Germany & France / Romania’s economic relations with key reform EU players

The transatlantic tour de force of Romanian diplomacy has been marked first by the political references, but Romania’s economic partnership with France and Germany gets new meanings, in view of the fact that the EU’s biggest powers except for the UK (EU27) are determined to decisively set the future and the new architecture of the EU.

The President of Romania met on Monday with the Chancellor of Germany and is to meet on Friday with the President of France, and it is expected that, once the political auspices are established, the economic relations to record the progress that Romania needs to be in a favourable position in the process of the EU reconstruction.

On Monday, Klaus Iohannis noted the „steady increases of more than 10% in recent years” in trade exchanges between Romania and Germany. „We have also approached the economic relations that have developed at an extremely dynamic pace, as we had a double-digit growth rate. We discussed the digitization and the President assured me that Romania is a place for IT specialists,” said Angela Merkel.

The meeting between the Romanian President and the President of France will take place at the European Council session on Thursday and Friday, in Brussels.

Here are the coordinates from which the new evolution of Romania’s economic relations with Germany and France can start:

Economic partnership

France and Germany are among Romania’s most important economic partners, and the relations with them are remarkable based on at least two coordinates:

• Companies from the two countries control Romanian entities having dominant positions in their sectors (telecommunications, auto, natural gas and electricity) and
• Concentrates a significant share of Romania’s foreign trade.

The two largest powers of the EU27 hold together 19% of the foreign direct investment in Romania. Germany is the third largest direct investor in Romania (12%) and France the fifth (7%). Cyprus is the fourth, remarkable by its offshore companies, and the first is the Netherlands, often preferred by Romanian investors for establishing investment vehicles.

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• Shares of foreign investments in total amount
• Source: BNR, FIC

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Almost 36% of Romania’s trade exchanges are concentrated in Germany and France.

Germany is by far the most important trade partner of our country (27.5%), and France ranks fourth (8.3%), according to the 2016 data of the National Institute of Statistics.

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• Top 10 trade exchanges of Romania with the EU countries
• EU countries   FOB exports (bn. euros) FOB imports (bn. euros) Total (bn. euros)             Share of total amount           Trade deficit (bn. euros)

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Only the Romanian exports of electrical machinery and equipment amounted to almost EUR 5.8 billion fob in 2016, meaning more than all exports to France (EUR 4.14 billion).

It should be noted, though, that Dacia – Renault also exported directly to Germany.

Also, Romanian imports from Germany exceeded total imports from France in the same category, according to the INS mixed nomenclature: EUR 4.99 billion CIF, compared to EUR 3.73 billion.

In fact, in the corporate field, it is worth noting four areas first:

• The French energy colossus Engie controls the supply of natural gas in the southern part of Romania, while the German corporation E.On covers the northern half and also controls the electricity supply in Moldova.
• Groupe Societe Generale controls BRD, the third largest bank in Romania, and Allianz controls one of the insurance market leaders in Romania.
• Renault made Dacia a brand of European notoriety and the Germans also produce in Romania important equipment for their cars.
• In telecommunications, the French came in first with investments, while the Germans entered the market later, indirectly, by taking over the Greek group OTE.

It is also worth mentioning the involvement of the Eurocopter pan-European concern in Brasov, where France and Germany have prominent interests, but also many others.

Germany

The German presence in Romania is also notable through the Continental subsidiaries in Romania, major tire and rubber production centres, which together with Telekom, Kaufland and Metro Cash & Carry retailers, the Allianz Tiriac insurer, Siemens and the auto equipment producers and many others, have tens of thousands of employees and business of about seven billion euros in Romania.

German-owned companies are the most numerous among companies with foreign participation in Romania, following the Italian ones: 21,727, or over 10% of the total, according to the April report of the National Trade Register Office (ONRC).

German shareholders have invested more than EUR 4.9 billion in the share capital of their Romanian companies, namely over 11% of the total capital subscribed by foreigners to Romanian companies.

On the other hand, Romania recorded a trade deficit of over EUR 1.4 billion in the relation with the most important trade partner, from which it imported EUR 13.8 billion and exported only 12.34 billion.

France

The French own not only the third largest bank in Romania and the Uzinele Dacia but also the Orange Romania subsidiary, Auchan retail, Leroy Merlin DIY retail and the Decathlon sports retail chains.

Lafarge, in the field of cement and building materials manufacturing, Groupama (insurance) or Sanofi (medicines) have businesses of over one billion lei each in Romania.

France ranks though only sixth by the number of companies from the Hexagon (8,745 or 4.16% of the total), according to the ONRC report.

The French shareholders have invested in the share capital of their Romanian companies about half of what the Germans invested in their own (more than EUR 2.4 billion, or 5.73% of the total share capital of the foreign-owned companies).