan, to modify it if circumstances so require,to remove obstacles organizational inertia and to celebrate each new success andthe prize - those who have made particular efforts.

Today, labor mobility is a phenomenon becoming more common, peopleincreasingly identify less with the organization because they can disappear in amerger or acquisition process. Organizations are much higher than in the past andloss of identity and alienation employees are very high. It is difficult, although notimpossible to use incentives to motivate.

According to Marcus Buckingham( Buckingam, 2001) says "stupiddirectors play checkers, while the good play chess." A good leader must identifythe unique characteristics of each employee and have to translate into improvedyield. Science to understand the wishes and needs of individuals can be extended towhole groups of individuals in the hands of wise leaders with sufficient insight andempathy. These leaders may use incentives to encourage different behaviorirrational positive groups they run. This can concretize in inviting the employee ofthe month to support the president, publishing a magazine article about him in thecompany or offering the possibility of obtaining various awards.

The ability of a leader to motivate and inspire confidence depends on theclarity of his speech. This is the antidote to anxiety and fear in the future, the mainreasons for the lack of motivation. Rudolph Giuliani, former mayor of New York,gave a good example of effectively via the clarity leadeship when he took aposition in 1993. Although the amount of problems of the metropolis was verygreat, Giuliani decided to focus on some clear and specific goals: reducing crime,îmbuntăţirea quality of life, disappearance Windscreen wiper from traffic lights,cleaning up graffiti and keeping suburban Vandals distance. When he establishedthe goals tangible, then it has exceeded Giuliani managed to gain the trust ofcitizens and respect of employees. After Therefore, it success to help overcome thechallenges and higher taxes such as crime.

One of the biggest benefits of effective motivation of employees is keepingthe best of them. According to Buckingham's not just that companies compete inselling goods and services but also to hire the best people the most competitivemarkets. While human resources departments have focused on developingattractive economic deals to hire and the AMI apăstra good people, this is notalready enough. The incentives are as irrational or even more important. Thecurrent attitudes, focused on the number and measuring results, often overlook thegreat advantage that it is the organization from a few members who enjoy whatthey do, believe in what they do and their work led to a conclusion in aenvironmental integrity, leadeship and culture that feel they are identified.

Great leaders are produced by large groups and organizations that createsocial architecture based on respect and dignity. These new leaders will have thestrongest voice, but the careful ear. Instead pyramid, the new organization will be


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built postbirocratice energy and ideas, will be led by people who find joy in thework they do on stage, while accepting each other and not afraid to leavemonuments behind.

Referencces:Brown Tom, Crainer Stuart, Dearlove Des, Rodrigues N. Jorge, - Business

Minds, Editura Publica, Bucureşti, 2008.Buckingham Marcus, Clifton O. Donald, - Now, discover your strenghts,

The Free Press, New York, 2001.Gardner W. John, - On Leadership, The Free Press, New York, 1993.Goffee Robert and Jones Gareth - "Why Should Anyone Be Led by You?"

in the Harvard Business Review, September - October 2000.Koesterbaum Peter, - Liderul – faţa ascunsă a excelenţei, Editura Curtea

Veche, Bucureşti, 2006.Palmer E. Robert – Ultimate Leadership. Winning Execution Strategies

For Your Situation, Wharton School Publishing, 2008.


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THE ANALYSIS OF COORDINATES SPECIFIC TO THEPOTENTIAL OF A COMPANY MARKET

Ionel Gabriel Dobrin"Drăgan" European University of Lugoj, Faculty of Economic Sciences,

Ion Huniade Street, No. 2, Lugoj, Romania, [email protected]

AbstractIn the contemporary economy, it is easy to see that the market of a company is a dynamicmarket, subject to frequent changes. Across time, this market inside which companies actevolves from the point of view of its absolute and relative size, of the changes in its internalstructure, as well as the change of its „physiognomy”.This dynamic evolution of the company market is mainly determined by the dynamics ofthe emergence and development background which characterizes the company as a whole.Key words: economy, market, company, demand, offer, sale, buy.JEL Classification: D23.

Introduction.The concept of market is the expression of the capitalization of a large and

often heterogeneous spectrum of companies. Each organizational unit seeks tooccupy the most favorable position on the market where it acts.

Based on its activity, the company will seek to strengthen or even toimprove its gained position in the current economic context. Furthermore, theachievement of this goal implies the strict delimitation of its own coordinates onthe market, on one hand, and the presentation of the main characteristics specific tothe organizational unit compared to the contemporary competition mechanisms, onthe other hand.

Literature review.The sphere of display and of confrontation between demand and offer as a

consequence of sale – buy processes is the market in its whole (Cornescu et al.2005). Seen as an independent economic agent, the concept of a company specificmarket is part of these general coordinates (Prisăcaru et al. 2009).

The organizational unit acts on this market either through the productsoffered for sale or through the services performed; all these fundamental elementscertainly represent the company’s current offer. It will closely seek to partially ortotally satisfy a demand of consumers from that specific market (Bădruş et al.1999).



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Methodology and data.The company market is defined as the actual degree or the potential of

breakthrough or consumption of the products or services of a company specializedin producing or trading them. This market, seen from the point of view of the directconfrontation between demand and offer, objectively reflects the relations betweenthe specific offer (that is one or more products or services), on one hand, and thedemand related to it, on the other hand.

If seen as a subdivision of the general market, the market of a product canbe appreciated by the specific degree of penetration, by its demand fromconsumers, as well as by its future trade potential.

The general market is made up of the many company specific markets onwhich they act, as well as from the total of markets of products that are the objectof sell – buy processes. Through a simple logical deduction, we can conclude thatthe total of markets on which companies act is equal to the total of markets ofproducts traded at a certain moment (Heteş-Gavra 2009).

Also, the practical definition of the market directly comprises not only thereal demand and the real offer, but also another series of elements, such as:

• the „unsatisfied” demand;• the forming demand;• the potential demand;• the „passive” offer etc.

Thus, in a „virtual manner”, the market does not necessarily imply theexistence of a market without demand or offer, this large notion gaining, in thisrespect, very precise practical meanings, such as:

• real or effective market;• potential market;• ideal or theoretic market etc.

The main objective of all market researches, especially of those directlyreferring to external markets, is the evaluation of their degree of economicindependence.

The dominant element is the free market, made up of all the situationsspecific to sale – buy processes that take place inside some strict „barriers”imposed indirectly, usually through economic measures such as taxes and fees.

Inside the free market, the fundamental economic laws apply objectivelyand without restrictions, its mechanism being the central element specific todecision processes of an economic nature. At the same time, these laws are veryimportant also for insuring the well-being of the contemporary society.

Thus, some of the important conditions decisive for the existence andcorrect functioning of the free market are:

• the total independence of companies;• the real independence of companies;• the decentralization of economic decisions;• the multitude and plurality of holdings that exist in the present.


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At the opposite pole from the free market is the controlled or plannedmarket. Inside such a market, the sell – buy processes are rigged by the practice ofvarious administrative measures, such as:

• the centralized imposition of market prices;• the imposition of prices practiced by suppliers;• the establishment of the main forms and means of transportation used;• the process of establishing repartitions etc.

Regarding the company market, here there can be easily identified thefollowing categories of specific customers acting on this market:

• individual consumers or the population;• companies focused on productive activities and the use of material

resources;• agents or distributors;• non-profit or non-lucrative organizations;• government organizations etc.

Thus, the market that comprises the demand of individual consumers asnatural persons is called consumer market.

Next, the business market is also presented; this is made up of all theorganizational units or all the companies that purchase goods and services with thepurpose of obtaining finite products or of performing other services that willsubsequently be offered for sale on this market. The characteristics of this type ofmarket are:

• a small number of large buyers;• an inelastic demand, with great fluctuations;• great interdependency between suppliers and clients;• the use of professional sell – buy techniques etc.

A major criterion which brings important differences in the marketstructure is the object of transactions. Considering this, the company market ismade up of two large compartments:

• the first big compartment is the material goods market;• the second compartment is generated by the services market.

According to the productive or nonproductive destination of offeredproducts or performed services, the two large compartments formerly analyzedeach divide in two, that is:

• the division specific to the productive means market and the consumergoods market;

• the division focused on the productive services market and the consumerservices market.The productive means market and the consumer goods market are

obviously the two major components that make up the material goods market. Thedifferences between them are directly related to the sell – buy processes that takeplace, as well as the economic nature of the sellers and of the buyers.


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It can be noticed that the productive means market is closely similar to thebusiness specific market, while the consumer goods market is definitely similar tothe consumer market. The similarities mostly appear because the buyers who act onthe productive means market are usually organizational units (companies). On theconsumer goods market, certain natural persons, as well as various legal persons(for example companies) act as consumers.

In what concerns the services market, there are two important servicecategories, according to their destination, that are the object of different marketcategories:

• the production services market, that focuses on the following activities:repairs, maintenance, technical assistance etc.;

• the consumer services market, that mainly addresses to the population andthat comprises: services of a personal, individual nature, repairs ofhousehold objects, the delivery of tourist services etc.If we look at the company market from the point of view of marketing

approaches, it can be noticed that it uses a series of specific criteria and instrumentsin order to determine its actual content and size at the present moment. In suchapproaches, it is obvious that a clear distinction must be made between the twomajor markets: the actual company market and the potential company market(Criveanu et al. 2002).

The actual company market directly refers to both the size of the market ata certain moment and to the total market transactions carried on. It represents theplace where the demand meets the offer of the market and is reflected in the entiresell – buy processes that actually take place.

The potential company market represents the total possible dimensions ofthe market, as well as the limits inside which the demand will directly meet themarket offer. This type of market is realized with a certain degree of probability.

While the actual market refers to the quantitative needs of the presentorganizational unit consumers, the potential market also includes in its complexstructure relative non-consumers, that is persons who are not interestedmomentarily in buying a certain product, because they temporarily lack the needand the motivation to do so.

The evaluation process of the scale of these markets (the actual companymarket and the potential company market) means to determine their area, theirstructure and their capacity.

According to the location or the position of the market where sell – buyrelations take place, there are two types of markets:

• internal market;• external market (all the existing external markets make up the international

market).The structure of the afore-mentioned markets can be carefully examined,

this thorough analysis resulting into a specific territorial structure that is subject to


98

certain peculiarities at a certain moment in time. In this respect, we candifferentiate the following main categories of markets:

• local markets;• rural markets;• urban markets;• area markets.

Results and discussions.The company market is a subdivision of the global market, according to its

size, profile and business area. It is made up of well-determined segments,according to the existence of certain criteria. So, the company market does nothave a completely unitary character, not even in the case of organizational unitswith a relatively reduced activity profile.

In order to monitor the market relations of a company, there is an obviousneed to insist on the structural component of the context where the companyevolves. It can be noticed that the structure of the global company market is highlycomplex. No matter the degree of complexity of this structure, the company marketis a „unitary mechanism”, although it is made up of several independent marketsegments (these intermingle and influence one another at certain levels ofintensity).

Concluding remarks.All in all, it is easy to notice that the structure of the company market has a

highly dynamic character. If we analyze the overall evolution of the market scalefrom a structural point of view, we will see that, inside it, great mutations takeplace, which are generated not only by the shift of quantitative proportions betweenits main components, by their replacement and redistribution, but also by thestructural deepening of the market in its whole.

All these elements must be the basis of conceiving the future marketingstrategies to be applied by the company.

Bibliographic references:Bădruş, G.; Rădăceanu, E. 1999, Globalism and management, C.H. Beck

Publishing House, Bucureşti, Romania;Cornescu, V.; Druică, E. 2005, Enterprise. Management. Profit, C.H. Beck

Publishing House, Bucureşti, Romania;Criveanu, I.; Tumbar, C. 2002, Strategy of the enterprise, Universitaria

Publishing House, Bucureşti, Romania;Heteş-Gavra, R. 2009. Financial globalization in the contemporary

economy, Bastion Publishing House, Timişoara, Romania;Prisăcaru, M.; Ursu, S.; Andrieş, A. 2009, Markets and financial

instruments, Al. I. Cuza University Publishing House, Iaşi, Romania.


99

CONNECTION BETWEEN SPORT AND ECONOMICSWITHIN THE EUROPEAN CONTEXT

Dan Mihai Jitaru"Drăgan" European University of Lugoj, Faculty of Economic Sciences,


AbstractThe sport, in its capacity as a social and economic phenomenon, contributes to achievingthe strategic objectives of solidarity and prosperity of the European Union. The sport isbased on the notion that peace, tolerance, mutual understanding and education, whichcorrespond to the European ideal. The sport is currently experiencing new phenomena, suchas commercial pressure, trafficking in human beings, doping, racism, violence, corruptionand money laundering. It has a huge social force. It can also be “a factor to promoteintegration, fair play and public health", said Wolfganag Schauble, federal Minister of theInterior of Germany, in the informal meeting of the Ministers of Sport in the EuropeanUnion.Keywords: sport, economics, european context.

1. IntroductionThe starting premise is represented by the potential of sport as an engine of

economic growth and combating unemployment. Sport contributes to theattainment of a quota from 1 to 3 per cent of GDP, with the tendency of growth,which is in local and regional development (see: companies manufacturing,services, jobs, the environment, health, consumer sports travel etc.) and not only.For example, the organization of sports by the scale, contribute to raising in thetourist sector, being spotlighted the fact that, at this moment, it demonstrates, forabout 25 per cent of European tourists, the main aim of the trip is the sport nature.

Of course, there are differences between the member countries, there arevarious ways to understand the phenomenon and is actionable, thus resulting EU -conscious of the need to establish a general concept, to create, through theEuropean Commission, a working group "Sport and Economics", meant to achieve,starting from a common platform, the comparisons between European countries,and on the other to introduce a "satellite" at the European scale account themethodology that would allow, on a scientific basis, measurement and stillretaining our sport from GDP, its effects on the growth of jobs, governmentspending, investing in sports and sports infrastructure. The sport, in all its forms, isa mean of accelerating the both on an individual level, as well as of the community.Sport has become a new instrument for a development policy that allows differentgroups to gain access to areas of public life, beyond all barriers, regardless of theirnature.



100

2. Literature reviewThe growing literature on the economic impact of professional sports

facilities and franchises on urban economies should prove to be a fertile area forfuture research. Neale: in his work ‘The peculiar economics of professionalsports’, said that in law the sports team is a firm (which may be profit-motivated).But it is not a firm in the economist’s sense. A single team cannot supply the entiremarket – if it did it would have no one to play. A sports league is similar to a multi-plant firm. Individual teams are ‘plants’, subject to decisions taken andimplemented collectively by the ‘firm’, at league level.

Sloane: in “The economics of professional football: the football club as autility maximiser”, questions Neale’s conclusion that the league (rather than theindividual team) is the relevant ‘firm’ (decision-making unit). In English football,the governing bodies establish parameters within which clubs operate freely andindependently. Hotchkiss, Julie L.; Moore, Robert E. and Zobay, Stephanie Mof Department of Economics from Georgia State University, in their study“Impact of the 1996 summer Olympic games on employment and wages inGeorgia”, determined a significant increase of employment after hosting theOlympic Games. Another conclusion that surprise many people, for this time JohnSiegfried and Andrew Zimbalist, indicate that the sports teams and facilities donot stimulate a significant economic growth. With live telecasting of games, dailycoverage on television news and the sports sections of professional newspaperssports, play a huge role in any European culture. Yet sports teams are smallbusinesses as they shown in “The Economics of Sports Facilities and TheirCommunities”.

3. Analysis of the sport impact on the economyThe economy of a country is influenced to a greater or lesser extent into

sports. If we take for example the biggest football clubs in Europe, we observe thatthe most important component is marketing. Each club gives a lot of attention tothat side, in order to promote and sell its image in every mean. Without doubt thiscan bring a lot of profit to increase their budget, without it being unable to contractthe best football players for their team, in order to succeed and to offer greatperformances in official and friendly games. If they can manage that, people willcome in great number to the stadium, where, besides the fact that they will buy alot of drinks and food which is provided inside the stadium during the entire game,will spend a significant amount on both tickets or subscriptions, as well aspromotional material that they will find at the presentation shops of the club.

Everything that is important for one particular club is the best performanceof the team, the stands which will be full of fans firstly, who will purchasesubscriptions for the entire season, but also the locals and tourists who want toattend to a good game. If the people come to the games in large number, theinterest of broadcasting is high and the television rights are increasingconsiderably. For example, the Spain Football Super Cup, a game between F.C.Barcelona and Athletic Club Bilbao, the minimal price of a ticket is 500 €, and the


101

maximal one is 900 €. Considering that the guest Stadium Santiago Bernabeu fromMadrid has a capacity of 85.000 seats, after selling all the tickets, they expectwinnings that exceeds 56 million €. So, in just few hours they will record enormousincome just by selling tickets.

They also have an income that exceed 125 mil € from television rights andanother one from selling official promotional materials, souvenirs, etc., increasingthe annual budget of the team with 420 mil. € for a season. Besides that income,there are also the gain from publicity banners and official t-shirts that the playersuse etc. So, important are the taxes paid to the state budget for that amount ofmoney. Another good example is hosting a high level competition such as theEuropa League Final that this year was held in Bucharest, Romania. More than30,000 tourists arrived in Bucharest for this final, leaving here over 30 mil euro inonly two days. There were involved over than 10,600 hotel rooms, 11.000 taxi cars,over 100 bars and restaurants in the old town centre, museums and dozens of travelagents that bring foreign supporters to the country.

In addition to the significance of such sports events, the economic size isbecoming increasingly important in public discussion. The rationale for theoperation of such large-scale sporting events, must involve on the one hand that theimperative of fiscal austerity and justification the use of public money and on theother hand, the potential benefits on VAT and employment resulting fromsubstantial budgets allocated to these events.

In this context, in the recent years, interest on the analyses of large impactof sporting events based on economic has increased considerably both in economicmodels form of the ex-ante and ex-post evaluation.

For example, the analysis of a sporting event, the scale of the EURO 2008shall also to be taken into account, the so-called "quality effects". Despite thedifficult analysis of those effects quantification that would be incomplete withouttheir consideration. Already the run-up to this event is characterized by amodernization of professional sports facilities for sports activities (e.g. theimprovements of sport infrastructure), non-sporting (especially the development oftransport infrastructure) and the effects on creating a sustainable and positive pointof view of host cities/regions, as well as for the host country of sports events.

Last but not least, it is expected that there will be effects on learning forhosting a major international sporting event for those involved in its organization,as professionals or volunteers, with lasting effects going beyond the period of theEURO 2008. According to Christian Helmenstein and Anna Kleissner, the currentstage of analysis for the EURO 2008 held in Austria, generated a VAT worth 641million euro, including the resulting effects from watching the public displays(Public Viewing), but excluding the future effects generated by investments. Theresulting effect of the labor employment was about 13.400 jobs per year (in oneyear) or approximately 11.800 jobs (full-time equivalent persons per year). Of thetotal VAT value of 641 million euro generated by the EURO 2008 in Austria,84,5% (541 million euro) results in 2008. Focusing on the year 2008 theemployment is superior, totaling 88.2%.


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Advertising value of EURO 2008 was estimated starting from the value forEURO 2004, which had been constructed by TNS SPORT to 113 million euro forTV, and 290 million euro including mass-media news and printed. It was assumedthat the municipality of publicity for both Austria and Switzerland is at least of thesame order. Meanwhile, a positive perception abroad Austria has increased, whichhad a positive impact to the potential visitors regarding their decisions for touristdestinations in Austria. Moreover, as a location in the context of the foreigninvestor decisions, Austria had a positive impact on its image and a betterreputation. In this regard, Anholt Nation Brands Index (NBI) provides a startingpoint for an analysis of the trade mark "the country value".

As a result of hosting the 2006 World Cup, Germany has experienced animprovement of its image abroad and German sympathies grew, leading to animprovement in rank from 5th position in 2005, 2nd in 2006. Not only butcountries, but even the cities can improve their market value (brand) following aslarge international sports events. A positive example is Sydney after the summerOlympics in 2000 and so far nowadays, has known an major improvement of itsimage, constantly reaching up to 2nd place in the Anholt Nation Brands Index.

Another source of collecting taxes from business that involves sport isagencies which perform sports betting (including legal persons which perform suchincome on the basis of contracts Association), to which – by hypothesis – theincome tax payable for these activities would be less than 5% of the revenue due toa tax of 5% of the income.

4. ConclusionsSport can be considered as a way of production area, in their depiction of

the service provider called education. In the sports activity are three categories of"clients": - primary clients (those who directly benefit from the effects of naturalgardening exercises); -secondary clients (parents, sponsors, etc.); and the thirdcategory of clients (society). Physical exercise, e.g. through their biologicalfunction, contributes to maintaining and improving own health. This represents areal earning income for each family’s budget, but also to society in general.

Sport, especially the performance one, represents a major area ofinvestment. The economic effects of sport are appreciated, from the temporal pointof view, as the immediate (local tourist, financial resources are exchanged fromtelevision rights, sponsorships, entrance fees, etc.) and late (sports grounds,accommodation spaces, press releases, etc.).

"The Sports Industry" is sustained and at the same time stimulates theproduction of sports equipment, material and facilities, measuring and electronicdevices, medical assistance, etc.

