Background:
The principalities of Wallachia and Moldavia - for centuries under the suzerainty of the Turkish Ottoman Empire - secured their autonomy in 1856; they united in 1859 and a few years later adopted the new name of Romania. The country gained full independence in 1878. It joined the Allied Powers in World War I and acquired new territories following the conflict. In 1940, it allied with the Axis powers and participated in the 1941 German invasion of the USSR. Three years later, overrun by the Soviets, Romania signed an armistice. The post-war Soviet occupation led to the formation of a Communist "people's republic" in 1947 and the abdication of the king. The decades-long rule of dictator Nicolae CEAUSESCU, who took power in 1965, and his Securitate police state became increasingly oppressive and draconian through the 1980s. CEAUSESCU was overthrown and executed in late 1989. Former Communists dominated the government until 1996, when they were swept from power by a fractious coalition of centrist parties. In 2000, the center-left Social Democratic Party (PSD) became Romania's leading party, governing with the support of the Democratic Union of Hungarians in Romania (UDMR). The opposition center-right alliance formed by the National Liberal Party (PNL) and the Democratic Party (PD) scored a surprise victory over the ruling PSD in December 2004 presidential elections. The PNL-PD alliance maintains a parliamentary majority with the support of the UDMR, the Humanist Party (PUR), and various ethnic minority groups. Although Romania completed accession talks with the European Union (EU) in December 2004, it must continue to address rampant corruption - while invigorating lagging economic and democratic reforms - before it can achieve its hope of joining the EU, tentatively set for 2007. Romania joined NATO in March of 2004.

Economy - overview:
Romania began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Despite the global slowdown in 2001-02, strong domestic activity in construction, agriculture, and consumption have kept growth above 4%. An IMF standby agreement, signed in 2001, was accompanied by slow but palpable gains in privatization, deficit reduction, and the curbing of inflation. The IMF Board approved Romania's completion of the standby agreement in October 2003, the first time Romania had successfully concluded an IMF agreement since the 1989 revolution. In July 2004, the Executive Board of the IMF approved a 24-month standby arrangement for $367 million. The Romanian authorities do not intend to draw on this arrangement, viewing it as a precaution. Meanwhile, recent macroeconomic gains have done little to address Romania's widespread poverty, and corruption and red tape handicap the business environment.

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