Schroeder sees Romania closing EU talks this year

German Chancellor Gerhard Schroeder encouraged Romania to press on with reforms, saying he saw good chances it would close European Union entry negotiations this year.

Romania and neighbouring Bulgaria missed the EU's eastward expansion in May and hope to join in 2007.

Sofia has already completed accession negotiations but Bucharest still has five out of 30 chapters to close, including key areas of competition, environment and justice.

"I'm convinced that if reforms continue at the same pace as recently, the talks may be finalised this year," Mr Schroeder told a news conference during a visit to Romania. "It's a realistic expectation..."

Mr Schroeder said Romania's accelerating privatisation drive was likely to earn the country a "functioning market economy" tag from the EU - a key condition for wrapping up membership talks.

"The fact that 70 per cent of Romanian GDP is created by the private sector means it's a market economy. It will become a functioning market economy if privatisation continues at the pace seen recently," he said.

During Mr Schroeder's visit, Romanian and German officials signed contracts worth an overall of about 800 million euros for projects ranging from improving border surveillance and security to upgrading the Balkan country's ailing power infrastructure.

About €650 million of the total amount represents a deal signed with EADS Defence and Communications Systems to implement an integrated homeland security solution for the Romanian state border. The project is aimed at paving Romania's way for a smooth entry into the Schengen Treaty.

The rest concerns several deals signed with Siemens AG, the ABB-AREVA consortium and German bank KfW. The projects focus on modernising power stations of electricity transmission firm Transelectrica.

Romania's market reforms had been on a slow track for almost 15 post-communist years but they have picked pace under constant EU pressure.

Over the past year, Romania adopted an EU-compatible constitution, set up an independent competition body and passed laws that should overhaul its inefficient judiciary and stem corruption.

The government agreed last month to sell the biggest firm, oil company SNP Petrom, to Austria's OMV in a landmark deal, showing the state is finally willing to cede control of strategic assets.

A Reuters poll of analysts released on Thursday saw a 66 per cent chance Romania will manage to join the EU in 2007.