It is obvious the importance of sport for any country’s economy. Eachlocal administration must understand that, besides the investment they make, theyalso can record numerous advantages and mostly material ones. As it manages thecreation of strong popular sport branches of the local community, or evenconstruction of buildings designed for sport - stadiums, polyvalent halls, swimming


103

pools, ice rinks, etc – so they can obtain more money from taxes that returns to thelocal municipality.

Bibliographic references:Baade, Robert A. and Richard F. Dye, 1990, “The Impact of Stadiums and

Professional Sports on Metropolitan Area Development."Baade, Robert and Allen Sanderson, 1997, “The Employment Effect of

Teams and Sports Facilities,” in Sports, Jobs and Taxes.Deborah K. Fletcher, 2002, "Capacity Constraints Limit the Economic

Impact of Sporting Events: Lessons from the Olympic Games" paper presented atthe Southern Economic Association Meetings, New Orleans, LA.

P.J. Sloane, 1971, ”The economics of professional football: the footballclub as a utility maximiser”, Scottish Journal of Political Economy.

Walter C., Neale, 1964, “The peculiar economics of professional sports”Christian Helmenstein, Anna Kleissner, 2008, “Efectele economice ale

UEFA EURO 2008 în Austria”Crompton, John L., 1995, “Economic Impact Analysis of Sports Facilities

and Events: Eleven Sources of Misapplication.” Journal of Sports Management.Porter, Phillip K., 1999, "Mega-sports Events as Municipal Investments: A

Critique of Impact Analysis", in J. Fizel, E. Gustafson, and L. Hadley (eds.), SportsEconomics: Current Research, Westport, CT: Prager.

Hotchkiss, J.L., R.E. Moore and S.M. Zobay, 2003, “Impact of the 1996Summer Olympic Games on employment and wages in Georgia”, SouthernEconomic Journal.

Rosentraub, Mark, 1994, “Sport and Downtown Development Strategy.”Journal of Urban Affairs.

Siegfried, John and Andrew Zimbalist, 2000, "The Economics of SportsFacilities and Their Communities." Journal of Economic Perspectives.

Efectele economice ale sportului în viziunea Uniunii Europene, AgenţiaNaţională pentru Sport, EurActiv.ro, 26 martie 2007:http://www.euractiv.ro/uniunea-europeana/articles|displayArticle/articleID_9776/Efectele-economice-ale-sportului-in-viziunea-Uniunii-Europene.html

http://www.euractiv.ro/uniunea-


104

QUANTITATIVE ASPECTS OF PRODUCTIONMANAGEMENT

*Adrian Nicolae Mateia, **Radu R. Şerban*"Drăgan" European University of Lugoj, Faculty of Economic Sciences,

Ion Huniade Street, No. 2, Lugoj, Romania, [email protected]**"Spiru Haret" University of Bucharest, Faculty of Marketing and International Economic

Affairs, Ion Ghica Street, No. 13, Sector 3, Bucharest, Romania, [email protected]

AbstractDue to the changes that appear in the economy structure, efficiency and profitability have amajor influence on reaching the objectives of the production units. Therefore, the mainresource to get the wanted results is to optimize production.Keywords: one-dimensional optimization methods, penalty functions, liniar programming,objective function, Petri nets.JEL Classification: C.

1. IntroductionManagerial activities become more complex, fact which implies taking a

decision as correct as possible, in order to avoid future losses. Nowadays, inconditions of uncertainty and fast changes, there are a series of techniques whichcan solve the managerial problems and offer the necessary information to choosethe optimum solution.

Adapting permanently the production plans to actual conditions on everyposition gives to the production planning a continuous character and, in the sametime, an operative one.

The economic theory and practice demonstrates direct correlations betweenthe management and the economic efficiency of each commercial company. Inorder to increase productivity, there must be a correlation between the capacity ofequipments and working rules, taking measures to reach the technical, qualitativeand economic parameters stipulated by the technical documents.

The present production management has as fundamental concern toimprove the operational component of foreseeing, organization, coordination,training and control within the economic units. Thus, the reduction of information-decision-action-control and complex evaluation of results is pursued by the leadersof the economic units.

Operative production planning may be defined [4], [8], [12] as a set ofconcerns regarding the theoretical and practical solving of determination,launching, following and actualization problems of the manufacturing program, onshort terms, at the level of company, department, position, taking into account the




105

technological aspects, the aspects regarding the necessary and availability ofresources, the economic and psychologic aspects.

The main objective of operative production planning is to elaborate modelsand algorithms for determining the commercial company production plan on shortterm, optimizing different goal functions (like: observance of delivery terms ofproducts, maximum use of production capacities, reduction of raw materialsconsumption etc).

The general structure of the optimization methods, from a theoretical aswell as practical point of view, is given by the models and methods ofmathematical programming. Many phenomena, from the most various areas(economy, technique) can be described by models of liniar and especially nonlinearmathematical programming.

2. Analysis of production systemsThe fundamental objective of production operational management consists

in realising the programs of physical production from the point of view of deliveryterms, quantities and structures of contracted assortments. Thus, the objectivefunction of the general model of the operational management process of productioncan be defined [12]:

TPCF ii

n

i

m

j

p

k

kij∑ ∑ ∑=

= = =1 1 1min ,

where: Ckij quantity of products i, with priority j in period k;

Pi price of product i;

T i penalty for failure to observe the contractual clauses;p number of periods,m number of priorities,n number of products.

For the different types of problems of mathematical programming, therewere created a series of solving algorithms [11].

A very interesting method of solving a problem of mathematicalprogramming is the so-called ”method of penalty function” [10], [11].

The method principle consists in replacing the solving of the problem ofmathematical programming with restrictions, with the solving of a series ofminimization problems without restrictions.

In the past years, in the specialty literature there have been developpedseveral methods of the type ”penalty functions”, through which the solving ofsome problems of nonlinear optimization are reduced to solving a series ofminimization problems of a function without restrictions [1], [2].


106

In the case of several minimization algorithms of a function with several

variables ℜ→ℜnf : (Cauchy algorithm, Fletcher-Reeves algorithm, Davidon-Fletcher-Powell algorithm, algorithm of cyclic optimization on axes ofcoordonates, Powell algorithm etc.) it is indespensable the determination offunction f minimum on a given direction, in the sense that, at an iteration k, theminimum of function f is searched, starting from the given point xk, on a given

direction ( )nkkk dxd ℜ∈, , that is [1],[10]

( ) ( )kkkkkp

dpxfpdxf +=+>0

min

In literature, [10],[11] Powell algorithm is considered to be one of themost efficient algorithms of one-dimensional optimization. It is based, in principle,on the interpolation of function f whose minim x* is searched, with a function ofsecond degree:

y = ax2 + bx + c

If the values of function f in three different points x1, x2, x3 which we willnote

f1 = f(x1); f2 = f(x2); f3 = f(x3)

then the coefficients a and b of the interpolated function which goes through points(x1, f1), (x2, f2), and (x3, f3) are

( ) ( ) ( )( )( )( )133221

213132121

xxxxxx

xxfxxfxxfa

−−−−+−+−

=

( ) ( )[ ] ( ) ( )[ ] ( ) ( )[ ]( )( )( )133212

22

213

21

232

21

221

xxxxxx

xxfxxfxxfb

−−−−+−+−=

Consequently, if a > 0, the minimum point of y is:

( ) ( )[ ] ( ) ( )[ ] ( ) ( ) ( )[ ]( ) ( ) ( )133322121

22

22

213

21

232

21

221

min 2

1

xxfxxfxxf

xxxfxxfxxfx

−+−+−−−+−+−

⋅=

The following values are known:x1

0 – initial point,p>0 – initial operation step,


107

M>0 – maximum allowed value of the step, >0 – precision of calculation.

A change of Powell algorithmLet us assume, as it follows, the following change. It refers to the choice of

the initial operation step p>0.

Being given the initial point x01 , we generate randomly a number of r

( 103 ≤≤ r ) points distributed uniformly on the interval

−

10,

10

MM(obviously

the considered interval is taken on the direction given by x01 and d o ).

The values of the function are calculated in points aaa r,...,, 21 and

)(min)(,...,1

afaf iri=

= .

Consequently, a is the point in which function f takes the lowest value.

The initial step p will be axp −= 01 and obviously p >0.

This way, the initial step p is not taken ”at random”, fact which can reducea lot the calculations.

Apparently, the minimization problem of a single-variable-function [1],[2], [11] is quite simple. Thus, if function f is differentiable, then the determinationof its minim x* on a given interval [a,b] can be done by using the classic results ofmathematical analysis. Let us consider x1, x2,...,xr the solutions of equation

( ) 0=′ xf ,

which belongs to the interval [a,b]. The value of the function is calculated in pointsa, x1,...,xr, ,b and immediately is chosen the point x*.

If function f is not differentiable or if its values are obtained after someexperiments, in order to determine the function optimum on a given directionspecial algorithms are used which do not use the information given by thedifferential.

The global model of the production system represents a series of logicalconcepts which are used in industrial production to program and simulate, and haveas a goal the increase of production and the reduction of costs, stocks etc. It mustlead the company to the desired objective, it should be as real as possible and itmust avoid anomalies [7].

The correct operation of real processes which share resources is a complexproblem. The complexity of resource problems must be considered under twoaspects: the first is that the one who plans the workflow must not take into accountthe existence of necessary resources, and the second one is that in the execution


108

moment, the activity which uses the resource, must have it, otherwise the activityand implicitly the process will be blocked (in stand-by) till the resource becomesavailable.

The elaboration of a workflow implies the cooperation between partnerorganisations. Under these conditions, the workflow must be conceived in anefficient manner in which the elements specific to organisations should be correctlyrepresented and even more, their actions must be able to correlate, in order to reachthe objectives.

Therefore, in the activity of modelling and analyzing the productionsystems with Petri nets, the same model can be used to analyze behaviouralproperties as well as to evaluate performance, and to construct systematically thecontrol/simulation of discrete events.

Petri nets have the following advantages [5], [6], [13]:• The ability to represent the process synchronization, activity competition,

conflict presence, casuality, resource allocation;• The position/situation of locations and actions implies the real-time system

monitoring;• The possibility to interprete (the possibility to associate objects with

different meanings for the model’s objective);• The adequate representation of essential features of the system allows the

construction of models using top-down and bottom-up;• As graphic instrument, Petri nets allow an effective vizualisation of

communications, the improvement of communications between designersand clients, thus avoiding complex specifications, ambiguous textualdescriptions or specific mathematical notations which generate problems ofunderstanding;

• As mathematical instrument, Petri nets can be described as mathematical(algebraic) equations which give the possiblity to a formal analysis of themodel. Thus, the formal properties can be analyzed in order to identify thespecific characteristics like overflow and block determination.

These advantages justify the use of Petri nets in the modelling and analysisof production systems in order to identify and treat anomalies.

3. ConclusionsThe correctness of the status of the modelled system can be verified with

the techniques of qualitative analysis as well as the techniques of quantitativeanalysis. The quantitative properties are derived from the numerical simulation andanalysis, and they show the properties and dependencies of the considered system.The design of the process is more sure through the analysis and evaluation of thesystem’s properties. The optimization is possible by evaluating and comparing theevolution with instruments specific for different variations of the model [13].


109

Bibliography:Fiacco, A. V., McCormick, 1968, ”Nonlinear programming: Sequential

Unconstrained Minimazation Technique”, John Willey, N.Y. 1968.Iyengar, G., Sigman, K., 2004, ”Exponential penalty function controll of

loss network”;Annals of Aplied Probability, Volume 14, number 4, 1698-1740.Ionescu, S., 1992, ”Managementul calităţii”, Editura I.N.I.D.Bucureşti.Ionescu, S., Păunescu, I., 2001, ”Managementul producţiei”, Editura

Eficient, Bucureşti.Petri, C.A., 1962, ”Komunication mit Automaten”, Schriften Institut fur

Instrumentelle Mathematik, Bonn.Petri, C.A., 1973, “Concepts of net Theory“, Proceedings of the

Symposium “Mathematical Foundation of Computer Science”, High Tatras,Slovakia.

Rădulescu A. V., 2004, Managementul producţiei, Editura Printech,Bucureşti.

Riascos, L. A. M., Moscato, L. A., Miyagi, P. E., 2004, ”Detection andTreatmeant of Faults in Manufacturing Systems Based on Petri Nets”, Journal ofthe Brazilian society of mechanical Sciences and Engineering, no 3.

Siegeris, J., Zimmermann A., 2006, “Workflow Model CompositionsPreserving Relaxed Soundness”, Business Process Management, 177-192.

Serban, R., Albu, C., Şerban, R: R., 2004, ”Cercetări operaţionale cuaplicaţii în economie”, Editura Dacia Europa Nova, Lugoj.

Şerban, R., 1987, ”Algorithms of unidimensional optimization”, EconomicComputation and Economic Cybernetics Studies and Research, nr1, 1987, 41-56.

Unguru, I., 1998, ”Managementul producţiei întreprinderii”, EdituraLumina Lex, Bucureşti.

Vittorini, V., Basile, F., Chiacchio, P., Mazzocca, N., 2004, ”Modelingand logic controller specification of flexible manufacturing systems usingbehavioral traces and Petri net building blocks”, Journal of IntelligentManufacturing, Springer Netherlands, 351-371.


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EXTENSIVE USAGE ANALYSIS OF THE HUMANRESOURCES EXISTING AT COMPANY LEVEL

Melania Elena Miculeac"Drăgan" European University of Lugoj, Faculty of Economic Sciences,Ion Huniade Street, No. 2, Lugoj, Romania, [email protected]

AbstractThe labor factor, respectively the human beings considered as an economic resource, has adouble dimension: quantitative and qualitative. The quantitative dimension is given by thestaff number and the working time, the analysis of its use offering the image of humanresource’s extensive use. The qualitative dimension is given by the work productivity,which represents the intensive use of human resource, which means to appreciate theefficiency in which human resource is used.Keywords: human resources, extensive use, unused working time.

IntroductionThe use of human resources is considered from two points of view:

• extensive use, which represents the subject of this article, implies theanalysis of the way/degree in which the company’s potential is used inwhat human resources are concerned, expressed by the staff number or theworking time.

• intensive use which means to appreciate the efficiency in which humanresources are used.

Analysis of staff number useIn order to analyse the use of staff number the coefficient of use of staff

average number (Ku) is used, indicator which is established for a managementperiod by dividing the effective average staff number to the written average staffnumber:

- for a management period:sN

efNKu =

- for a certain moment:Ns

NefKu =

This coefficient shows us the extent in which company’s available humanresources were effectively used in the operating and selling process.

On the basis of Ku the need of staff can be decided. It lies at the basis ofdeciding the company’s staff policy.



111

Analysis of working time useThis analysis will offer more extensive information than the analysis of

staff number use. Both of them must identify the company’s reserves of humanresources and use the ways in which these reserves can be implied in the process ofproduction.

By analysing the use of working time are emphasised the working timereserves within the working day, not only the reserves in whole days which resultfrom the analysis of staff number use.

For the working time there are two measuring units ( Lala Popa, Miculeac,2009):

• human beings-days – represent the number of days in which the company’sstaff is present at work or has contractual relations with the company;

• human beings-hours - shows the number of hours of presence at work or ofcontractual working relations between the staff and the company.

The stock of human resources the company has is established starting fromthe calendar time fund (Tc):

NpxNzcTc =where:

Np – staff number ;Nzc – number of calendar days

The maximum available time that can be alloted to a company is notedwith Td, and compared to Td there are a series of unused times 1t ,…, nt .

The difference between Td and the unused times gives the effective allotedtime Tef.

efT = Td - ∑

=

n

int

1

;

but

Td = Tc - ( lz + ls + oc )

where:

oc - annual leaves

ls - legal holidays

lz - free days

With the help of these time categories different indicators are built,indicators which will be used in the analyse of effective working time use.


112

1) Degree of available time useIt is established as the ratio between the time effectively worked expressed

in human being-hours and the maximum time available expressed in human being-hours.

].[

].[

hoursbeinghumanTd

hoursbeinghumanTefGUTD

−−=

• If UTDG < 1 that is efT < dT , the fact that the working time is not

completely used influences the production size and from there all theeconomic indicators which are based on the production size (Citeau, 1997).

• If UTDG = 1 that is efT = dT , is a situation almost impossible.

• If UTDG > 1 that is efT > dT , means the deviation from the normal working

schedule, that is the use of additional hours. Such a situation is equivalentto assuring a quantity of working resources additional to the written ones,but implies an increase of the contre-valeur of working use more thanproportional to the production increase, because additional working hourshave higher paying levels compared to normal working hours.

2) Average duration of a working dayIt is established as the ratio between the time effectively worked expressed

in human being – hours and the time effectively worked expressed in human being– days or as a ratio between the total number of hours and total number of days(Miculeac, 2007).

dz =].[

].[

daysbeinghumanT

hoursbeinghumanT

ef

ef

−−

or dz =Nz

Nh

The legal normal duration of a working day (dz) is of eight hours, but the

effective average duration ( dz ) can be longer or shorter than the legal one.

• if dz < dz – it means the there are registered losses of working time whichcan be losses in whole days as well as losses within the working day;

• if dz > dz – it means that additional hours were used, hours with a higherpaying level compared to the the payment of normal working hour.

3) Average working time on employee

It can be expressed in the average number of hours ( nh ) and in average

number of days ( nz ) as it follows :• in hours:


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nhNs

hoursbeinghumanef

T ).( −= or nh

Nsh

N=

where: Ns - number of employees ; Nh – total number of hours

• in days:

nzs

N

daysbeinghumanef

T ).( −= or nz

Ns

Nz=

where:Nz – total number of days.

By comparing the number of hours effectively worked by an employee tothe one scheduled to be worked on average by an employee are emphasized thedeviations from the normal working schedule, in whole days as well as within theworking day.

4) Average unused time on an employee

It can be expressed in average number of unused hours ( nnh ) and in

average number of unused days ( nnz ) as it follows :• in hours:

nnhs

N

hoursbeinghumanef

Td

T ).( −−=

• in days:

nnzs

N

hoursbeinghumanef

Td

T ).( −−=

Consequences of not using the working timeRegistering an effective working time inferior to the scheduled level to be

used produces a series of effects on some economic indicators:1. on production value:

001)( )( xWhTTQ T −=∆where:

0Wh - hourly productivity in main period


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2. on turnover

0

0001)( )(

Q

CAxxWhTTCA T −=∆

where:0

0

Q

CA- degree of production capitalization within the main period

3. on added value

00

0001)( )( xVa

Q

CAxxWhTTVA T −=∆

where: 0Va - average value added to 1 leu turnover in the main period

4. on the efficiency of fixed assets use (Mf)

10001

)()(1000/ ×

∆=∆

Mf

QQ T

T

where: )(1000/ TQ∆ - change of production at 1000 lei invested in fixed assets

5. on the rotation speed of circulating assest (by number of rotations)

1

)(

)( AC

CAnr T

TAC

∆=∆

6. on gross profit

00

0001)( )( Pbr

Q

CAWhTTPb T ×××−=∆

where:0Pbr

0

0

CA

Pb= - ratio of gross profit on main period

7. on capitals rentability

10011

)()( ×

∆=∆

OwnedCorPermanentC

Pbr T

T

8. on fixed expenses at 1000 lei turnover

10001000

0

000

0

0

001

0

)(1000/ ×××

−×××

=∆

Q

CAWhT

Cf

Q

CAWhT

CfCf

T

9. on wages fund___

001)( )( ShTTFS T ×−=∆

where:___

0Sh - average hourly wage in main period


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The causes that lead to an incomplete use of working time are grouped inthree categories:

a) objective causes that means those that can be attributed nor to companyneither to staff:

- medical leaves;- maternity leaves;- causes of force majeure.b) organisational causes, which can be attributed to the company (Peretti,

1998):- defficiencies in organising the operating system;- defficiencies or lack to acquire raw materials, materials, energy;- registering a different rhythm in different operations that connect in the

technological process;- technological breakdowns caused by not doing or doing in a wrong way

the revisions and repairs to machines, equipments and installations.c) causes that can be attributed to the staff - most of them are due to staff’s

attitude towards work in general (Berstein, Wild, Subramanyam, 2001):- unjustifiable absences, late comings to work, losses of time within the

working day, extended lunch breaks;- lack of correlation between the staff qualification and the level of work it

has to perform. The staff with a lower qualification may need more time toperform the job.

ConclusionsIn order to use the available working time to the fullest, the company may:

• organise and plan the production in such a way as to eliminate theineffective times between the different operations;

• assure a rhythmicity to the provision of raw materials, materials correlatedto the production rhythm;

• establish and realise some revision and repair programs according to thespecifications of used equipments and installations;

• realise at the company’s level a stimulating and coercive system whichimposes to employees an attitude of maximum efficiency towards work.

Bibliography:Berstein, L., Wild, J.J., Subramanyam, K.R., 2001, Financial Statement

Analysis 7TH Edition McGraw – Hill Irwin;Citeau, J.P., 1997, Gestion des ressources humaines, Armand Colin, Paris;Lala Popa, I., Miculeac, M.E., 2009, Analiză economico – financiară.

Elemente teoretice şi studii de caz, Editura Mirton, Timişoara;Miculeac, M.E., 2007, Analiză economico – financiară. Concepte teoretice,

aplicaţii şi teste grilă, Editura Mirton, Timişoara;Peretti, J.M., 1998, Ressources humaines et gestion du personnel, Ed. a 2-

a, Vuibert, Paris.


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ROMANIAN ECONOMY IN THE EUROPEAN CRISIS

Aurel Mihuţ"Drăgan" European University of Lugoj, Faculty of Economic Sciences,


AbstractEuropean economy still faces today, one of the worst economic and financial crisis sincethe Second World War. Economic and financial crisis has spread worldwide withmaximum speed, the economies of all Member States of the European Union encounteringserious difficulties, both in the banking system and real economy. Romanian economiccrisis started in 2008 and the uncertain deadline, is a matter of concern for many people. Itis true that today we are witnessing the worst crisis in 80 years. We have an officialexplanation of the crisis, provided by public institutions, that the problem stems frominappropriate behavior of economic agents: selfishness, greed, speculation and marketunable to function smoothly, ensuring proper allocation of resources: informationasymmetry, liquidity trap , deflation, etc.On the other hand, most researchers, members of the academic, and private sector analystsargue that state intervention just planted seeds of financial turmoil that cross the present.The recipe prescribed by the authorities can result in mitigation of economic difficultiesbut, in contrary to their aggravation. The economic crisis is the result of several factors,which mainly include monetary policy errors, distorted economic incentives and pathologyof the banking and financial regulatory policy.This paper is to highlight what triggered today's crisis in the Romanian economy, hoping tofind a remedy to the problems of the economic, social and political that we face.Keywords: economic crisis – financial; economic recession; economic recovery; the GDP,unemployed, International Monetary Fund; Value Added Tax.JEL Classification: G01, G11.REL Classification: 11B.

IntroductionThe two objectives of the Romanian national integration in the North

Atlantic Alliance (NATO) and European Union (EU), have been achieved. Whereare Romania after EU integration?, Who had won or lost both Romania and the EUin this process?

EU is the way to strengthen Romania?The main advantages of Romania after EU accession are of:

- A society;- A policy;- Economy;

In terms of EU social values such as democracy and constitute humanrights, ensuring their implementation in our country.



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In terms of economic policy, Romania has the free movement of goods andlabor, among other Romanian citizens have the right to employment, insurance andsocial protection or consular protection in a country where Romania has verydiplomatic.

Romanian economic crisisBecoming an EU member, Romania has had to adopt standards of fair

competition, leading to higher prices in certain areas, such as energy. Anotherproblem was that of small businesses, many of them not being able to aligntechnology standards have had to fail.

Other problems arise from membership consist in the fact that Romaniahad to allocate money to the EU budget and to help finance projects, but it is not areal obstacle, since the period 2007-2013 our country would have to absorb anamount almost double than that allocated.

Pulling a brief conclusion of the above, we can say that enlargement andRomania's accession is a win-win relationship, but it seems that Romania hasserious problems in managing this situation, the main problem being given byinability to absorb post-accession EU funds, funds allotted for the development gapbetween European regions.

But Romania is not a special case, in 2004-2006, Poland spent 2.7 billioneuros from 11 billion allocated to the Czech Republic spent 522 million of the 2.2billion allocated, Hungary spent 959 million euros of approximately 5 billionallocated, while Slovakia obtained only 452 million of the 1.6 billion allocated. Inthe case of Romania, our country must contribute in 2007-2013 to about 10.2billion euros, but can access 19 funds, 67 billion. So far, Romania has attractedonly 7% of this amount, despite being one of the worst developed countries. Withover 3 million hectares of uncultivated and an aging rural population, Romaniaseems to distance can build upon a considerable asset. Another problem thatRomania is likely to face long-term, is given even by the exodus of labor, whichautomatically leads to "loss of value added that could make the country". Over85% of labor force immigration is between 18 and 35 years, representing a "realbreath of fresh air" for the West found a more advanced process of aging.

The crisis in Romania started as a financial one, then moving into aneconomic one, gradually. Specialists, analysts, economists have not yet reached asatisfactory answer to the question when the crisis started. Romanian authoritiessay that the crisis in Romania started on September 30, 2008. NAFA and theGovernment has proposed that companies were approved facilities to pay state debtand no longer followed, after September 30, 2008, the timing of payment crisis, butpreviously paid obligations on time, will be back to pay installments. In the fall of2008 and early 2009 all officials and all top analysts argued that Romania will notbe affected too much by outside events. Reality would contradict them. In 2009 wehad an economic fall 7% this year the economy is still heading for a fall of 2%, and


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the outlook for next year, although they are on the increase, are already beingquestioned.

Crisis hit in the private sector, which began to be put up after 2004 and hadsustained growth until 2008. Private business worth 10 billion went intoinsolvency, and many Romanian businessmen fear more than ever it might gobankrupt because they have money to support the businesses. Banks that gaveloans other-time on the treadmill and supported consumer boom, went to anotherextreme. The crisis has imposed tight restrictions of credit and increased interestespecially from individuals. Confronted with daily problems, including the risk ofjob loss and having to pay the bills, especially the banks, being heavily indebted,Romanians began to cut their consumption strong. From this began a whole spiralof cuts that were not stopped even now. Businesses of all companies fell, tradedeclined and the country has experienced a dramatic loss of income, but with ahigher spending bill. Thanks to the support received from outside the governmentmanaged to conclude an agreement with the IMF and European Union to attractfunds to stop the fall of the Romanian economy. Romania has signed an agreementwith the IMF two years, for 12.95 billion euros, the total package of foreignfinancing from the IMF, EU, WB and EBRD is 19.95 billion euros. In thegovernment debt situation worsened more than in 2008. Three years ago,government debt was much lower compared to today. From almost 26% ofgovernment debt have reached 32% of GDP, the rate of inflation, price growth inRomania was higher in comparison with the same trend in other countries. Inchapter general duty in 2008, Romania ranks 17, while today is ranked 52. In termsof inflation, now three years ranked 63, and today we are ranked 105. TodayRomania has a debt of 100 Billion euros, but not loans have only to cover "existingholes".

Crises can be defined as situations characterized by a pronouncedinstability are therefore accompanied by volatility and increased uncertainty. Intimes of crisis (whatever form it might take) we are in a constant state of anxietyand uncertainty about the future, fear or panic. Our instinct to defend and preserveus to sometimes behave irrationally and to emphasize further this volatility becauseeach of us, we have the cognitive capacity, filter information and understand thephenomenon in our way, and then translating it into a market conductrelated. There are no fixed values defining an economic crisis, but recession isconventionally agreed that after two successive quarters when we deal with the fallin GDP of a country or region, which usually decrease is accompanied by adecrease in individual income, reduction of employment, industrial production andconsumption reduction. The financial crisis is a manifestation of the economiccrisis and distrust generated by the financial system, which results in a significantdecrease in stock trading volume, distortion of the credit system, destroying thecredibility of insurance companies and deregulation of financial marketmechanisms.


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Global competitiveness report by World Economic Forum shows thatRomania's economic situation worsened in the last three years. Although no onethought possible in May Basescu said cutting salaries by 25% and beginning aprogram of redundancies. Then increased VAT from 19 to 24%, again leading tohigher inflation and a new wave of reductions in consumption. Romania lost in justtwo years 30 billion in the economy, was about as far as GDP a year in 1999. Byannouncing the end of stagnation in EU economies and even a contraction in someMember States.

In 2012, we forecast 0.6% growth in overall EU and 0.5% in the euro,monetary policy commissioner said.

In 2013, growth will continue at a slow but only 1.5% for the EU as awhole and 1.3% in the euro area. Job growth will stagnate in 2012 and is likely adecrease in hours worked. Economic growth is too moderate to positively affect thelabor market. Unfortunately unemployment is expected to decline in theEU. Differences between labor markets will persist. For 2012, the EuropeanCommission expects GDP to grow by 2.1%, while in the previous forecast, theEuropean Commission estimates that Romania's economy will grow by3.7%. Representatives of European Commission forecasts that the Romanianeconomy will continue its growth in 2013, the advance will be 3.4%. In terms ofinflation, analysts expect the institution harmonized index of consumer prices tofall to 3.4% in 2012 from 5.9% in 2011. As the unemployment rate to fall from7.8% in 2011 to 6.8% in 2012.

Regarding healthcare, Romania is the first in infant mortality rate inEurope and the number of cases of TB, according to EU statistics. Deaths fromheart attacks in Romania causes most deaths in Europe, according to data presentedat the National Congress of Cardiology. Finally, Romania is the last place thenumber of doctors per thousand population.

Allocate 4.3% of GDP for public health sector, while the average area is4.9% of GDP this country and the EU percentage is 6.2%.

With regard to education, Romania ranks first in Europe to drop, accordingto UNICEF, but also in terms of violence in schools. Quality of education hasdeteriorated. If after three years, ranked 71, in this we stand today on90th. Currently, many schools of arts and crafts, because it was abolished, andpeople no longer have a place to qualify in certain areas in demand. Framework fortechnical education in economics, has deteriorated in terms of quality feather tozero.

Romania has not yet recovered even after the first wave of economic crisis,we indulge in a strategy of poverty and stand at the mercy of great powers, insteadof thinking about everything as a business rigorously designed. Lamentations onthe issue covers many crisis and violation of basic rules of economic nature. Thecrisis seems to be that screen behind which hides a terrible mess and a waste tosociety. We can not agree that we, economically speaking, depend on Europe. It istrue that Europe offers urges us some resources, some tens of billions of euros that,


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unfortunately, does not grasp the extent they should. The advantage of Polishchildren, up to a rate of almost 100%. Romania, however, depends on its resourcesand not Europe. The major risk that could turn into a catastrophe if we continue theway we evolved to now is that we do not yet have a strategy. Human resources canbe used, but we send out, to increase GDP significantly in different countries,which are also in crisis: Italy, Spain and others. How to revive the economy if yourconsumption, if you impose programs that everybody has to pull the zipper pocketin place to open it wider and to stimulate consumption? How to revive theeconomy if all resources were alienated by the party, despite the national interest.

The only chance for economic growth in 2012 was to see a significantincrease in public investment in the absorption of European funds and export. Asboth an election year, it is important that any expenditure to be growth oriented anddoes not supply any imbalances.

An IMF report ranks Romania last in terms of living standards in the EU,such as beat and Bulgarian neighbors, document predicting that the gap betweenthe two countries' GDPs will increase by 2015. Regarding the risk of bankruptcy,Romania is placed on eighth place in the world and third in Europe, according tofinancial market monitoring company Credit Market Analysis.

ConclusionsCurrent period weights and risk means that sales fell, unemployment

increased, there is lack of liquidity. Is when more than accept lower profits but toensure business continuity and the bank debt, best prospects will have businesswith low gearing. But there are also opportunities because there are much morelikely to expand rapidly and at a cost far lower than in the past. Also do not ignorethat because the crisis will make a market screening after which they remain thebest, and firms will have to become more efficient, we can buy products and betterservices and lower prices. Last but not least all of us after the crisis will also haveexperience and be more thrifty and will look twice. There are a number ofstabilization and development solutions, unfortunately not all are in reach of thebusiness. Even to reach the business are sometimes applied in at least two reasons:because the crisis has created a mental block in making decisions, and somecompanies have experienced management and advanced enough to cope with newchallenges. Of that business will be to strengthen management whethercommercial, financial, production. Finally it is important that companies continueto develop and pursue not only stabilize the business but this should be asustainable development.

The only solution for Romania to recover seems to be trying to enhanceincentives rather domestic consumption and open trade with other markets, morestable than European ones that could get her out of crisis.

Forecast: if governments do not take real measures to support new businesscreation and development of existing and if entrepreneurs do not take measures for


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their companies be more competitive and to capture new markets will probablysoon go bankrupt!

BibliographyPaul Krugman, The Return economy decline and crisis of 2008, Public

House, 2009.Liviu Voinea, Economy end illusion - Crisis and Crisis: A heterodox

approach, Public Publishing, 2009.Fota Dionysius, Bacescu Marius, Economic crisis in Romania in 2009 -

cause, effect, solution, University Publishing House, Bucharest, 2009.Daniel Daianu, Radu Vranceanu, Romania and the EU. Inflation, balance

of payments, growth, Polirom, Iasi, 2002.


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BUSINESS EMAIL EXCHANGES AND THE USE OFPOLITENESS FORMULAS IN ENGLISH AND

ROMANIAN

Alina Nistorescu"Drăgan" European University of Lugoj, Faculty of Economic Sciences,

2 Ion Huniade Street, Lugoj, Romania, [email protected]

AbstractThe article presents the use of politeness formulas in business e-mail exchangescontrastively for English and Romanian. Salutations, terms of address, solicitudes, seasonalgreetings, complimentary closes and closing formulas are analyzed in email exchangeswritten in English, respectively in Romanian by employees working in a multinationalcompany. Special attention is paid to the choice of grammatical structures and ofvocabulary items used in this type of professional communication.Keywords: email exchanges, business professional communication, politeness formulas.

Electronic mail has become one of the most frequently used means ofbusiness communication. It has been adopted by people all over the world due toits particularities. These special characteristics (rapidness, low cost, replicability,accessibility), have influenced business people’s preference for electronic mail.From the point of view of functional styles, electronic mail is considered to be acombination between oral and written communication, still there are few papersanalyzing this newly emerged variety. There are many questions that need ananswer regarding this mixed type: how does this combination between oral andwritten communication actually function, are there any preferred linguisticstrategies that are constantly involved, do people prefer certain vocabulary items,have there been established certain patterns, etc.

In this article the use of politeness formulas in business e-mails is analyzedfor English and Romanian contrastively. The attention is focused on fixedpoliteness elements of minimal length and complexity. The politeness formulasthat are scrutinized hereon are salutations, terms of address, solicitudes, seasonalgreetings, thanks and apologies, complimentary closes and closing formulas. Theanalysis has been performed on a number of 300 business emails exchangedbetween professionals working in a multinational company, some professionalsworking on Romanian territory and others in foreign countries. The language ofthese exchanges is English, but attention is drawn upon the fact that not allbusiness professionals are native speakers of English, some are native speakers,others are not.



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The analyzed emails constitute a mixed lot, from the point of view oflength, structure and content. The frequency of the exchanges between pairs ofrecipients varies from several emails a day to one exchange in the entire analyzedperiod. The emails were gathered over a period of ten work days in the spring of2008 and have not been selected in any way. The analyzed business emails are notthe only means of communication used between these people, videoconferencing,phone calls and face-to-face conversations are also used by these professionals.

In any given situation, the choice of a certain set of politeness formulasdepends greatly on the level of formality, therefore the analyzed emails have beenclassified, according to the level of formality, into three categories: regular emailsexchanged between co-workers (referred to as the first category), emails exchangedwith professionals belonging to other organizational structures, either messages toestablish a first contact or subsequent messages (referred to as the second category)and emails that are official organizational announcements, containing informationabout company accomplishments (referred to as the third category).

The first category is the bulkiest and most dynamic. The entire group ischaracterized by a low level of formality and is made of 224 messages,representing 75% of total received messages. It contains a large inventory ofpoliteness formulas, but these consist of minimal items or very simple punctualstructures; in some cases fixed polite elements are missing. Usually one singlepiece of information is introduced and the email consists of a few words,resembling more the replies of a face-to-face conversation.

The second category contains 64 messages, representing 21% of allmessages, these emails are meant to establish a first business contact, or aresubsequent exchanges, addressed to suppliers, auditors and other professionals thatare not part of same corporation. All emails in this group have a formal tone; theyresemble most to what is commonly considered a business letter. Politenessformulas that are used in this group resemble considerably those used in traditionalbusiness letters. They have a more elaborate structure and a well-establishedinventory and placement in the message.

The third category contains only 12 messages, representing 4% of allanalyzed messages. These emails in fact contain official information regardingimportant company achievements and structural changes (new divisions, mergersand important personnel changes usually regarding top managerial positions. Thisis a special group of business emails, resembling more to a set of company pressreleases. They have an official tone, which corresponds with a high level offormality, still few politeness formulas are used.

All three categories of business email messages have both an external andan internal component, this being a particularity of electronic communication. Theexternal component which may contain politeness formulas is the subject; still theuse of such elements is noted only in the first group. The subject line of the emailsin the first category frequently indicates the urgent nature of the message. Morethan 52 % of these e-mails have subject lines similar to the following: needs urgent


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confirmation – please reply, please answer asap, urgent – please reply, etc. Othersubjects point out how important the message is, and a phrase like important -please read carefully is used. As it can be easily noted, even if message contain alow level of formality, messages labeled as urgent, frequently have the word‘please’ included in the subject lines. This association is made to soften theimperativeness of the word ‘urgent’. The presence of the word ‘please’ signalsconsideration for other people’s problems, and indicates awareness of the fact thatone’s priority is not always everybody’s priority. The other two categories do notcontain politeness formulas in the external component; in the second categorybecause the subject line is a summary of the content (for example: proposal forcooperation, additional information about December agreement, approvedmanufacturers) and the subject line of the third category is invariably the same:organizational announcement, hence no politeness items are used here.

The internal component of the analyzed business emails has numerous andvaried politeness formulas. The occurrence of politeness has been analyzed for allthree categories in the three theoretical sections of the email message: the openingsection, the body of the message and the closing section. The opening sectionusually contains salutations made of greeting formulas with or without theassociation of an address term; the body of the message may con thanks andapologies, seasonal greetings, solitudes.

The internal component of the business email has several elements whichare common to the business letter: an opening line or salutation, the body of themessage, a closing line and a closing formula, accompanied by the sender’s nameand title. However, this structure is applicable according to Caudron (2000: 32)only in the case of a new subject email; the salutation, and even the closing phrase,may be missing in the case of a reply, or when several emails are exchanged on thesame topic. This characteristic is borrowed from direct interaction, where onenever greets or takes leave after a single reply. This is customary at the beginningor at the end of the conversation. Consequently, business emails do not require asalutation or a closing phrase, unless there is a new subject line.

This research however shows that Caudron’s findings are partiallyaccurate. It is true that emails in the first group have such formulas with newsubject lines, but not in all cases. There are situations in which the topic iscontinued in the next business day or there is a longer time interval between themessages exchanged on a certain topic, for these cases salutations and closing linesare used. (E.g. Hi, Jeff, it’s me again. or Hello Tom, on second thoughts I think wecan solve this in a different way.) Furthermore, some of the analyzed emails do nothave a salutation, but they contain a closing formula. (E.g. Speak to you later!, I’llget back on that!, Well that’s all could find so far. Bye for now!) The emails in thesecond group contradict even more Caudron’s theory. All 64 messages have thesepolite formulas at the beginning and at the end of the email, even if the exchangeshave the same subject line. Organizational announcements also have opening andclosing formulas, but the inventory is extremely limited: in the beginning to all


125

employees, dear employees, dear colleagues and at the end regards, or no closingformula, just the name and title of the sender.

Another element that needs attention is the use of the signature in 96% ofall messages. By ‘signature’ reference is made here to the standard and automaticaddition of the sender’s full name and complete contact information at the end ofthe email, and it is distinct from writing the sender’s name at the end of themessage. The practice of using what is in this article called “a signature is presentin 288 messages, with the exception of the group labeled as “organizationalmessages”, all emails have a signature. We are aware of the fact that, it is anautomatic addition to the message, still its presence or absence in the email isestablished by the sender of the email. If the sender has chosen to insert a signatureit means that this is viewed as necessary. Indeed the elements of a signature (fullname, job title, company name, company address in full, company phone numbers,the sender’s mobile and email address) are important contact information for theworld of business. In this way the recipient has available at all times this crucialinformation about the sender.

Organizational announcements do not have a signature inserted at the endof the message, but they have the information about the sender, such as the fullname, job title and name of the department inserted at the end of the message. Jobtitles like president, vicepresident, CEO, head of Asia Pacific Division are used togive weight to the message. Three organizational announcements have two peoplesigning the same message, the president and the vice-president of the respectivedivision (one displayed to the right and the other to the left). In this way themessage seems even more official. However, the contact information (like email,phone or fax) is not included at the end of the message, since it is not necessary forthe recipient and since the recipient is not required to send a reply. Professionalswill follow the organizational structures to communicate to their supervisors orhigher-ups, so top managers’ contact information although available, is notincluded in these emails.

An interesting particularity, involving the signature in emails belonging tothe first group, is the fact that the signature is doubled by sender’s first name. 202emails, (out of 224) belonging to the first group, end with a variant of the sender’sname which is followed by the signature. Even if the full name of the sender isincluded in the automatic signature, the sender feels the need to end the messagedifferently, in a way that reflects more accurately the level of formality that existsin that particular relationship. Having the name of the sender written twice in anemail message is chiefly a particularity of emails belonging to the first group. Thiselement is not signaled in the other two categories.

In fact, the signature is impersonal and official and it does not match theinformal tone of these emails. Therefore the sender prefers to use a different varietyto identify himself/ herself, a variety which is more appropriate for the informalrelationship existing between sender and recipient. If the signature follows thesame rules as in written communication, being positioned on the left side of the


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page and containing contact information in the full, the other signature does notobey any of these rules. It is made of the sender’s first name. The first name can beeither unchanged (e.g. Adrian, Tom, Garry, Gerd, Sonia, Lia, etc.) or shortened(e.g. Adi, G., Cristi, adi n.). These first names are written without a capital letter(e.g. adi n.), they are shortened to a minimum (e.g. G.), or placed on the same linewith the closing formula (e.g. Regards, Gram). These names indicate once morethe relationship existing between these professionals, and not the automaticsignature that is also displayed at the end of the message.

Emails of the first category are also the most interesting ones from thepoint of view of the tools used to render the content more vividly. An emailmessage in the business environment is hypothetically void of such features.However, many of the analyzed emails contain elements that may be seen as effortsof taking professional communication out of a daily routine. Professionals thatwork together 10 hours a day, exchanging numerous messages everyday andsharing and solving their work problems, regardless of the fact that they aresituated on different continents, form a business family. Therefore, anyprofessional communication in a certain business family allows more freedom thanin the case of occasional business exchanges. Even if these emails are short andoriented towards one specific piece of information, the messages are ‘spiced up’with various elements such as acronyms, emoticons, use of various colors for thetext, different sizes of text, uncommon use of punctuations marks, etc. Theoccurrence of these elements in the other two groups is extremely rare.

Acronyms appear both with reference to professional informationexchanges (e.g. fyi, asap) or to personal life (e.g. Have a nice WE!). One possibleexplanation for the presence of acronyms is given by Angel & Heslop (1994: 111),who consider the use of contractions as a means of creating a conversational stylethat is not intimidating. There may be other reasons for the use of acronyms, suchas saving time when writing the message or force of habit (especially fyi and asapare frequently used in the business jargon).

Emoticons or similies are noted in the first category, but are absent in thesecond and the third group. The main function of emoticons, generally speakingwithout specific reference to professional communication, is to make up for themajor drawback of written communication, namely the impossibility of renderingnon-verbal cues that are present in direct interaction (Nistorescu, 2006: 113).However, the occurrence of emoticons is not as extensive as one may think, only15% of first category emails have such elements in their structure. The preferredemoticons are: )-: or (-: and they are used only in association with personalcommentaries about professional occurrences (being right or wrong about certaindata, information or expressing one’s feelings about something). Occasionally theemoticon :-\ is used to express dissatisfaction.

The use of a different color of the text of the message is chiefly used tounderline certain important bits of information. The color red is preferred, butoccasionally blue is also used. Red is meant to underline important or required


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information, changes operated on previously transmitted data, prices, etc.Sometimes both blue and red are used in the same message. This practice isrecorded in 21% of the messages in the first group and 2% of the messages in thesecond group; it is not accounted for in the third category. Rarely this practice isassociated with different sizes of the text.

Punctuation is used for emphasizing purposes as well. The most commonpractice is the repetition of the punctuation mark in order to underline something. Itis present in 26 % of the messages. The generally preferred punctuation marksinvolved in repetition are the exclamation mark and the question mark. They areused mostly in messages in which contradictory pieces of information arediscussed or in which professionals wish to point out something. The punctuationmarks appear not only repeated, but sometimes colored red or having a differentcharacter size than the rest of the text. Punctuation used for emphasizing purposesdoes not appear in the second and the third category. However, even if certainpunctuation marks are used repeatedly in the first category of emails in someoccasions, the same category is illustrative for the lack of punctuation marks in thebody of the message, especially commas. Second and third categories havepunctuation marks used according to grammar rules.

The focus on the form of the emails, just like in the case of the content,shows considerable more variety in the first category and more consistency in thesecond and third categories. The emails exchanges between co-workers havevarious layouts, with the salutation or the closing phrase written on the same rowwith the body of the message; either both elements or only one of them. The blockformat, also the most frequent format in business letters, is preferred in mostemails, 90% of all analyzed emails have the left alignment. The remaining 10 % isthe semi-block format which appears only in first category of emails. Thus thesalutation and the closing phrase are placed in the center of the page, while thename is on the right hand side. However, the signature is always aligned to the left.

In conclusion, this study has pointed out that business professionals usevarious structures and styles in their everyday activity. These structures and stylesdepend on the relationship existing between these professionals. They exchangemore emails with other professionals from the same corporation than with peoplefrom a different company. These emails have a low level of formality and recordthe greatest variation in form and style. They reflect more the dynamics of oralcommunication, and have little resemblance to written communication. The emailsexchanged with business professionals belonging to different corporations have aformal tone and are similar to traditional business letters. The special category ofemails containing organizational announcements, emailed to the employees of acorporation, due to the informational content have a special structure and tone. Thestructure is that of a press release, whereas the tone is official. Due to the fact thatorganizational announcements do not constitute ordinary exchanges, as a reply isnever customary, they constitute a special subcategory in professionalcommunication.


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In order to see more clearly the differences that appear within the threecategories presented above, a more detailed analysis of the fixed structures of theemails is necessary. Fixed structures, such as salutations, terms of address, closingphrases and complimentary closes, can give more information about how businessprofessionals use linguistic tools to communicate efficiently and effectively. Ineveryday interaction these fixed structures indicate to what extent emails belong towritten or to oral communication.

References:Angell, D. & Heslop, B., 1994. The Elements of Email Style: Communicate

Effectively via Electronic Email. Reading, Mass: Addison-Wesley PublishingCompany.

Caudron, S., 2000. "Virtual Manners". In Workforce 79.2, pp. 31-34.Christensen, J.2003. "Professional E-mail Needs Attention" at

http://www.csun.edu/~vcecn006/index.htm.Nistorescu, A. 2006. "E-mail Etiquette in the Business Environment". In

Anale, Seria economică 9/ 2006, Lugoj: Nagard, pp.109 – 115.

http://www.csun.edu/~vcecn006/index.htm


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CONCEPTS REGARDING CONSUMER’S ANDMARKETING SPECIALIST’S BEHAVIOUR IN TIME OF

DEPRESSION

Cosmina Dema Poruţiu"Drăgan" European University of Lugoj, Faculty of Economic Sciences,


AbstractThe psychological effect of economic depression caused fundamental changes in theconsumption behaviour at world and european as well as national level. When the researchwas done, there was reached the idea that a new type of consumer was born, one thatprefers useful and durable products, renounces to impulsive purchases, analyses morecarefully the quality-price ratio. On several occasions, one has no longer the possibility tobuy everything one would need, so that he establishes some priorities. The depressionproblem is not one of the comsumer’s, it is one of companies and service providers too.They have to find those techniques necessary to survive during depression.Keywords: Economic depression, sale techniques, consumer, seller/producer,psychological sale, price, consumption behaviour.

Consumer shall mean any natural person who purchases, uses or consumesas final beneficiary, products from companies or receives the services they offer.

The economic depression has fully stroken the consumers.After eight years of constant growth (in 2008 of about 8%), the Romanian

economy gasps at present. The perspectives are as gloomy as possible. No one nolonger doubts that the export’s and consumption’s decrease will have negativeeffects on the economy. Saving up doesn’t mean total renunciation to someproducts, but finding more suitable solutions.

Bonus cuts, pay freeze or reduction, or even job loss made the consumerspoorer. As a consequence, the people became very careful regarding consumption.Thus, the bigger the fear, the more the consumer tempers and organises better hisexpenses. As different studies and statistics state, consumers began to spend moneymore efficiently.

Economic and financial depression proved to be a learning experience forconsumers. The consumer becomes more rational regarding the decision to buy andhe is more careful with the product and its intrinsic characteristics. He spends moretime looking for durable goods and he is more inclined to postpone the purchasesand to buy less.

The big consumers before recession become the main clients ofpsychological offices due to daily stress and fear of no longer being able to pay



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their instalments, debts, credits to banks. The company owners that invested intechnology, buildings and businesses are the first to panic. The common consumer,the common people that is closer to the minimum threshold is very familiar withthe state of „saving up, not spending, not buying unless it is strictly necessary”.

Sales experts adapted themselves immediately to the situation and put towork their entire arsenal of techniques in order to give the clients the impressionthat every penny they spend is not lost, that it is worth it.

Consumers give up to credits, to journeys, to going out, they spend moretime at home. The accent will lie on products that improve life at home, onspending the free time with the family. So the family values will be more valuedand, in general, everything that expresses safety, stability.

Hard times boost products such as alcohol, tabacco, chocolate, health careproducts, as indicators of the stress level increase in consumer’s life.

In most cases the key element of sales before depression was theproduct, in some cases the seller and in very few cases the client.

There was a period of economic growth, and there were enough clients,often demand surpassed supply and on these conditions the client was notconsidered an important actor. There were enough clients.

Nowadays, in time of depression, the sale process is more difficult. As aconsequence, the consumer will be exigent and it will be harder to „mistake” him,because we witness a „taming” of buying impulses. The client informs himselfbefore buying, takes his time, because there is no one standing in a queue. He canno longer be rushed to buy right now, on the spot, because otherwise there will beshortage and he will have to wait a few months. There are stocks everywhere.Supply is bigger than demand. The dictatorship of seller came to an end, thedictatorship of client started. Thus the client became the key element of the saleprocess.

Now the product must be adapted to the client’s needs and not the otherway round. The client must leave pleased and accomplished. If we areproducers/sellers, he must recommend us to others too, he must bring to us otherclients.

The companies which do not take care of their own clients, as well as theold-fashioned companies which thought that their task is only to manufacture aproduct at a price as lowest as possible, will not survive in the 21st century.Without clients the wheel seizes up and finally stops.

Thus, nowadays, the sales central element must be the client, seller’sattitude towards client first and then towards product.

In periods of depression the psychological sale, the one which bases itssuccess first on satisfying the buyer’s psychological needs, is the one that mustprevail.

Consultative sale (when the client told the seller his needs, desires andpleasures and the seller ”tailored” him a solution and then told him what ”was theprice”) was very good during the period of ”economic leisure”. At that moment,


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the buyer said ”I want the best” and the seller took care to ”make him a price”accordingly!

Nowadays, things are totally different.For example, we want to celebrate a special event in our life in a certain

location. We will clearly ask what is the price and what discounts we can benefitof. If we are not pleased, we do not trust them or we feel that we are caught in „ theprice trap”, we step back and go somewhere else.

To conclude, regarding this idea, the sentence ”I cannot tell you the priceunless we meet!” is nowadays the „sale death”, because in period of depression theprice of consumption goods and services is the main element when making theconsumption decision.

Choices are made according to price maybe more than ever. It is put inbalance the quality-price ratio, buyer’s loyalty tears more easily and from all thistransformation win only those sellers/producers which adjust themselves todemand.

Another technique recommended to sales specialists in time of depressioncould be the one that the products or services whose payment could bepostponed or payed in several instalments will register bigger sales.

This form of buying will help consumer absorb „the payment shock”. Ithas been proved that this type of sale technique ”is a successful one” even in thecase of consumers that have the necessary money to buy on the spot. The offeredoption is extremely advantageous, because it allows consumers to use the moneyfor other purchases or payments, on one hand, and on the other hand, they have thefeeling that thay have found the most advantageous flow of liquidity inputs andoutputs from the household in a period they consider extremely difficult from aneconomic point of view.

Another technique used by marketers is the promotion or discounttechnique, the consumer having the feeling that he makes a good business if hebuys a certain product.

Although natural in time of recession, the disount policy represents a two-edged strategy. In the attempt to attract clients with prices which are very muchreduced there can be generated disturbances at the level of consumer’s trust. It isobvious that one product or another must „fit” in a way to the client’pocket.Nevertheless, lowering a price below a certain „psychological” threshold causessome reactions of caution. Thus, a product whose price was reduced a lot can beconsidered by the consumer to be one morally worn out or close to the limit ofvalidity or, even worse, the product quality is questioned.

In the same time, the present discount policy will make the consumercontinue to wait, in the hope that prices will lower more.

Personnally I think that a good solution is to offer a lowered price toconsumers that buy a certain quantity of products (for example, a 30% discount isoffered on purchases bigger than lei 200).


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Both of them are however solutions that need attention in order to establishsome pricing strategies that offer the best results in time of depression.

The depression seems to be the drop that repositions today’s consumer atthe basal layer of Maslow’s pyramid, his choices being governed rather by hissafety or even by his primary needs.

During depression, Romanians no longer buy „by impulse”, they respectmore strictly the shopping list, they no longer make stocks, focusing only on whatis strictly necessary. It is as obvious as possible that most people have changedconsiderably their consumption behaviour –either they bought less quantities oftheir favorite services and products, either they drawn their attention towardscheaper products.

Life must be lived in depression too, no matter if we are consumers orproducers and consumers in the same time. Some might say that it is even more„exciting”, the challenges are bigger. Everyday we should wish for a better life andcompulsory do something in order to have it. A true fighter has no time tocomplain. He either works, either thinks and acts. When he succeeds to do themboth it is great! Then he gets out of depression slowly and for sure.

In fact, depressions created big idea in all areas. Those that succeed toadapt and reinvent themselves, and I refer to producers as well as to consumers,will get out of depression stronger. Economy has a cyclic evolution, and depressionmeans in fact that it sets back again. I think that this depression is a big businesslesson for everyone. Companies that do not submit to pressures and succeed toassure a floating line during recession, will rise again more powerful once theeconomic situation relaunches.

I make appeal to positive thinking, I think that only in this way we can livein depression, without however staying with it. A society’s destiny does not dependon a depression or another, it depends on that society’s power to face challenges.

BibliographyJim Blythe, Comportamentul consumatorului, Editura Teora, Bucureşti,

1998* * * www.money.ro* * * www.wall-street.ro

www.money.ro

www.wall-street.ro


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QUALITY OF THE FINANCIAL ACCOUNTINGINFORMATION FROM THE PERSPECTIVE OF THE

CORPORATE GOVERNANCE

Rada Dănuţ"Drăgan" European University of Lugoj, Faculty of Economic Sciences,


AbstractCorporate governance has as objective the overall leadership and management of the entireorganisation by the risk management, organisation and exercising of internal control,including the internal audit. Within the concept of corporate governance, a core role isplayed by the transparency of the financial-accounting information, as it lies at the basis ofthe decision making.Keywords: corporate governance, risk management, internal control, internal audit,financial situations.

1. The concept of corporate governance and its basic principlesThe notion of corporate governance occurred for the first time in usual

terms in America in the '70s, at the peak of the Watergate scandal, when theAmerican Congress, extremely surprised by the scope of the corruptionphenomenon, initiated by the great companies among politicians, required theestablishment of a set of much more detailed rules and regulations in the field ofinternal control, internal audit and risk management. This is how scaffolds of theconstruction entitled corporate governance were set, construction that hascontinually developed both on the American continent and in Europe, becomingthe transparency level provided to the users of financial information.

Conceptually, Corporate Governance – Anglo-Saxon term – means theoverall leadership and management of the entire organisation by the riskmanagement, organising and exercising the internal control, including the internalaudit. In the literature and practice we encounter several attempts to definecorporate governance, however there is no unanimously accepted definition so far.We should retain as fundamental two definitions elaborated by importantregulation bodies in the audit field, i.e. the IIA (USA Institute of Internal Auditors)and IFAC (International Federation of Accountants).

The first definition, forwarded by IIA, affirms that: ”Governance is acombination of processes and structures implemented by the Board of Directors inorder to inform, lead, direct and monitor the activities of the organisation with thepurpose of reaching the previously set goals”. Analysing the definition andinterpreting the assertions contained we may draw the following conclusions:



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1. “Governance is a combination of processes and structures” – it means thatthe act of management represented by governance relies on a code ofprocedures, able to settle and regulate the multitude of problems (processes)and it also has corresponding structures for the management of theseprocesses.

2. “implemented by the Board of Directors” – this indicates the level where thecorporate governance is performed.

3. “…in order to inform, lead, direct and monitor the activities of theorganisation” – this section shows the goals of the corporate governance act,goals set in the attributions of the bodies of collective management - theBoard of Directors.

4. “…with the purpose of reaching the previously set goals” – the final goal ofcorporate governance is subordinated to the shareholders’ interest on a longor medium term, interests formulated and communicated to the Board ofDirectors.The second definition elaborated by the IFAC stipulates that: “Corporate

governance is a set of practices of the Board of Directors and of the executivemanagement, executed with the purpose of ensuring the strategic directions ofaction, the reaching of the set goals the risk management and the responsible use offinancial resources”.

This definition puts in connection two management levels of theorganisation, i.e. the Board of Directors and the executive management, byprocedures (practices) meant to ensure the reaching of the set goals: “the riskmanagement and the responsible use of financial resources”.

We remark from both definitions the essential aspects of corporategovernance. The use of practices and structures by the Board of Directors with thepurpose of reaching the goals previously set by the organisation.

The concept of corporate governance includes not only the internalenvironment of the organisation (shareholders and employees), but also externalinfluential factors (creditors, customers, suppliers, the government, community (thelatter having an important part to play in the perpetuation of the firm’s activity, inits development. In fact the World Bank, in the definition given to corporategovernance, affirms that: “the purpose of corporate governance is to draw togetheras closely as possible the interests of the individuals, corporations and companies,with the purpose of keeping the balance between economic and social goals,between the common and individual ones.”

As regards the principles of corporate governance, they were announced inthe most general manner possible, leaving the practitioners of this managerial actthe possibility to apply them as creatively as possible. These principles affirm theydo not aim at imposing a universal model of corporate governance, nevertheless inthe future it is necessary to elaborate certain global standards of corporategovernance.


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In 1992, Sir Adrian Codbury, Chairman of the London company Codbury,elaborated the first code of corporate management and leadership comprised 19recommendations regarding the basic rules necessary for the administration of acompany, aiming at increasing efficiency, in the context of an non-discriminatorybehaviour towards the shareholders. In a nutshell, this Codbury Code forwards,beside the important role of the Board of Directors, the need to constitute an auditcommittee and to widely use independent executive directors (non-executivedirectors) who do not have a managerial accountability within the organisation.

Out of the desire to introduce “the best practice” in business, the OECDmember countries – states with powerfully developed market economies -elaborated and published in 1999 The Principles of Corporate Governance,document which attempts to complete the tasks and attributions of the Board ofDirectors by issues related to the equitable treatment of shareholders, their rolewithin the corporate governance, offering information and their transparency, theaccountability of the Board of Directors. In short, the six global principles ofcorporate governance elaborated by OECD stipulate:

1. The frame of corporate governance should promote transparency andefficiency of markets, concordance with the rules and laws and segregationof liabilities among different leadership, regulations and authorities;

2. The frame of corporate governance would protect and facilitate theexercise of shareholders’ rights;

3. The frame of corporate governance would ensure the equitable treatment ofall foreign shareholders. All shareholders would have the opportunity toobtain effective damages for the breach of their rights;

4. The frame of corporate governance would recognise the shareholders’rights set by law or by approved engagements and commitments and toencourage co-operation between organisations and shareholders in thecreation of value and jobs, in the support of the financially healthyenterprises;

5. The frame of corporate governance should ensure a prompt and reliabledisclosure of information, about all the material problems regarding thecorporation, including the company’s financial situation, performance,property and management;

6. The frame of corporate governance should ensure the strategic guidance ofthe company, an effective monitoring by the Board of Directors, as well asthe accountability of the Board of Directors before the shareholders and thecompany.These principles were recognised by the Forum for Financial Stability, by

the World Bank and the International Monetary Fund, and adopted by theInternational Organisation of the Real Estate Values Committees. Moreover, theyare at the basis of the elaboration of national codes of corporate governance,including in Romania.


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The issues related to corporate governance in our county were approved byLaw no. 672/2002 regarding the public internal audit and later on by the Order ofthe Minster of Public Finances OMFP no. 946/2005 for the approval of the code ofinternal audit, containing the standards of management and internal audit in thepublic entities and for the development of the managerial control systems.

So as to conclude, within the concept of corporate governance, a core placeis occupied by the transparency of financial-accounting information, as it lies at thebasis of the decision making act. From this perspective, the financial accountinginformation, comprised in the annual financial situations, should reach a certainquality and contribute to the competitive management of the organisation.

2. Qualitative characteristics of financial informationIn order to be useful for consumer (users), the financial information must

meet certain requirements called qualitative characteristics. According to The IASBgeneral frame for the elaboration and presentation of the financial situations, thefour main qualitative characteristics are: intelligibility, relevance, reliability andcomparability,.

IntelligibilityAn essential quality of the information provided by the financial

situations is that they could be easily understood by the users. For this purpose, itis supposed that the users dispose of sufficient knowledge on the businessoperation and economic activities, of notions of accounting and are willing tostudy the forwarded information with the due attention. Nevertheless, theinformation on certain complex issues, that should be included in the financialsituations, due to their relevance in the economic decision making, should not beexcluded only for the reason they might be too difficult to comprehend by certainusers.

RelevanceFor the information to be useful, it should be relevant for the users’

decision making. The information is relevant when it influences the users’economic decisions, helping them to evaluate past, present or future events,confirming or correcting their previous assessments.

The prediction and confirmation roles of information are closelyconnected. For instance, the information on the present level and structure ofassets are valuable for the users when they try to predict the capacity of the entitybenefit form opportunities and to react to unfavourable situations. The sameinformation has the role to confirm previous predictions, for example the way inwhich the entity may be structured or the result of the planned activities.

The information about the financial position or previous performances arefrequently used as basis for the prediction of the future financial position andperformance, and of other problems the users are directly interested in, such as thepayment of dividends and wages, variations in the price of bonds, as well as theentity’s capacity to honour its due obligations and commitments. In order to have


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predictive value, the information need not be under the form of an explicit prognosis.The capacity to elaborate predictions based on the financial situations is howeverenhanced by the manner in which the information is presented on the past transactionsand events. For instance, the predictive value of the profit and loss account isimproved if the information on unusual revenues or expenditure that appear to beunusual, abnormal or rare are present separately.

The relevance of information is influenced by its nature and by thesignificance threshold. In certain cases, the nature of information is sufficient, byitself, for determining its relevance. For example, reporting a new segment ofactivity may influence the assessment of the entity’s risks and opportunities,irrespective of the significance of the results obtained within the respectivesegment in the reporting period. In other cases, both the nature and thesignificance threshold are important, e.g. the value volume of stocks in each maincategory an entity should detain in order to have an appropriate activity.

The information is significant if its omission or erroneous presentationcould influence the economic decisions of the users, made on the basis of financialsituations. The significance threshold depends on the size of the element or error,judged in circumstances specific to the omission or erroneous presentation. Thus,the significance threshold offer a range or a limit rather than representing aprimary qualitative traits that the information should have in order to be useful.

ReliabilityIn order to be useful, the information should also be reliable. It has the

quality to be credible when it does not contain significant errors, it is not biased,and the users may trust it completely as it represents what it set out to represent orwhat is reasonably expected from it to represent.

The information may be relevant, but so little liable under the aspect ofnature or representation, in so far as its recognition may be misleading. Forinstance if the validity and value of damages are disputed in a litigation, it wouldnot be appropriate for the entity to register the entire amount of damages in thebalance sheet, although it would be appropriate to clarify the amount claimed andthe circumstances of the conflict.

The following elements define reliability;1. Truthful representationIn order to be credible, the information should truthfully represent

transactions and other events it set out to represent, or what could be reasonablyexpected to represent. For example, the balance sheet must represent, in acredible way, the transactions and other effects that are concretised in assets,debts and own capitals of the entity on the reporting date, which meet therequirements of the reporting criteria.

Most of the financial data are subjected to a certain risk of offering arepresentation less credible than required. It is not due to bias, but rather to theinherent difficulty, either in the understanding of transactions and other eventsthat are to be assessed, or in conceiving and applying the techniques of evaluation


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and presentation able to transmit messages corresponding to the respectivetransactions and events. In certain cases, the assessment of the financial effects ofcertain elements could be so uncertain that the entities in general could notrecognise them in the financial situations, e.g. although most entities generate thecommercial fund internally along time, it is usually difficult to identify or toassess this commercial fund in a credible manner. In other cases, however, therecognition of the respective elements may be relevant, along with the recognitionof the respective elements and the presentation, at the same time, of the risks oferror hindering their recognition and assessment.

2. Prevalence of the economic over the juridicalFor the data to credibly present the events and transactions they intend to

represent, they have to be accounted for and presented in accordance with theirfundament and the economic reality, and not only in their legal form. The fundamentof transactions or other events is not always in accordance with what transpires fromtheir legal or conventional form. For example, en entity assigns an asset to a thirdparty, in such a way that the documents support the transfer of the right of ownershipto the respective third party, nevertheless there may be contracts ensuring the entitythe right to continue to rejoice future economic benefits from the respective assets.In such circumstances, reporting a sale would not present the transaction concludedin a credible manner (if such a transaction truly existed).

3. NeutralityIn order to be credible, the information contained in the financial

situations must be neutral, i.e. free of influences. The financial situations are notneutral if, by the selection and presentation of the information, they influence themaking of a decision or the formulation of a reasoning in order to reach a resultor a present goal.

4. CautionThe persons who elaborate financial situations should be confronted with

uncertainties that inevitably “float” above many events and circumstances, such asthe cashing in of doubtful book debts, the probable duration of use of corporalimmobilisations and the number of possible claims regarding the product duringguarantee period. Such uncertainties are recognised by presenting their natureand value, but also by exercising caution in the drawing up of financialsituations. Caution means including a degree of precaution in exercising thereasoning necessary to meeting the required estimations, in condition souncertainty, so that the assets and revenues are not overrated, and the debts andexpenditure are not underrated. Nevertheless, exercising caution does not allow,for instance constituting hidden reserved or excessive provisions, the deliberateunderrating of assets or revenues, and neither the deliberate overrating of debtsor expenditure, as the financial situation in this case would no longer be neutraland consequently they would no longer have the quality of being reliable.

5. Integrality


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For the data in the financial situations to be reliable, they must becomplete, within reasonable range of the significance threshold and the cost forobtaining those particular date. An omission may make the information false orit may be misleading, and thus it no longer has a credible character and risks tobecome defective from the relevance viewpoint.

ComparabilityThe users should be able to compare the financial situations of an entity

along time in order to identify the trends in its financial position and itsperformances. The users should at the same time be able to compare the financialsituations of different entities, in order to assess their financial position,performance and changes in their financial position. Thus, measuring andpresenting the financial effect of the same transactions and events should beeffected in a consequent manner within an entity and along time for one and thesame entity and in a consequent manner for different entities.

An important implication of the information quality’s comparableness isthat the users should be informed about the accounting policies used in theelaboration of the financial situations and on any change of these policies, as wellas on the effects of such changes. The users should be able to identify the differentbetween the accounting policies for transactions and other similar events used bythe same entity form one period to another, as well as those of different entities.The conformity with the International Accounting Standards, including thepresentation of accounting policies used by the entity, helped to achievecomparability.

The need for comparability should not be misinterpreted as mereuniformity and should not be left to become a hindrance in the introduction ofenhanced accounting standards. It is not advisable for an entity to continue tohighlight in accounting situations, in the same manner, a transaction or anotherevent if the method adopted does not maintain the qualitatively characteristic ofrelevance and reliability. It is not advisable either for an entity to leave itsaccounting policies unchanged, when there are more relevant and more reliablealternatives.

As the users desire to compare an entity’s financial position, performanceand changes in the financial position along time, it is important that the financialsituations might reveal appropriate information for the prior periods.

The financial accounting audit requires an examination methodology ableto ensure an independent opinion, sol that it equally defend all the users of theaccounting information such as: the shareholders, the state, the employees, thebanks, the stock exchange bodies, the debtors, the suppliers, the customers, etc.

Bibliography


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Ghiţă, M., Boulescu M., Fundamentele auditului / Basics of Audit,Didactic and Pedagogic Editions, Bucharest, 2001.

Ghiţă M., Pereş I., Bunget O., Guvernanţa corporativă şi audtul intern /Corporate governance and internal audit, Mirton Editions, Timişoara, 2009.

Rada, D., Audit financiar contabil / Financial accounting audit, ModusP.H. Editions, Reşiţa, 2002.

Rada D., Audit financiar. Control financiar / Financial audit. Financialcontrol, Mirton Editions, Timisoara, 2006

Rusovici, A., Ghizari E.I,, Rusu G., Auditul situaţiilor financiare înentităţile economice / Audit of financial institutions in economic entities, TheOfficial Gazette Editions, Bucharest, 2006.

Toma, M.. Iniţiere în auditul situaţiilor financiare ale unei entităţi /Initiation in the audit of financial situations of an entity, CECCAR Editions,Bucharest, 2005.

***, Law no. 672/2002 on the public internal audit.


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CREATIVE ACCOUNTING AND TAX DODGING

Doina Rada"Eftimie Murgu" University of Resita, Faculty of Economic Sciences,Traian Vuia Square, No. 1-4, Resita, Romania, [email protected]

AbstractCreative accounting represents the way in which professional accountants, based on theirknowledge, perform certain misconducts with the purpose of manipulating the figures inthe annual accounts. Apparently the things are all right, but in reality the principles ofaccounting are completely left aside. The consequences are multiple, and we may citeamong them tax dodging.Keywords: accounting principles, annual situations, manipulation, financial information,tax dodging.

1. Creative accounting between permissibility and illegalityMany a time accounting uses the financial situations with the purpose of

creating a more favourable image for the company, which they present to differentcategories of users of accounting information who have certain interests within thefirm. The accounting principles play an essential part in achieving this goal due tothe fact they leave room for interpretation as regards their applicability.Remodelling financial situations for the interest of the enterprise bears the name ofcreative accounting.

The concept of creative accounting describes the way in which theaccounting professionals use their knowledge with the purpose of manipulating thefigures from the annual accounts. In the literature various definitions were givenfor creative accounting, and we shall list some of them.

Jameson stated that: “The accounting process supposes operating withdifferent opinions and solving the conflict among them in view of presenting theresults generated by transactions. Such flexibility facilitates manipulation,deception and misrepresentation. These activities, practised by some lessscrupulous members of the profession, begin to be known under the name ofcreative accounting... There is no doubt about the negative character of creativeaccounting. It distorts the results and financial position related to the company...[1]”.

Trotman is somewhat more indulgent with those who make appeal tocreative accounting, claiming that it is merely a communication technique aimingat enhancing the information provided to investors. [2]

Teller and Raybaud express the following conception regarding creativeaccounting: “the practices of accounting information, often on the edge of legality,practised by certain companies which, taking advantage of the limits of



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normalisation, attempt to embellish the image of their financial position andeconomic and financial performances ”. [3]

Naser offers perhaps one of the most comprehensive definitions of creativeaccounting: „1) the process by which, given the existence of some breaches in therules, the accounting figures are manipulated and, taking advantage of flexibility,those measuring and information practice are chosen which allow the turning ofsynthesis documents from what they should be in what the managers desire; 2) theprocess by which transactions are structure so that they allow the “manufacturing”of the desired accounting result”.

The reasons why one resorts to creative accounting are numerous. Withoutattempting to find excuses for those who do it, we may affirm that resorting tocreative accounting is somewhat due also to the permissiveness or ambiguity of thelegislative frame. The accounting professionals use each escaping gate in order toreach their goal.

For instance, an important factor of influence may be considered thecompany’s policy. If the managers’ remunerations are calculated in accordancewith the accounting result, then managers are tempted to resort to diversetechniques in order to maintain this result as high as possible, ignoring its long-term consequences. If the accounting result is above the set average, then theoverplus is distributed for the increase of future bonuses. If the result is below theset average, then one resorts to the “big bath” procedure, which refers to the factthat in the year when a loss is registered, managers major the respective loss byincluding all future probable losses, which will allow the presentation of some highgains in the years to follow. The persons who resort to creative accounting attemptto delay the recognition of losses as long as possible. Managers are also motivatedto opt for creative accounting and in the situation when this contributes to thesafety of his position, if he obtains a share of the profit. We may affirm that,indirectly, managers are suggested by the shareholders or partners, through theseadvantages, to apply techniques of creative accounting.

Another case when one resorts to the application of creative accounting isthe moment when the company needs loans. If in some contracts a restriction wasset as regards the total of the amounts borrowed by a company (which is obtainedas multiple of social capital and reserves), then one resorts to accounting methodmeant to major the accounting result and reserves, or one use financing techniquesoutside the balance sheet. Sweeney affirmed that companies in advance state ofindebtment are two or three times more susceptible than the other companies tochange these accounting policies in view of majoring the result.

We may include even the state in the motivational compound. Forexample, if an enterprise has an engagement based on a share of the profit, then itis tempted to diminish the result. As the state establishes which are the maximumamounts that may be spent, and diminishes the amount of the profit is high,companies are tempted to used accounting methods meant to reduce the result.

The companies quoted at the stock exchange too make appeal to creativeaccounting. They fear the effects of presenting fluctuating results from one year to


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the other, and prefer to present a constant situation, a slight increase of profit fromone year to the next, and this is done by “levelling” the results, which supposes theuse of certain techniques (finding of provisions, revenues and expenses in advance,of change of methods and accounting estimations...) in order to downsize thedeviation of the published result from the amount considered normal or expected.

Another situation of using creative accounting is when one chooses topostpone the recognition of part of the profit earned in order to cover, in the futurebudgetary years, possible unforeseen costs.

The specialised critics think that only incompetent managers resort tocreative accounting. It is considered that they surrender to personal interests to thedetriment of the interests of the economic entities. One normally ends up usingcreative accounting when the company has not achieved satisfactory performances.Being unable to assume the risk that suppliers cease to grant commercial credits,that creditors reduce the reimbursement deadlines, that customers search for othersuppliers, the management decides to apply techniques of creative accounting.

We may claim that one resorts to creative accounting the moment theeconomic entity is at a loss, when it is haunted by the spectre of failure.

The most despairing thing is that the use of creative accounting is verydifficult, perhaps even impossible to detect. The only places containing informationabout the way the financial situations are elaborated are the enclosures, but wemust remain aware of the fact that no accountant will mention in the accountingenclosure that he or she has applied techniques of creative accounting.

Some of the effects of applying creative accounting are the following:- Increasing or diminishing expenditure. This is possible due to the fact that

accounting regulations leave room for interpretation as regards thequantification of expenditure belonging to a certain budgetary year;

- Majoring or reducing revenues. The manipulation of revenues may beachieved with the help of the caution principle. The operation ofrecognition of revenues may be slowed down or sped up, depending on thecompanies' needs;

- Increasing or diminishing assets. The assets may be manipulated by theprocess of stock evaluation. The company may choose any of the availablemethods for stock evaluation (FIFO, LIFO, CMP). The value obtainedfrom the use of one or the other of the methods may be different, and thusthe enterprise opts for the method that is the most favourable for it. theeffect of using these methods, from the viewpoint of creative accounting,has the role to influence the profit and loss account;

- The manipulation of the information presented in the enclosure. In theenclosures elaborated and annexed to the financial situations there arecertain parts where one may include more or less information. Due to thisthing, the accountant may decide to omit certain relevant data that couldaffect the decision-making capacity of the external users.It is the omissions from the legal stipulations that allow this phenomenon.

The estimations and predictions which must be made in view of elaborating the


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finical situations imposed by the very accounting norms are a plausible excuse forthe adepts of this phenomenon. We may only resort to the practitioners’ ethicprinciples as regards the observance of accounting principles. It is left to thelatitude of each and every practitioner if the estimations and predictions he has tomake are made according to the law or in the company’s interest, if he is objectiveor subjective when elaborating the financial situations.

2. Creative accounting as source of tax dodging or fiscal evasionAs we mentioned above, creative accounting represents a modalities of

“doctoring” or embellishing the financial situations and reports, more precisely ofeconomic reality, with the purpose of presenting a favourable image of theeconomic entity’s financial performances and performances.

“Tax dodging is avoiding by any means, entirely or partially, to pay taxesand other amounts due to the state budget, local budgets, the budget of state socialsecurity funds and other special extra-budgetary funds by natural and legal persons,either Romanian or foreign, called tax-payers.” [1].

Like in the case of creative accounting, we may not blame the imperfectionof the legislative frame, but we must admit that because of the gaps in legislationthe persons may resort to fiscal manipulation in their own interest.

A natural or legal person may resort to tax dodging for various reasons. Asthere are two types of fiscal evasion, i.e. legal and illicit, the reasons for resortingto tax dodging are different too. Some reasons are illegal, others are quite legal, butfrom the moral, ethical point of view they are inappropriate.

Illicit tax dodging may take several forms:1. The traditional fraud is characterised by the partial or total avoidance to

pay one’s fiscal obligations. This is done by elaborating and presentingfalse documents or even by not presenting the documents required by thelegislation.

2. The legal fraud consists in hiding certain contracts with the purpose ofescaping some fiscal obligations.

3. The accounting fraud is perhaps the most difficult to detect, because of themultitude of documents used. It consists in using forged documents,embellishment of balance sheet, keeping two books in parallel, one realand the other fictional.

4. The fraud by evaluation consists in reducing the value of the stocksassessed.The practice comprises various operations related to fiscal evasion. Perhaps

one of the most frequently encountered example available to those who resort totax dodging is to elaborate forged fiscal declarations or even the failure to presentfiscal declarations. Another usual operation is to diminish cashing-ins in order toreduce the VAT and at the same time reducing the taxable profit. This is done bycashing-ins without receipt or sales without invoice. It is also customary to majorthe expenditure with the purpose of reducing the taxable profit. This operation is


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performed by including in the category of exploitation expenditure the personalexpenses, exaggerated publicity, false expenses and others. For instance, acompany may avoid the payment of the tax on benefits if it operates as anassociation with lucrative purpose. Another eloquent example may be when acompany with fiscal obligations declares its bankruptcy, and later on a newcompany appears, led by the same owners as those of the former company declaredbankrupt.

These are the most frequently seen examples of fiscal evasion. Howeverthere are examples of tax dodging which, from the ethical viewpoint, may beconsidered not only immoral, but also degrading. For example certain socialcategories such as the war veterans, revolutionaries, former political detainees,handicapped persons, repatriates, even non-profit associations, are exempt from thepayment of the tax on real estate properties. Thus, some persons who own such aproperty register it in the name of a relative who benefits from this tax exemption,although that person has in fact no relation with the building or the benefitsobtained from it. There are persons who take advantage also of the fact that thelegislation favourable stipulations for some special regime areas, free zones,defavoured regions, and established the headquarters of their private companies inthese areas, only to benefit form certain advantages.

It is true we cannot put an equality sign between creative accounting andtax dodging. Although part of tax dodging may be considered “legal” only becauseit is hidden behind the legislative omissions, it may be sanctioned as contraventionif the competent authorities succeeded in proving its existence. To the luck ofcreative accounting practitioners, it cannot be sanctioned legally. But what aboutthe ethical viewpoint? This question would be answered separately by each andevery follower of accounting “doctoring”. Creative accounting is situatedsomewhere on the edge of legality, and consequently we may consider it legal.Nevertheless, from the ethical viewpoint creative accounting is consideredimmoral.

In order to put an end to the phenomenon, conceptual frames have been set(such as IASC), normative acts (such as, in Romania, Law no. 87/1994 for theeradication of tax dodging, Law no. 21/1999 for the prevention and sanctioning ofmoney laundering, the Code of fiscal procedure) and control organisms (theFinancial Guard). But in spite of these efforts, accountants continue to provecreative, inventive and full of imagination, demonstrating thus that the accountingprofession is not as deprived of imagination as it is usually considered.

We have to admit that this issue is truly an existing phenomenon and itshould be eliminated. Beyond the fact that the application of creative accountinginfluences first of all the partners who have interests within the company, andindirectly the competition, by an unfair practice. It is not fair and moral that acompany benefits from certain advantages gained in a contestable manner andanother society to lack these advantages.

We have presented several essential notions regarding tax dodging,although it may not be connected with creative accounting, but my purpose was to


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present how fragile the line of creative accounting legality is and how easy it is foranyone to cross the line of tax dodging.

Although there are always modalities to breach the rules, and the morecomplex these rules are, the more creative the breaches become, one shouldintervene and establish certain norms which, even if they cannot eliminate thephenomenon of creative accounting, they may at least slow it down.

The first thing to do would be to make accounting norms much clearer andto limit as much as possible the users’ subjectivism in the interpretation andestimation of phenomena.

End notes:1. M. Jameson, „A practical guide to creative accounting”2. M. Trotman, „Comptabilite britannique, mode d’emploie”3. Quoted by B. Raybaud – Turrillo and R. Teller in Creative accounting

Bibliography:Arens, Alvin A., Loebbecke, James K., Audit – O abordare integrată /

Audit – An integrated approach, Eighth Edition, Arc Editions, 2006Needles, Belverd E. Jr., Anderson, Henry R., Caldwell, James C.,

Principiile de bază ale contabilităţii / Basic principles of accounting, Fifth Edition,Arc Editions, 2007

Feleagă, Niculae, Malciu, Liliana, Politici şi opţiuni contabile / Accountingpolicies and options, Economic Editions, 2008

Gabriel, Ioniţă, Bişa, Cristian, Gearbă, Robert, Oană, Gabriela, Sârbu,Lucica, Tutoveanu, Olga, Consultanţă fiscală / Fiscal consulting, Irecson Institute,2005

Pereş I., Caciuc Leonora, Mateş D., Imbrescu, Carmen, Iosif, Anda, Bazelecontabilităţii / Basics of accounting, Mirton Editions, 2004

Pereş I., Mateş D., Pereş C., Bazele teoretice şi aplicative ale contabilităţii/ Theoretical and applied bases of accounting, Eurobeea Editions, 2002


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THE IMPACT OF NEW CHANGES IFRS ON THEACCOUNTING OF CREDIT INSTITUTIONS

Alexandra Doroş"Drăgan" European University of Lugoj, Faculty of Economic Sciences,


AbstractLegislative stages in accordance with IFRS accounting treatment, began to OMF no.907/2005- approving categories of entities applying accounting rules in accordance withInternational Financial Reporting Standards, accounting regulations that comply withEuropean directives, as amended, continued with NBR Order no. 13/2008, NBR Order no.15/2009, NBR Order no. 9/2010 and ends with NBR Order no. 27/16.12.2010 - forapproval of Accounting Regulations in accordance with International Financial ReportingStandards applicable to credit institutions.Keywords: Accounting Regulations, International Financial Reporting Standards; theaccounting, legal provisions applicable to credit institutions, chart of accounts.

I. From the accounting treatment required by the accounting regulationscorresponding with European directives to the accounting treatment requiredby IFRS - Legislative steps taken by Romanian credit institutions

Current accounting regulations corresponding with international financialreporting standards, accounting regulations that comply with European directivesdefine as credit institutions in our country, the following entities:

• Banks, Romanian legal persons;• Credit cooperative organisations;• Savings and loans banks for housing;• Mortgage loan banks;• Branches in Romania of foreign credit institutions;• Foreign branches of credit institutions, Romanian legal persons.In 2005 the Ministry of Public Finance issued an Order of the Minister of

Public Finance no. 907/2005, approving the categories of legal persons applyingaccounting rules in accordance with International Financial Reporting Standards,accounting regulations that comply with European directives.

Through the Government Emergency Ordinance no. 99/2006 - on creditinstitutions and capital adequacy, approved with amendments by Law no.227/2007, as amended and supplemented, shall be regulated:

• conditions of access to banking services in Romania;• prudential supervision of credit institutions and investment services

firms;



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• oversight of payment and discount systems for financialinstruments operations.

Considering the Accounting Law no. 82/1991, republished, the O.M.F.nr.907/2005 - approving the categories of entities to apply accounting rules inaccordance with International Financial Reporting Standards, accountingregulations that comply with European directives, as amended, the GovernmentEmergency Ordinance no. 99/2006 - on credit institutions and capital adequacy,approved with amendments by Law no. 227/2007, as amended and supplementedand the Law. 312/2004 - the National Bank of Romania, NBR issues:

1. Order no. 15 of 22 dec. 2009 – regarding the drawing up by creditinstitutions, for information, of individual annual financial statements inaccordance with International Financial Reporting Standards come into force on 24dec. 2009, which in Article 1, paragraph (1) stipulated the following "for thefinancial years 2009, 2010 and 2011, credit institutions shall prepare, forinformation, a set of individual annual financial statements in accordance withadopted International Financial Reporting Standards stipulated in Art. 6, paragraph2 of Regulation (EC) no. 1.606/2002 of the European Parliament and the Councilof 19 July 2002 on the application of international accounting standards (IFRS),obtained by restating the information presented in annual financial statementsprepared under the accounting records kept under accounting regulations inaccordance with European directives applicable to credit institutions , non-bankfinancial institutions and the Deposit Guarantee Fund in the banking system,approved by the National Bank of Romania, 13/2008, further on called AccountingRegulations in accordance with European directives."

One can notice that the start of Regulations in accordance withInternational Financial Reporting Standards (IFRS) is given by EC Regulation nr.1.606/2002 the European Parliament and ruled by the NBR by Order nr. 15/2009.

By this Order, NBR asks for information purposes only "a single set ofannual financial statements" in accordance with IFRS for financial years 2009.2010and 2011 of credit institutions in our country.

In order to stress the differences between the accounting treatment inaccordance with the accounting regulations harmonized with European directivesand the treatment required by IFRS, the NBR Order nr.15/2009 specified in Art.Three, Paragraph (1) that "Credit institutions shall prepare a statement to reflectdifferences between the accounting regulations harmonized with Europeandirectives and treatment stipulated by IFRS for each item in the format of balancesheet and profit and loss, …"

2. Order no. 9 of 16 July 2010 - "on the application of InternationalFinancial Reporting Standards by credit institutions,.......", applicable since July 30,2010, stipulates in Article 1, paragraph (1) that "as of January 1, 2012, creditinstitutions shall keep records in accordance with the treatment under InternationalFinancial Reporting Standards adopted according to the procedure stipulated inArt. 6, paragraph 2 of Regulation (EC) no. 1.606/2002 of the European Parliament


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and the Council of 19 July 2002 on the application of international accountingstandards, further on referred to as IFRS."

Credit institutions in Romania were advised, since the end of July 2010,about the applicability of IFRSs, with express mention in Article 1, paragraph (2)that accounting organization and lead shall "follow the Accounting Law no.82/1991, republished, of IFRS, of the regulations issued by the National Bank ofRomania for the implementation of this Order, as well as other applicable legalprovisions."

One can clearly observe Romanian accounting normalizer’s care to makeavailable to credit institutions in our country, accounting procedural rules, both inaccordance with International Financial Reporting Standards (IFRS) and for theirbetter understanding, comparability and applicability.

3. Order No. 27/16.12.2010 - for approval of Accounting Regulations inaccordance with International Financial Reporting Standards applicable to creditinstitutions, published in the Official Gazette, Part I - nr. 890 of 30 December 2010

This Order approves the Regulations in accordance with InternationalFinancial Reporting Standards applicable to credit institutions in our country, as ofJanuary 1, 2012. To ensure a high degree of transparency and comparability offinancial statements, the regulations in Article 1, paragraph. (1) of Order no.27/16.12.2010 apply with:

• Accounting Law no. 82/1991, republished;• International Financial Reporting Standards;• other legislation applicable to credit institutions.NBR Order no. 27/16.12.2010 includes two Annexes, namely:• Appendix 1 - Settlement of 16/12/2010 entitled " Accounting

Regulation in accordance with International Financial Reporting Standardsapplicable to credit institutions"

• Appendix 2 - Annex since 16/12/2010 on consistencies betweenaccounts in the chart of accounts prescribed by regulations in accordance withInternational Financial Reporting Standards applicable to credit institutions andappropriate accounts under the regulations in accordance with EuropeanDirectives"

Legislative stages in accordance with IFRS accounting treatment, began toOMF no. 907/2005- approving categories of entities applying accounting rules inaccordance with International Financial Reporting Standards, accountingregulations that comply with European directives, as amended, continued withNBR Order no. 13/2008, NBR Order no. 15/2009, NBR Order no. 9/2010 and endswith NBR Order no. 27/16.12.2010 - for approval of Accounting Regulations inaccordance with International Financial Reporting Standards applicable to creditinstitutions.


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II. The Impact of legislative changes in accordance with IFRS on theaccounting of the Romanian credit institutions

The main changes brought by Order NBR no. 27/16.12.2010 - AccountingRegulations for approval in accordance with International Financial ReportingStandards applicable to credit institutions, refers specifically to the General Plan ofaccounts used by credit institutions. Accounts under the Plan accounts are rankedaccording to asset liquidity, liability for debt and equity nature in conjunction withthe rules underlying the financial statements in accordance with InternationalFinancial Reporting Standards.

In the Annex to the NBR Order no. 27/16.12.2010 - on consistenciesbetween accounts in the chart of accounts prescribed by regulations in accordancewith International Financial Reporting Standards applicable to credit institutionsand appropriate accounts under the regulations in accordance with Europeandirectives, there are significant changes made in the Chart of Accounts.

For a more coherent and representative highlight, we synthesized thesechanges in the following manner:

1. Accounts removed, from the Chart of accounts applicable toRomanian credit institutions, by the new IFRS accounting regulations:

• 1423 - Financial loans received from credit institutions;• 1522 - Term granted loans;• 1512 - Term repo;• 1521 - Overnight granted loans;• 1511 - Overnight repo;• 17812 - Outstanding interests;• 1782 - Doubtful debts on credit cooperative operations in the network;• 17822 - Doubtful interests;• 1812 - Outstanding interests;• 1822 - Doubtful interests;• 20214 - Uses of permanent appropriations;• 20215 - Exploitation global credit;• 20216 - Loans for stock finance;• 20217 - Loans secured by financial securities;• 20218 - Loans to importers;• 252 - Factoring accounts;• 241 - Repos, developed on 2nd degree synthetic division;• 243 - Granted loans, developed on 2nd degree synthetic division;• 252 - Factoring accounts, , developed on 2nd degree synthetic division;• 255 - Available from the European Community's financial contribution to

the National Fund, developed on 2nd degree synthetic division;• 256 - Available from the European Community's financial contribution to

the National Fund, developed on 2nd degree synthetic division;• 258 - Available in European Community financial contribution, to the

National Fund for programs in 2000, developed on 2nd degree synthetic division;• 367 - Other stocks and the like;


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• 368 - Other different assets;• 373 - Difference accounts, developed on 2nd degree synthetic division;• 374 - Expenses assigned, developed on 2nd degree synthetic division;• 4011 - Participatory loans;• 4019 - Other term subordinated loans;• 415 - Lent securities;• 417 - Attached claims;• 418 - Payments to be made for parties in companies;• 433 - Advance payments for intangible assets;• 434 - Advance payments for tangible assets;• 473 - Unrented property from cancelled leasing;• 474 - Simple location assets;• 476 - Depreciation;• 515 - Reserve for own shares;• 518 - Conversion reserve;2. Newly introduced accounting accounts. Accounting regulations

harmonized with IFRS:• 1314 - Redeemable after notification deposits with credit institutions;• 1324 - Redeemable after notification deposits with credit institutions;• 1511 - Repos on overnight;• 1512 - Term repo operations;• 1513 - Overnight lent securities;• 1514 - Lent term securities;• 1521 - Overnight repo operations;• 1522 - Term repo operations;• 1523 - Overnight borrowed securities;• 1524 - Time borrowed securities;• 17314 - Redeemable central deposits after notification;• 17,324 - Redeemable deposits of affiliated credit unions after

notification;• 20113 - Lumps;• 209 - Other loans to customers;• 241 - Lent repo operations and securities, developed on 2nd degree

synthetic division;• 243 - Borrowed reverse repo operations and securities, developed on 2nd

degree synthetic division;• 305 - Equity instruments measured at cost;• 311 - Forward financial derivative instruments => 311 - derivative

instruments held for trading, developed synthetic degree;• 312 - Call option financial derivative instruments => 312 - derivative

instruments, developed on 2nd degree synthetic division;• 313 - Put option financial derivative instruments => 313 - derivative

instruments covering treasury flow, developed on 2nd degree synthetic division;


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• 314 - Financial derivative instruments cover the fair value of a portfolioagainst interest rate risk;

• 315 - Financial derivative instruments of cash flow coverage of aportfolio against interest rate risk;

• 316 - Changes in fair value af. hedged items under a fair value hedge aportfolio against interest rate risk;

• 4425 - Real estate investment;• 503 - Own shares;• 504 - Adjustments to social capital / equipment capital;• 5521 - Provisions for employees as short-term compensated absences;• 5522 - Provisions for employee participation in profit sharing and

payable bonuses;• 5523 - Provisions for pensions and similar obligations;• 5525 - Provisions for other post-employment benefits;• 5526 - Provisions for other long-term employee benefits;• 5527 - Provisions for employee benefits at the end of the contract of

employment;• 5529 - Provisions for other employee benefits.3. Accounts whose names were changed:All accounts of "outstanding claims" in the old rules, in the new

regulations are renamed "outstanding undepreciated receivables" and the"questionable" are found as "depreciated".

• 181, 281 381, 481 - Overdue claims => 181, 281, 381, 481 - outstandingundepreciated receivables, developed on 2nd degree synthetic division;

• 182, 282, 382, 482 - doubtful claims => 1782, 282, 382, 482 -depreciated claims, developed on 2nd degree synthetic division;

• 203 - Loans for export => 203 - Consumer loans and installment sales;• 204 - Loans for equipment => 204 - Loans to finance foreign trade

operations;• 205 - Loans for real estate => 205 - Loans to finance inventories and

equipment;• 206 - Other loans to customers => 206 - Loans for investment properties;• 301 - Repo securities in possession or loans repurchased with specific

delivery, developed on 2nd degree synthetic division => 301 - assets and financialliabilities held for trading, developed on 2nd degree synthetic division;

• 302 - Transaction securities => 302 - assets and financial liabilitiesdesignated as being appreciated at the right value through profit or loss, developedon 2nd degree synthetic division;

• 303 - Placement securities=> 303 - Financial assets available for sale,developed on 2nd degree synthetic division;

• 304 - Investment Securities => 304 - Investments held to maturity,developed on 2nd degree synthetic division;

• 321 - Interbank market securities => 321 - certificates of deposit,developed on 2nd degree synthetic division;


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• 322 - Negotiable securities => 322 - savings notepads and passbooks,developed on 2nd degree synthetic division;

• 351 - Related personnel and accounts => 351 - Employee benefits,developed on 2nd degree synthetic division;

• 361 - Values of gold, precious metals and gems => 361 - Assets held forsale, developed on 2nd degree synthetic division;

• 362 - Materials => 362 - Materials and other supplies, developed on 2nddegree synthetic division;

• 363 - Materials of small inventory => 363 - Fixed assets held for sale;• 379 - Other accruals and prepayments => 379 - Government subsidies

and other accrual accounting, developed on 2nd degree synthetic division;• 411 - Parties in related companies => 411 - Securities carried at cost,

developed on 2nd degree synthetic division;• 412 - Shares => 412 - Securities appreciated at fair value through profit

or loss, developed on 2nd degree synthetic division;• 413 - Securities of the portfolio activity => 413 - Securities available for

sale, developed on 2nd degree synthetic division;• 471 - Leasing and related operations=> 471 - Receivables from financial

leasing, developed on 2nd degree synthetic division;• 472 - Leasing operations related to current immobilizations => 472 -

Liabilities from financial leasing operations;• 551 - Provisions for risks of implementation of commitments by

signature => 551 - Provisions for loan commitments, financial guarantees and othercommitments data;

• 553 - Provisions for country risks => 553 - Provision for litigations;4. Synthetic accounts of the 2nd degree of "attached claims" and

"attached debts" in the chart of accounts approved by NBR Order no.13/2008, have been developed in synthetic accounts of third degree, in view ofnew regulations harmonized with International Financial ReportingStandards, as follows:

• 1171 - Attached claims: 11711 - Attached claims 11712- Amounts to bewritten off;

• 1172 - Attached debts: 11721 - Attached debts and 11722- Amounts to bewritten off;

• 1317 - Attached claims: 13171 - Attached claims and 13172 - Amounts tobe written off;

• 1327 - Attached debts: 13271 - Attached debts and 13272 - Amounts tobe written off;

• 1417 - Attached claims: 14171 - Attached claims and 14172 - Amounts tobe written off;


• 1517 - Attached claims: 15171 - Attached debts and 15172- Amounts tobe written off;


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• 1617 - Attached claims: 16171 - Attached claims and 16172- Amounts tobe written off;













• 2517 - Attached claims: 25171 - Attached claims 25172- Amounts to bewritten off;









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In this paper the following abbreviations were used:"NBR" - National Bank of Romania"IFRS" - International Financial Reporting Standards"OMF" - Order of the Minister of Finance"GEO" - Government Emergency Ordinance

Bibliography:Doroş, A., 2012, Accounting for Credit Institutions in accordance with

IFRS, University Publishing House, Bucharest;*** Accounting Law no. 82/1991, republished;*** Law no. 312/2004 on the Status of the National Bank of Romania;*** Emergency Ordinance no. 99/2006 on credit institutions and capital

adequacy, approved with amendments by Law no. 227/2007, as amended andsupplemented;

*** The Minister of Public Finance no. 907/2005 approving the categoriesof entities applying accounting rules in accordance with International FinancialReporting Standards, accounting regulations that comply with European directives,as amended;

*** NBR Order no. 13/2008 on regulations harmonized with Europeandirectives.

*** NBR Order no. 15 of 22 dec. 2009 – on drawing up of creditinstitutions, for information, the individual annual financial statements that complywith International Financial Reporting Standards

*** NBR Order no. 9/2010 on the application of International FinancialReporting Standards by credit institutions, as the accounting basis and for thepreparation of individual annual financial statements since the fiscal year 2012

*** National Bank Order no. 27/16.12.2010 - Accounting Regulations forapproval in accordance with International Financial Reporting Standards applicableto credit institutions.


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THE MANAGEMENT OF COMMERCIAL COMPANIES

Narcisa- Mihaela Stoicu“Vasile Goldiş” Western University of Arad, Faculty of Law

AbstractThe management of commercial companies differs according to the type of the company.Typically, the manager is an individual, but it might also be a legal person, with theobligation to appoint a permanent individual representative. The manager’s capacity, hishonorability, citizenship, associate status and limitation of plurality of offices are factorsthat must be considered in order not to violate the laws regarding the incapacities andlimitations of this position.Keywords: management, companies, pluralism, accountability

The management of companies is done by specially appointed persons,through acts of execution.

The management of commercial companies is conducted differently, thus:in unlimited companies, the management is provided by one or several managers,each having the right to represent the company, unless stipulated otherwise in thearticles of incorporation, (Art. 75 of Law no. 31/1990, published in the OfficialGazette no. 33 of 29 January 1998, provides that the right to represent the companybelongs to each director, unless stipulated otherwise in the articles ofincorporation".) in limited partnerships, the management of the company will beentrusted to one or more commissioned associates; in joint stock companies,management can be made by two alternative systems, a unitary one, in which thecompany is managed by one or more managers, their number being always odd,and a dualistic one, in which the company is managed by a directorate and asupervisory board; in a partnership limited by shares, the company is managed byone or several managers, who can only be commissioned associates; and in alimited liability company, the management is done by one or more managers.

The law distinguishes according to the legal form of company, when thereis a plurality of managers, thus: in a joint stock company and a partnership limitedby shares, the plurality of managers is organized by law, as a collegiate, the boardof trustees, which can delegate management to one or more directors, appointingone of them as a managing director, while for unlimited companies, limitedpartnerships and limited liability companies, this plurality of managers is notorganized by law as a board of trustees, but it is necessary that, by the act ofappointment of directors, the powers conferred to them be shown specifically, aswell as whether they are to exercise these power together or separately. If it isdecided that the managers must work together, the decision must be unanimous,(Art. 76 par. 2 of Law no. 31/1990 provides that, in the case of urgent documents,


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the decision can be made by a single manager, but only if the other managers areeven temporarily unable to take part in the management.) in order for it to beconsistent with the law. When there are the divergences, managers must notify thegeneral assembly. If the managers have established, through the articles ofincorporation, to work separately, each may take their own decisions, within thelimits of the powers they were conferred.

A manager can be an individual, but also a legal person. When a legalperson serves as a manager, it is required to designate a permanent representative,who must be an individual, and who will fulfill its duty and who will be jointlyliable with the legal person for damages caused to the company. When therepresentative has been revoked, the legal person must appoint a replacement forthem.

In order for a person to fill the position of a manager, they must meetcertain requirements, provided by law, as follows: to have full capacity of exercise,because it must conclude legal document; to be known as an example of morality,thus excluding persons who were sentenced for fraudulent management, breach oftrust, forgery, use of forgery, deceit, embezzlement, false witness, giving or takingbribes, for offenses under the Law no. 656/2002 for the prevention and sanctioningof money laundering, for offenses under art. 143-145 of Law no. 85/2006 oninsolvency proceedings (Art. 6 par. 2); in any form of company, the manager canbe associated or unassociated.

The manager status cannot be combined (For some incapacities, see art. 35of Law no. 31/1990, published in the Official Gazette no. 33 of 29 January 1998.)with the employee one during the term in office, having no right to conclude anemployment contract with the company, and if such contract exists, it will besuspended during the term, if the managers were designated from among theemployees of the company.

The manager status may be exercised simultaneously in no more than 5terms of manager, in boards of trustees, and in no more than 5 terms of managerand member of the supervisory board. Exceptions apply to situations where theperson elected to the board of trustees or to the supervisory board owns at least onequarter of the total amount of stocks in the company, or is a member in the board oftrustees or in the supervisory board of a joint stock company that that holds thatquarter.

Managers can be appointed either by the articles of incorporation, or bydecision of the ordinary general assembly, and for the appointment to be regardedas valid, the appointed person must expressly accept the mandate and be insuredfor professional liability.

The manager’s term of office is chosen by the associates, for Unltd., LPsand Ltd. companies, and for JSCs or PLSs, it is established by the articles ofincorporation, for up to four years, while the term of office for the first members ofthe board of trustees cannot exceed 2 years, in accordance with provisions of art.153 ind. 12 of Law no. 31/1990.


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According to art. 14 of Law no. 26/1990 on the Trade Registry, theapplication for registration of a commercial company must include managers andtheir powers, showing, in particular, which of them is empowered to represent thecompany, since they need to submit their signatures to the trade register.

Opposability to third parties of the appointment or dismissal of themanager operates only after recording the operation in the Trade Register, inaccordance with the law, obligation which is incumbent either on the manager, oron the board of trustees.

In LPs, Unltd. and Ltd. companies, the remuneration may be determinedby the associates representing the absolute majority of the social capital, and inJSCs and PLSs, the remuneration of managers is determined by the articles ofincorporation or by decision of the general meeting of shareholders.

Granting of loans or financial advantages during or after delivery, serviceor work operations are conducted between them and the company, direct or indirectguaranteeing, in whole or in part, of the execution, by the managers, of any of theirpersonal obligations to third persons, the acquisition, for consideration or payment,in whole or in part, of a claim regarding a loan or other personal benefit granted bya third party to the managers are not allowed, as the law prohibits debts bymanagers on behalf of the company. Exception is made for operations whosecumulated outstanding value is lower that the equivalent of EUR 5,000 in lei, aswell as operations completed under the conditions of their exercise of regularactivities, if the clauses of the operation are not more favorable to managers thanthose that the company regularly practices with respect to third persons.

The main obligations of the manager of a commercial company, asregulated by law, are to take over and store documents regarding the establishmentof the company, to fulfill the formalities required for establishing the company, tosubmit signatures to the trade register, when appointed as representative of thecompany, to run the company, i.e. to do all the work required for the accomplishingthe objective of the society, to check whether the associates have made thepayments they owed, to keep the records required by laws and to takeresponsibility for their proper keeping, to prepare the annual financial report, aswell as to enforce the law in the distribution of profit and the payment of dividends,to take part in the meetings of all governing bodies of the company, to apply thedecisions of the general assembly of associates, to perform any other tasksspecified in the articles of incorporation, as well and the duties established by law(art. 73).

Apart from responsibilities, the law also provides the rights of managers,recognizing the possibility for them to represent the company in dealings with thirdparties, seeking to achieve the object of its activity, with limitations stipulated inthe articles of incorporation, in decisions of the assemblies of associates or in legalprovisions, as well as the right to perform all work operations involved by themanagement of the company


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As an exception to this rule, in the case of LPs, Unltd. and Ltd. companies,each manager is entitled to represent the company, if the articles of incorporation tonot provide otherwise.

The manager who has the right to represent the company may not transferthis right to another person, unless that possibility has been expressly granted.Otherwise, the company may stake a claim to the benefits resulting from theoperation from the very substitute, while the manager will be jointly liable with thesubstitute for any damage to the company.

The manager of a company may be removed from office throughrevocation, withdrawal, incapacitation or death of the manager.

When discussing the manager’s revocation, we must note that in LPs,Unltd. and Ltd. companies, if the managers were not appointed by the articles ofincorporation,( Art. 77, 90 and 197 par. 3 of Law no. 31/1990, published in theOfficial Gazette no. 33 of 29 January 1998, provide that “Associates who representthe absolute majority of the social capital may choose one or several managersamong themselves, setting their powers, the term of office and their remuneration,unless the articles of incorporation provide otherwise. With the same majority,associates may decide to revoke the managers or to limit their powers, unless themanagers were appointed by the articles of incorporation”, “The provisions of art.75, 76 par. (1), art. 77, 79, 83, 84, 86 and 87 will also apply to limited partnershipsand the provisions of art. 80, 81, 82 and 85, to commissioned associates”, “TheCompany is run by one or more managers, associated or unassociated, appointedby the articles of incorporation or by the general assembly. Managers cannotreceive, without authorization from the assembly of associates, an office as amanager in rival companies or which have the same object of activity, an theycannot make the same kind of trade, or related, on their own or on behalf of anothernatural or legal person, under the sanction of revocation and liability for damages.The provisions of art. 75, 76, 77 par. (1) and 79 shall also apply to limited liabilitycompanies.) associates representing the absolute majority of the social capital maydecide on this matter or on limiting their power, as well as the fact that in JSCs andPLSs, managers are removed by ordinary general assembly of shareholders.

Revocation is ad nutum, intervening at any time and not depending on anybreach of contract by the manager, as the manager status has an intuitu personaecharacter; however, the manager may request, in court, that the company beobliged to pay interest on compensation.

A manager may also be removed from office if they withdraw or resign,and if detriment was caused due to the resignation, the company is entitled tocompensation under the law.

The liability of managers towards the company is engaged under thecommon law conditions of civil liability. Whatever its form, liability is based onthe fault of the manager, who must ensure sound management, that would lead toattaining the object of the company.

The company can hold managers accountable for failure to comply withthe obligations arising from the mandate contract, failure to comply with the


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obligations provided for them by law, such liability being, as the case may be, civilliability in tort or criminal liability.

In case the manager is a legal entity, the permanent individualrepresentative of the manager has the same civil and criminal liability as anindividual manager who acts in his own name.

Failure to comply with obligations concerning the reality of paymentsmade by associates, the reality of dividends paid, the existence of records requiredby law and their correct keeping, the exact fulfillment of general assemblydecisions, the strict fulfillment of duties under the law and the articles ofincorporation render manager accountable before the company.

Harmful actions of other persons for which the managers are indirectlyliable before the company consists of damage caused by directors or employees, incases where the harmful actions were committed as a consequence of themanagers’ failure to fulfill their surveillance obligations. This indirect liability ofmanagers is a conjunct and subsidiary liability, and they are held liable only if thecompany could not recover the damage from the guilty person. Other harmfulactions of other persons for which managers are liable are those committed by theirimmediate predecessors, with which they are jointly responsible if, despite havingknowledge of irregularities committed by the latter, they do not notify external or,as appropriate, internal and financial auditors.

Responsibility for actions or omissions shall not be incumbent onmanagers who have had their opposition recorded, in writing, in the registry ofdecisions by the board of trustees, and who notified, in writing, external, internaland financial auditors, where there are several managers.

Under art. 155 and 155¹ of Law no. 31/1990, action for damages may beraised for reparation of damage caused on the company by the acts of the manager,to which the company is entitled, since harmful actions of managers damagecompany property.

The general assembly may adopt a decision by which the manager is to besued for compensation for the damage caused to the company, decision which mustbe taken under the quorum and majority conditions required for ordinary generalassembly. Under the same conditions, the general assembly shall also designate theperson who will take the matter to court.

The manager’s term of office shall cease ipso jure on the date of thegeneral assembly’s decision on suing the former, which also means that the generalassembly will have to replace him.

Shareholders have the right to introduce themselves an action for damagesagainst the manager, but only if they represent, individually or jointly, at least 5%of share capital and if the general assembly of shareholders does not decide to holdthat manager accountable or does not act upon the proposal of one or moreshareholders to raise action for damages. The action for damages raised by theshareholders in their own name, but on behalf of the company, will mean that thesum of money which the manager is obliged to pay as compensation will betransferred into the property of the company. After the court decision admitting the


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shareholders’ action remains irrevocable, the general assembly may decide toremove the manager from office and replace him.

The civil liability of the manager was classified, in doctrine and inspecialized practice, into three categories: ordinary responsibility before thecompany and associates, exceptional liability before third parties, and aggravatedliability, in the case of company bankruptcy.

Jurisprudence has rejected claims requesting the liability of managershaving, as factual grounds, the failure to undertake efforts for returning assets in tothe debtor's property; the failure to record the debts towards the budget; poormanagement; abusive continuation of poor exploitation; failure to monitor theirown claim collection; holding an office as a manager for another legal entity;failure to submit reports to the public finance administration; failure to pay budgetdebts.

Courts have rejected claims in cases where insolvency has been shown tohave other causes, such as the lack of chance to run a profitable activity; thetemporary interruption of production activities for reasons not imputable to themanger; the failure to recover one’s own claims; the failure to pay current debts;the failure to receive the value for exported goods; lower market demand and lowerprices.

Conclusion. The necessity of a different type of management was impliedby the diversity of types of the commercial companies. All the aspects regardingmanagers and the management of companies can be discovered in the presentRomanian regulation.

The civil liability of the manager is classified in ordinary responsibilitybefore the company and associates, exceptional liability before third parties, andaggravated liability, in the case of company bankruptcy.

BibliographyS.D. Cărpenaru, Romanian Commercial Law, All Publishing House, 1998S. Cărpenaru, Commercial law, Ed. Universul juridic, 2007F. Ciutacu, Commercial law. Collection of cases. Commercial legislation,

Ed. Themis Cart, 2003S. Fildan, V. Ciocan, I. Kocsis, Commercial Law, Cordial Lex Publishing

House, Cluj-Napoca, 2011D. A. P. Florescu, Th. Mrejeru, G. Bălaşa, Companies law, Ed. Lumina

Lex, Bucureşti, 2003.


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STATISTICAL STUDY OF MEDICAL RECOVERY ATTHE REHABILITATION HOSPITAL IN BĂILE-FELIX

*F. Marcu, *L. Lazăr, **I. Timar, ***A.Timar*Faculty of Medicine Oradea, Department of NEUROLOGY AND RECOVERY,*Faculty of Medicine Oradea Department of NEUROLOGY AND RECOVERY,

**“VASILE GOLDIS” Western University Arad***“OCTAVIAN GOGA “ National College

AbstractIn modern society, medical rehabilitation is an area of great interest, which is in constantdevelopment. Reasons for this are easy to understand, if we consider two aspects:increasing incidence of chronic diseases and injuries, and increased numerical elderpopulation. Medicine of rehabilitation is a logical continuation, absolutely necessary to acttherapeutically; because of this fact it is called “the third medicine”, a concept thatemphasizes the close connection with preventive medicine (first medicine), and therapeuticmedicine (second medicine).The ultimate goal of medical rehabilitation is to optimize quality of life by increasingfunctional independence. Medical rehabilitation, which aims to restore individual health, isone of the two complementary aspects of the concept of individual recovery. It alsoincludes social and professional recovery, which aims to reintegrate the individualworkplace, family and society.Keywords: medical rehabilitation; individual health; situation; patient; quality of life.

Introduction

Medical recovery is the development process of a disabled person,concluded with the achievement of the entire physical, psychological, social,professional, occupational and educational potential, compatible with thepsychological or anatomic infirmities and with the environmental limitations.

The process of medical recovery is very important and it considerablyinfluences the personal development of the patient. The more the recovery reachesits aim, that is to restore the patient within the family, profession, society and toincrease the quality of his or her life, the more he or she will develop on a personallevel. By offering moral support to the patient, he or she will manage to participateactively, optimistic and confident in the recovery program. Physical developmenttriggers psychological development. In situations in which results are visible, inwhich a functional remnant or a lost function may be recovered, or where it ispossible to regain a maximum level of independence, satisfaction isincommensurable. Knowing that he or she can be useful once again to society, tohis or her family, to his or her profession helps the patient build self confidence,


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confidence in his or her personal strength. It is highly important that the patient beconscious from the very beginning that the success of the recovery programentirely depends on the attitude expressed towards the program and the more thepatient will respect in detail the indications of the program, the more the programwill reach its objective.

Medical recovery may be considered as personal development. Thedevelopment of the recovery potential of the patient facilitates the development ofhis or her relationship with himself or herself and with those around. The patientmay develop psychologically, physically, socially and even educationally.

The medical recovery helps the patients by offering them the possibility ofregaining a maximum level of independence. For some patients, the recovery ofcertain lost functions, of a functional remnant means a new beginning. For somepatients, even the slightest degree of recovery of a moving deficit may generatehigh levels of satisfaction; the faster return to the workplace constitutes anotherimportant objective, rejoicing over the fact that they can be useful again both fromthe professional and the social points of view.

By means of the medical recovery programs, some patients "may startliving again". In cases in which results are visible, the level of confidence of thepatients is higher. The medical recovery influences almost any type of pathology;there are multiple fields in which medical recovery is used.

The medical recovery implies personalized programs of physical activitycomplemented by specialized medical evaluation and psychological assessment,which allow the patient to regain his or her confidence and to pursue life andfurther projects.

Material and methodThe methods used in medical recovery may be organized according to the

following therapeutic ways:1. Physiotherapy, therapy using physical factors, which includes:- Balneo-Climatotherapy, a complex treatment methodology using natural

cure factors in medical practice.- Hydro-Thermo-Therapy is a therapeutic procedure using warm water as

agent- Electrotherapy implies the use of electric power for tissue stimulation, in

view of healing different affections or recovering certain lost functions of the body.- Kinetotherapy defines therapy by movement achieved through medical

recovery programs aiming to recover certain diminished functions or the functionallevel in different types of ailment.

- Massotherapy represents the use of therapeutic massage2. The main purpose of the occupational therapy (ergotherapy) is to help

people regain their independence in most areas of life.3. Orthotics and Prosthetics4. Logopedia, ramură a pedagogiei speciale care studiază posibilităţile de

înlăturare a deficienţelor de limbaj.


164

5. The cognitive or psycho-behavioural therapy is based on the principlethat our dispositions or our emotional reactions are not directly determined by theevents in our life, but rather by the way in which we analyse them.

6. The purpose of the vocational or educational therapy is to help those insearch of professional guidance make the first step in projecting a study and careerplan

The purpose of this study is to highlight the efficiency of the recoverytreatment performed in the Rehabilitation Hospital in Băile-Felix, meaning the wayin which the parts of the medical recovery treatment offered by the above-mentioned hospital influence the health of the hospital patients.

Outcomes and conclusionsThis study was carried out during 2009-2011 in patients treated in the

Ambulatory of the Rehabilitation Hospital in Băile-FelixAs it can be seen in chart 1, in 2009, when the ambulatory service of the

hospital opened, 5086 patients were treated; of these, only 150 underwent twotreatment cures and the other 4936 underwent a single treatment cure. This meansthat in 2009, only 2.94% of the total number of patients treated in the ambulatoryunderwent two treatment recovery cures.

Column1

pacienti cu 1 cura detratament=4936

pacienti cu 2 cure detratament=15097,0

6%

2,

Chart 1

In 2010, see chart 2, a total of 5442 patients were treated within theambulatory service; of these, a number of 441 patients, accounting for 8.1%underwent two recovery treatment cures. The rest of 5001 patients, accounting for91.9% underwent a single treatment cure.

Study year 2009


165

Column1

pacienti cu 1 cura detratament=5001

pacienti cu 2 cure detratament=441

91,9%

8,

Anulde

Chart 2

In 2011, as shown in chart 3, out of the total of 5855 patients treated in theambulatory, 611 patients, accounting for 10.4% underwent two recovery treatmentcures. The rest of 5244 patients underwent a single medical recovery treatmentcure throughout 2011.

Column1

pacienti cu 1 cura detratament= 5244

pacienti cu 2 cure detratament=611

89,6%

10,4 % Anul destudiu2011

Chart 3

As it can be seen in chart 4, the total number of patients treated in theambulatory increased from 5086 in 2009, to 5442 in 2010; and in 2011, the totalnumber of patients treated in the ambulatory reached 5855. The efficiency of the

Study year 2010

Study year 2011


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recovery treatment of this hospital was highlighted both by the increasing numberof patients treated in the ambulatory service of the Rehabilitation Hospital of Băile-Felix and by the progressive rate of patients who underwent two treatment curesthroughout one year.

4500

5000

5500

6000

2009 2010 2011

Total pacienti tratati inambulator

Chart 4

BibliographyIoana Mircea, Compendiu de recuperare medicală, Editura Universităţii

Oradea, 2004J.A. DeLisa, Rehabilitation Medicine: Principles and practice, J.B.

Lippincott-Raven Publisher, Philadelphia, 1998F. Kottke, J. Lehman, Krusen’s Handbook of physical medicine and

rehabilitation. W.B. Saunders Co., Philadelphia, 1990M. Sinaki, Basic clinical rehabilitation medicine, B.C. Deker Inc.,

Toronto-Philadelphia, 1997http://www.sfatulmedicului.ro/Terapii-complementare/terapia-

ocupationalahttp://www.psychologies.ro /Kinetoterapia-si-efectele-sale-beneficehttp://www.topsanatate.ro/ electroterapia-puterea-vindecatoare-a-

curentului-electric

http://www.sfatulmedicului.ro/Terapii-complementare/terapia-

http://www.psychologies.ro

http://www.topsanatate.ro/


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LAW CAPACITY WASTEWATER TREATMENTPLANTS

*Nicoleta Luminiţa Jurj, **Georgeta Burtică, ***Elena Săvescu, ****FlorinDumescu, ****Ladislau Klein

* “Politehnica” University Timisoara, Romania, Faculty for Industrial Chemistry andEnvironmental Engineering, Timisoara, 2 Victoriei Sq., tel 0256/403000, fax 0256/403021,

e-mail: [email protected];** “Politehnica” University Timisoara, Romania, Faculty for Industrial Chemistry and

Environmental Engineering, Timisoara, 2 Victoriei Sq., tel 0256/403000, fax 0256/403021,e-mail: [email protected];

*** SC AQUATIM SA,Timisoara, Romania, 11/A Gh.Lazăr Str., f ax: 0256294753, e-mail: [email protected];

**** “Vasile Goldis” Western University Arad, Romania, Faculty for Economics, 15 MihaiEminescu Str., phone: 0257.213.066, fax: 0257.243.777, e-mail: [email protected],

AbstractThe question of small water users having no centralized wastewater collecting, cleaning anddischarging system is of maximal actuality in Romania. Therefor economically efficientsolutions are looked for. For disperse mountain villages, farms, or detached householdstraditional systems, with high maintenance expences because of long networks for smallflows, can be economicaly not advantageos. Very small capacity treatement plants are asolution for such cases. The aim of the experimental part of the present work is to simulatesituations, damages which can occur during running of a low capacity wastewatertreatement plant. Low capacity hosehold wastewater treatement plants are economicalternatives which remove the disadvantages of emptyable basins namely the high costs, thefrequvent empying operations, with unpleasant smelling, continous danger of groundwaterinfection, need for massive and expensive concrete buildings. The proposed plants arebased on a classical treatement technology and need emptying of the exess mud only onceor twice a year. In opposition with the case of classical plants, the mixture extracted fromthe proposed low cost systems does not smell and has a relatively low content of solidmatter.Keywords: plant, wastewater treatment, consumer, influent, emissary

1. IntroductionThe question of the small water users having not any centralized collecting,

transport, cleaning and discharging system is of maximal actuality in Romania.Therefor rapid, technically and economically efficient solutions are looked for.Such way a suitable rural infrastructure is intended to be developed, according tothe today comfort and hygiene standards (Dima M., 1998).

The public sewage system with a centralized treatment plant is the mostadvantageous solution for small and medium sized settlements with a high density






168

of buildings and inhabitants connected to the system. But for settlements, such asdisperse mountain villages, farms, or detached households such a system can beeconomicaly not advantageos, with high maintenance expences because of the longnetworks for small flows (Ianculescu O., Racoviteanu R., 2001).

Collecting wastewater in emptiable basins is nowadays accepted in moreand more countries at least inside the European Union. These basins need a verylarge constructed volume (minimum 3m3 for each equivalent inhabitant accordingto the Austrian law and at least 5m3 for each equivalent inhabitant according to theGerman law). This also is an unhandy solution with massiv and expensivebuildings, involving erection restrictions, polluting danger for the environment, forsoil and for underground water if leakages appear. Also it can be disagreeable topeople due to the large size of required devices (Negulescu C., 2004).

Small and very small capacity treatement plants are a solution that is usedin Europe beginning with the last years. More treatement technologies used invarious types of low and very low capacity treatement plants are now outlined.Legislation existing in some European countries comprises financing programs orjust confering subventions to promote these technologies.

One of the advantages of the small and very small capacity treatementplants is that they are very simple, easy to be achieved, and that they are notdifficult to be started up. The main disadvantage of such plants is the highacquisition price and the need of periodical surway that must be carried out byqualified personell (Ianculescu D.O., 2002).

Treatment plants are classified according to more criteria, namely the inletflow, the number of equivalent inhabitants, the ammount of organic substances(BOD) in the plant inlet. The equivalent inhabitant concept was introduced by the91/271/EEC Directive in 1991 as a reply to the need for a universal comparativemeasure of plant capacity (so one unit of equivalent population is 60 mg BOD/dayaccording to the 91271/EEC directive).

A clasification of wastewater treatement plants according to their maximaldaily flow is comprised in table 1.

Table 1.Classification of treatement plants according to the maximal daily flow

Nr. Type of the plantDaily maximal flow rate

of wastewater inletEquivalentinhabitants

1 Very small plants Q < 5 l/s < 2.5002 Small plants Q = 5 l/s....50 l/s 2.500 ... 25.0003 Medium sized plants Q = 50 l/s . . .250 l/s 30.000 ... 125.0004 Large sized plants Q > 250 l/s > 125.000

Source: Self processing based on directive 91/271/EEC


169

2. Specific problems of the small capacity treatment plantsTreating the household wastewater resulting in small colectivities envolve

a number of specific problems, so in erecting as in achieving and in leading them.This is due to any or more of the following:

- the low flows passing through;- the high variation in flows and in the maximalflow/minimal flow ratio;- intermittent as regards running;- they are in work without a continous supervision, the qualified personel

carries ounly a periodical inspection of the plants;- the treated water is discharged in a low capacity receiver or in a receiver

without flow;- the receiver is of a very high quality.

3. Specific needs towards the small capacity treatment plantsThe needs concerning the efficiency of the low capacity wastewater

treatement plants are in accordance with the the domain of their use, namely:- minimal costs in investments and use;- to have robust, fiable and simple machineries, equipment, and

installations;- to have a complex automatisation and data transmiting system;- a low energy use;- the materials used in construction and erection must be resistant and

corrosionless;- the equipment must be compact and to accupy the posible smallest area;- the flow and pollutant charge shocks must be avoided and the necessary

means must be provided for a continous running with a steady flow (basin formaking flow uniform).

Situations in which micro-plants are suitable to be used are as follows:- localities, quarters, or streets where no sewage network exists (for

instance villages or periferial quarters, even rezidential ones);- lonely buildings in places where no waste water nerwork exists (parkings,

motels, hotels, inns, sanatoriums, military buildings, monasteries a.s.o.);- places where situation is propitious for achieving and using such micro-

plants even if a sewage network already exists (for instance in case of autonomehoseholds, or of micro-zonal water supply and sewage systems);

- places where a quick and qualitative development of rural infrastructureis desired (Ianculescu D.O., Molnar A., 2001).

Taking into account the above conditions, micro-plants can berecommended for beneficiaries as follows:

-those who want to improve their confort conditions and want to live in aclean environment;

-those who want to achieve savings;-those who are openminded for that what is new, whant to experience, have

a techical sense and are not too easy-going;


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-those who have option for a not centralized managing of energeticresources, of water and of sewage;

-those who use water in a rational way, by high performing, smallammount of water consuming washing devices (both for vessel and linen);

-those who use ecologic, biologically degradable detergents;-peasants’ hoseholds with agrotouristic activities, with a need for a higher

confort level;-those who have no water resourses for agriculture.

4. Research methodsThe aim of the experimental part of the work is to simulate different

damage situations, which can occur during running of a low capacity wastewatertreatement plant, namely electrical sut down, damages of the pomp serving in wateroxygenation a.s.o.

Experiments were carried out on an ORM 5 type small calacity treatementplant that was erected for a 5 l/s flow, and was placed inside the treatment plant ofTimisoara municipality (www.agir.ro). The profile of the plant is prezented in fig.1.

13

15

5

1 2 3

910

11

12

4

8

6

714

Fig. 1. The profile of the ORM 5 type plantSource: Self processing

The components of the ORM type plant are listed below:1. Reception tank and first step settler 9. Mud storage compatiment2. Activating basin - compartment 1 10. Aeration plate3. Activating basin - compartment 2 11. Second settler feeding pipe4. Secondary settler 12. Shield5. Inlet of the influent 13. Feeding and recicling pump6. Aer supply 14. Driving back pipe7. Gaslift pipe 15. Aeration basin feeding

connection8. Efluent outlet

www.agir.ro


171

The technologic flowsheet of the ORM5 type treatment plant is presentedin fig. 2. The ORM treatment plant consists of the following compartments:- compartment 1: storing, bulk separation, equalizing and flow distribution;- compartment 2 and 3: biological oxydation and nitrification;- compartment 4: final settlement and mud recycling.

The compact ORM treatment plants are designed and built for wastewaterresulting in communities with 5 – 500 inhabitants, the rainwater being totallyexcuded.

One of the pilot experiments aimed to determine the dissolved oxygenconcentration in the aeration basin after the aeration was shut down. Samples weretaken with a frequency of one per ten minutes with a Sigma pump. The analyseswere carried out with Merck kits. The results can be seen in table 2 and arerepresented in graph fig. 1.

Fig. 2. Technological diagram of the ORM 5 treatment plant

Tab. 2.Dissolved oxygen concentration at different deepth in the aeration settler versus

timeNr. Time (s) Dissolved oxygen concentration

(mg/l)1 5 3.02 10 3.03 20 2.84 30 3.25 40 3.3

Source: self processing


172

The second experiment carried out on the pilot installation aimed toexamine the changes in dissolved oxygen concentration after shutting down theaeration, at different depths in the settler, so in water as in mud. Samples weretaken simultaneously, ten minutes after the aeration was stopped; a Sigma typepump was used. Sampling was carried out by use of a device with six flexible pipesdiposed at different depthes, namely at 20cm, 40cm, 60cm, and 100cm above thebottom. The automatique sampling took place in six different vessels. Aftersampling, the following indicatores were determined: dissolved oxygenconcentration, suspended matter, and the age of the mud. The results arerepresented in table 2 and in figures 4, 5, 6, and 7.

Fig. 3. Variation of oxygen concentration versus timeSource: self processing

Tab. 3.Concentration of settable matter, of suspended matter and of dissolved oxygen in

the aerator at different depthes

Depthcm

Settlablesubstances(after fiveminutes)

mg/l

Settlablesubstances(after 30seconds)

mg/l

O2concent.

mg/l

Suspended matter

mg/l

Volatilityindex of the

mud

0 4,00 5,0 3,2 286 17,420 4,50 5,0 3,6 295 16,940 0,20 1,3 4,3 78 16,660 0,10 0,7 3,2 52 13,480 0,05 0,2 2,6 48 4,1

100 0,20 0,2 5,1 42 4,7Source: self processing


173

Fig. 4. Variation of the settlable matter concentration after 5 and 30 minutes atdifferent depthes in the aeration tank


O2

0123456

0 20 40 60 80 100

O2

Fig. 5. Variation of the concentration of dissolved oxygen at different depthes inthe aeration tank


MS

0

100

200

300

400

0 20 40 60 80 100

MS

Fig. 6. Variation of the concentration of suspended matter at different depthes inthe aeration tank


suspensii decantabile

0

2

4

6

0 20 40 60 80 100

dec 5

dec 30


174

IVN

0

5

10

15

20

0 20 40 60 80 100

IVN

Fig. 7. The age of mud at different depths in the aeration tankSource: self processing

5. Results and discutionFigure 2 represents the variation of settlable substance concentration in the

aeration tank at different depthes. Analyses of settlable mattter both for 5 secondsand for 30 seconds were carried out for making results more conclusive. The resultsleds to the conclusion that settlable matters are present in a constant concentrationin the settler in the 0 – 20 cm depth range, a significant decrease follows inside the20 – 40 cm depth, a steady decrease appears between 40 – 100 cm at a 30 secondlong period, and a decrease of concentration close to 0 at the 40 – 100 cm depthinterval, the sample being collected inside a five seconds long period.

In figure 3 a small increase in oxigen concentration can be seen in the 0 –40 cm deep layer, followed by a relatively steady decrease in the layers that follow.The presence of a higher ammount of disolved oxigen in the 20 – 40 cm layercompared to that situated at 0 – 20 cm can lead to the conclusion that there is atendency of oxigen to access outside the system, followed by a relatively constantdecrease of concentration at 40 cm.

Concentrations of suspended matter are presented in fig. 4 and it can beseen that in the 0 – 20 cm domain the concentration remains relatively constant.Afterwards an important decrease follows in the 20 – 40 cm and in the domain thatfollows the decrease is relatively less intensive, a relatively onstant value, round 48mg/l, being registerd.

Fig. 5 presents variations of the volumetric index versus the changes insampling heigth in the aeration tank. It appears that in the 0 – 40 cm depth a verysmall decrease in mud index appears. It is followed by an important decrease in the40 – 80 cm interval and, afterwards, a fluctuation with a steady increas ofconcentration was registered in the intervals that follow.

The experiments were carried out for better and profund knowing thephysical and biological processes that take place in the mini treatment plant forassuring the best conditions for its optimal run. It can be concluded that the mostsignificant processes in mud settling take place in the 20 – 60 cm depth range.


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6. Conclusions and recomandationsHosehold wastewater treatement plants with low capacity are a modern

economic alternative that definitively remove all the disadvantages of emptyablebasins namely the need for frequvent empying operations, unpleasant smelling,continous danger of groundwater infection, massive and expensive concretebuidings, restrictions in erection. These plants are based on a well known classicaltreatement technology and needs the emptying of the exess mud only once or max.twice a year. In opposition with the situation existing in the case of classical fossaeor Imhoff type reservoirs, the mixture extracted from the systems presented abovedoes not smell and has a relatively low content of solid matter.

Biomass aeration is carried out with compressed air produced by a blowerwith membrane that is characterized by small dimensions and low energy use andalso by a low noise level that is not perceptible even during the night. Oxygensolving is assured by porous diffusers that were studied and homologated speciallyfor this size of the tank. Recirculating of biologic mud is achieved by a special air-lift which lifts the mud. The air-lift, patented and achieved by ORM not only liftsthe water – mud mixture, but also contributes to its oxygen content by 3-4 mg/l,such way it being alreay reactivated when returned to the aeration tank.

The compressed air for the air-lift is delivered by the blower which is usedfor oxidation.

The water resulting in the process observes the European norms and thenational norm NTPA 001, such way being possible discharge into any naturalemissary - receiver such as rivers, channels, lakes, sea a.s.o.

LiteratureDima M., 1998, Epurarea apelor uzate urbane, Editura Junimea, Iaşi;Ianculescu D. O., Molnar A., David C., 2002, Staţii de epurare de

capacitate mică, Ed. Matrix Rom, Bucureşti;Ianculescu O., Racoviţeanu R., Ionescu Gh., 2004, Epurarea apelor uzate,

Ed. Agrotehnica, Bucureşti;Negulescu C., 2004, Exploatarea staţiilor de epurare a apelor uzate

orăşeneşti, Ed. AgroTehnica, Bucureşti;Nistreanu V., 2000, Procese unitare de tratare a apelor, Editura AGIR,

Bucureşti;Rojanschi V., 1996, Cartea operatorului din staţiile de tratare a apelor,

Editura Tehnică, Bucureşti;Rojanschi V., 1997, Cartea operatorului din staţiile de tratare a apelor,

Editura Tehnică, Bucureşti;*** Directive of the European Council 91/271/CEE Concerning the

Treatment of Urban Wastewater;*** The Romanian Law of Water 107/1996, published in the Romanian

Official Monitor nr. 244/Oct. 08, 1996;*** The Decision of the Romanian Gouvernment 188/2002, supplemented

by the Decision 352/205, containing the Normative concerning the limits for the


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pollutant content of the wastewater discharged to water resources NTPA 001 andthe Normative concerning the limits for the pollutant content of the wastewaterdischarged to the wastewater networks of localities NTPA 002;

www.edwards.rowww.agir.ro

www.agir.ro

www.edwards.ro


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PROFESSIONAL CATEGORIES

Sorin Fildan“Vasile Goldiş” Western University of Arad, Faculty of Law

AbstractThe transition process which Romanian commercial law underwent has affected both theterm of ‘trader’, by redefining it, and the classification of professional categories.Currently, the term of ‘professional’ is conveyed by a descriptive listing of the categories ofpersons it comprises: traders, entrepreneurs, business operators, as well as any other personauthorized to carry out economic or professional activities.Keywords: trader, professional, entrepreneur, economic activities

Roman commercial law is currently undergoing a transition from anobjective system to a subjective one, since the 1887 Romanian commercial code, inforce until 1 October 2011, was based on the objective system, but new Civil Codehas produced a transition from this system to the subjective system. (By the newCivil Code, the legislator opted to merge common-law provisions applicable to civil legalrelations with those applicable to commercial relations, by establishing special provisionsapplicable to professionals.) Also, the Civil Code makes a change in the terminologyused in commercial matters, so that the term of trader is replaced by that ofprofessional, (According to art. 3 of the Civil Code, all those who operate a business areconsidered professionals) the term of acts or deeds of trade is replaced with the termof production, trading or service providing activities. (According to art. 8. par. (2) ofLaw no. 71/2011 implementing the new Civil Code, published in the Official Gazette ofRomania, no. 409 of 10 June 2011.)

The trader was defined by the legislator in the 1887 Commercial Code asthe person performing deeds of trade regularly, professionally and at their owneconomic risk, as well as enterprises. The classification made under this definitionreveals two categories of traders: individual traders, who had to conducts deeds oftrade in accordance with the requirements of the law, and enterprises, organizedunder one of the forms prescribed by law. The difference between these twocategories of traders is highlighted by the fact that enterprises acquired trader statussince their registration into the Register of Commerce, but the individual traderacquired this status after having cumulatively met the requirements for conductingdeeds of trade regular and effectively, professionally and at their own risk.

In art. 3 of the new Civil Code, the term of professional is conveyed bydescriptive listing of the categories of persons it comprises: traders, entrepreneurs,business operators, as well as any other persons who are authorized to carry outeconomic or professional activities, as prescribed by law. (As regards the termprofessional, in light of the provisions of the Civil Code, see Gh. Piperea, Commercial Law.


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Enterprise – in the regulation of new Civil Code – , Ed. C.H. Beck, Bucureşti, 2012, p. 32-36.)

The category of individuals independently performing certain activitiesincludes freelancers, individual entrepreneurs and associates within a familybusiness, as well as practitioners of regulated or liberal professions.

The establishment of new requirements to be met by a person in order to beconsidered a professional was necessary, owing do the fact that the provisions ofart. 7 of the 1887 Commercial Code were repealed, and they were the onlyprovisions setting forth requirements that had to be met by an individual in orderedto be considered a trader. The new requirements for a natural person to beconsidered a professional are: performance of activities consisting of producing,managing or selling goods and services in an organized way, as well as conductingsuch activities systematically.

Currently, the focus is on the work of the professional, and not on thelucrative purpose of the work, in contrast to the 1887 Commercial Code, as thiswork may pursue either a lucrative purpose, or a non-lucrative one. As regards thecondition for carrying out the activity in an organized way, clarification must bemade on the forms of organization in which individual professionals may performtheir professional activities. Thus, when the professional performs an economicactivity, E.G.O. no. 44/2008 (Any natural person may perform economic activities onRomanian territory, in all fields, trades, occupations or professions that are not prohibitedby the law.) regulates the conditions under which such individuals can carry outtheir activity, which must be provided in NACE code.

Individuals can carry out economic activities in many forms, asfreelancers, as entrepreneurial owner of an individual business or as a member of afamily business, but all these forms require that a professional office be located inRomania.

According to E.G.O. no. 44/2008, any economic activity, regardless ofhow it is carried out – permanent, casual or temporary – must be registered andauthorized under the established conditions, assistance and representation officesbeing organized by municipalities to provide help with the necessary formalities.

A freelancer is an unincorporated entity, who does not have its ownpatrimony, but is able to carry out economic activities independently andindividually, without having the possibility to hire third parties on the basis of anemployment contract, and being bound to use only their own labor force andprofessional skills.

Because this form does not have its own patrimony, the law gives thefreelancer the right to form a subdivision within its personal property. Thissubdivision is entitled assigned patrimony and includes a set of assets, rights andobligations assigned to the performance of the freelancer’s economic activity.

The conditions under which the natural person, as an entrepreneur, (Theentrepreneur is a person who manages an economic enterprise.) holder of an individualenterprise, performs their activities, are governed by E.G.O. no. 44/2008, fromwhich we can also extract the definition assigned to an economic enterprise, this


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being an economic activity carried out in an organized, continuous and systematicmanner, as a combination of financial resources, labor force and raw materials,carried out at the risk of the entrepreneur.

This form of organization has no legal personality, but the individualenterprise may hire a third party with an individual employment contract.

Like the freelancer, the individual enterprise is also an unincorporatedentity, which means it cannot be the holder of its own patrimony, but only of anassigned patrimony.

The natural person has the possibility, conferred by law, to carry out aneconomic activity as part of a family business, which consists of two or moremembers of a family (According to the provisions of E.G.O. no. 44/2008, the term"family" means husband, wife, their children, relatives and affines up to the 4th degree.).

This form of economic organization is managed by an individualentrepreneur together with their family, through a written agreement ofestablishment submitted in writing, ad validitatem. The agreement of establishmentmust include the name and surname of the members, the representative of theenterprise, the date of preparation, the shares into which net income will be dividedetc. The lack of these items will lead to the absolute nullity of the agreement ofestablishment.

Family businesses are prohibited from hiring third parties on anemployment contract.

Family businesses, along with the above-mentioned forms of organization,have no legal personality, their members having individual professional status, andhold an assigned patrimony, members being bound to state their shares in theenterprise.

The representative designated by the agreement of establishment is theperson who manages the interests of the enterprise, being allowed to act only onthe basis of a special mandate, as a document under private signature, signed by allfamily members.

With regard to the legal status of the assigned patrimony, mention must bemade of the fact that art. 31 of the new Civil Code expressly provides thepossibility of creating divisions within a person’s patrimony, and the patrimonialmass assigned to the practice of an authorized profession is nothing but such asubdivision of patrimony permitted by law. Prior to the entry into force of the newCivil Code, the existence of this assigned patrimony for individual professionalswas recognized unanimously by specialists, but the difference between the old andthe new regulations is made by the function of this patrimonial mass, that ofguaranteeing the performance of obligations assumed by the professional inconnection with his professional activity.

The individual professional’s assigned patrimony, under the old regulation,was the main pledge of the professional’s creditors, and all other assets in theindividual professional’s patrimony were a subsidiary pledge, which gave creditorsthe right to pursue his entire professional patrimony, if the assets in his assigned


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patrimony proved to be insufficient for performing the obligations arising from theprofessional’s economic activity.

In the present regulation, the above-mentioned principle no longer appliesin the case of assigned patrimony committed to the performance of a professionauthorized by law. (The general rule about the debts arising in relation to a certaindivision of patrimony, authorized by law, must follow, first of all, the assets thatare subject to that patrimonial mass (According to art. 2324 par. 3 of the new CivilCode.), and if those assets are not worth enough to cover debts, the law providesthat the creditor may also pursue the other assets of the debtor. (The new Civil Codeprovides an exception, established by art. 2324 par.4, according to which the assets whichare subject to a division of patrimony, and are assigned to the exercise of a professionauthorized by law, can be pursued only by creditors whose claims arose is relation to thatprofession.)

In accordance with art. 151 of Law no. 71/2011 implementing the NewCivil Code, the exception provided by art. 2324 par. 4 of the new Civil Code onlyapplies to patrimonial divisions made after its entry into force.

The individual professional’s activity may be without a lucrative purpose,that is, it may not be an economic activity, in which case the forms or organizationare regulated by special laws, (Law no. 36/1995 of notaries public and their activities,published in the Official Gazette of Romania no. 92 of 16 May 1995, republished in theOfficial Gazette of Romania no. 732 of 18 October 2011; Law no. 51/1995 on theorganization and practice of the lawyer’s profession, published in the Official Gazette ofRomania no. 116 of 9 June 1995, republished in the Official Gazette of Romania no. 732 of18 October 2011; Law no. 188/2000 on judicial enforcement published in the OfficialGazette of Romania no. 559 of 10 November 2000, republished in the Official Gazette ofRomania no. 738 of 20 October 2011.) which are necessary for these professionals tocarry out their work. The main form of organization is called an office / individuallegal / notary practice, etc., and is an unincorporated entity like the freelancer, butin this case priority is given to the provisions of the special law under which it wasestablished, as the normative acts on the organization of performance of legalprofessions provide similar forms of organization in the practice of suchprofessions.

The category of private legal persons (In respect of this sub-category, the maindifference from the previous regulation is that it includes both for-profit legal personswhose activity is carried out for the purpose of obtaining a profit, and non-profit legalentities.) includes commercial companies, cooperative organizations, autonomousadministrations, civil societies with a legal personality, economic interest groupsetc. The category of public institutions is a new category introduced by the newCivil Code, and was not included under the term of trader in the previouslegislation, a situation that is similar for the of category unincorporated entitiessuch as law firms, notaries public, judicial executors, pension funds, which werealso not included under the term of trader in earlier legislation.

The term of commercial companies encompasses both commercialcompanies established under Law no. 31/1990, and commercial companies with astate-owned capital, set up under Law no. 15/1990, namely former state enterprises


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reorganized in the form of commercial companies under Law no. 15/1990. Some ofthe state-owned commercial companies whose object consists of public-interestactivities are called "national companies" or "national societies".

Law no. 31/1990 classified commercial companies in: social partnerships,limited partnerships, corporations, partnerships limited by shares and limitedliability companies.

Autonomous administrations are legal entities dealing with the exploitationof public-interest underground, air, water resources etc, which are part of publicproperty and can be managed by autonomous administrations or public institutions,or can be leased or rented, as they are inalienable. According to Law no. 15/1990,autonomous administrations are organized and operated in strategic areas fornational economy, such as: energy, weapons, mining, natural gas, postal servicesand telecommunication. The activities performed by them are comparable to thoseof a corporation. Under the same normative act, autonomous administrations arelegal persons that cover their expenditures from their own revenues and whosepurpose is to obtain profit, having their own management and financial autonomy.

Cooperative organizations have the status of professionals and the object ofconducting merchandising, service-providing activities etc., seeking the obtainmentof profit. They are subject to the obligation of registration in the Register ofCommerce, and they acquire professional status upon their establishment.

Economic interest groups are regulated by Law no. 161/2003 and are anassociative form, with the purpose of facilitating or developing the economicactivities of their members.

Associations and foundations (G.O. no. 26/2000 on associations andfoundations, published in the Official Gazette of Romania no. 39 of 31 January 2000. ) arenon-profit, private legal entities. The establishment of associations and foundationshas the purpose of conducting activities or general or local interest. Theprofessional status is given by the new Civil Code to such legal persons, as the oldregulation did not regard them as traders.

Under the provisions of G.O. no. 26/2002, associations and foundations areallowed to participate in certain economic activities, including the establishment ofcommercial companies. Commercial companies thus established may only have thepurpose of financing their business objectives, and not that of obtaining profit forthe members.

ConclusionThe change made by the Civil Code in the terminology used in commercial

matters affected the entire system of classification. The necessity of establishingnew requirements to be met by a person in order to be considered a professionalwere settled by this new regulations: performance of activities consisting ofproducing, managing or selling goods and services in an organized way, as well asconducting such activities systematically. Commercial companies, cooperativeorganizations, autonomous administrations, civil societies with a legal personality,


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economic interest groups, etc. have been also defined by the Civil Code, becauseall this requested adjustment to current values and concerns of the society.

BibliographyS.D. Cărpenaru, Romanian Commercial Law, Ed. Universul Juridic, 2007F. Ciutacu, Commercial Law. Collection of cases. Commercial legislation,

Ed. Themis Cart, 2003S. Fildan, V. Ciocan, I. Kocsis, Commercial Law, Ed. Cordial Lex, Cluj-

Napoca, 2011R. Petrescu, Romanian Commercial Law, Ed. Oscar Print, 1996Gh. Piperea, Commercial Law. Enterprise – in the regulation of new Civil

Code – , Ed. C.H. Beck, Bucureşti, 2012

Documents

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