Several challenges of year 2013 (I)

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If 2012 was the year when political instability made the headlines, 2013 is expected to be a year when Romania’s economic and financial problems, superimposed to the impact the prolonged crisis of the Euro zone will have upon our country (smaller or bigger, depending on the government’s capacity to attenuate the shock coming from abroad) will return as Romanians’ major priority. Of course there will be political tensions too, but not to last year’s extent.The cruel austerity policy imposed by the presidential party starting 2010 provoked the collapse of two cabinets – controlled by Traian Basescu – last year and brought to power in Parliament the Social Liberal Union (USL) which, after failing to impeach the president last summer, took its revenge in December, when it became the absolute winner of the general elections and forged the strongest majority in Parliament of the last 23 years.

In theory, at least, the colossal victory obtained by the USL, which forced Traian Basescu to admit his defeat and nominate Victor Ponta as premier for the second time, dealt with the political crisis in Romania and ended the fierce power struggle that dominated the whole year 2012. With an overwhelming majority in Parliament, the Ponta II Cabinet now has – in theory – full freedom of action and enjoys the political support legitimised through elections to reject the president’s attempts to interfere with the activity of the Executive and enforce the measures stipulated by the ruling programme of USL. In practice, however, surprises might still appear, some of them where nobody would expect to see them. Naturally, new tensions can spark anytime between Basescu and Ponta, despite the fact that the two politicians signed an agreement of ‘institutional cooperation.’ Actually, if secret addenda do not come to light from now on, this document has no legal power, because it stipulates no responsibility if either side infringes the very general and interpretable provisions of the ‘pact.’A reason for dispute between president and the USL majority this year might appear during the drafting of the new Constitution. In 2009, Traian Basescu proposed a Constitution draft, although the president does not have this prerogative, which was sanctioned through a consultative referendum. The major changes brought by the presidential document refer to a ‘functional semi-presidential regime’ that would broaden the attributions of the president, renouncing a chamber of the Parliament, allowing the president to dissolve the Parliament, and diving Romania into 12 regions. USL, on the other hand, wants to maintain the bi-cameral Parliament, in line with Romania’s political tradition, and a parliamentary regime with a clear delimiting of the attributions of each power in the state. If things go this way, we might witness a new constitutional crisis arbitraged by the Constitutional Court – the institution that went against its own jurisprudence to save Basescu in extremis, last summer, from losing the presidential office. In a demonstration of clear biasing, the Constitutional Court justified its decision to reject the Law of purely uninominal elections, proposed by USL last year, by saying that it would lead to an increase of the number of MPs, thus coming against the wish of the electorate, as expressed in the 2009 referendum on modifying the Constitution by imposing a maximum number of 300 legislators. The Court’s motivation is totally unfounded, even hilarious, because the USL law would have resulted in a Parliament with 313 members – 300 elects and 13 mandates obtained through redistribution by the candidates of minorities. Even worse, in their desperate attempt to favour the presidential party (if December elections were held under the provisions of the purely uninominal system, PDL would have obtained only one mandate) the Court’s judges compromised the legal notion of ‘consultative.’ In fact, the Court no longer recognised the consultative character of the 2009 referendum and obliged the Legislative to enforce its result, hence the very high probability of a new conflict between president and Parliament, with a biased Court – which lost its credibility – called upon to arbitrate the conflict. Other tensions may appear during the modification of the electoral law or the administrative reform.Until then, trouble may spark over the austerity policy arduously promoted by Traian Basescu. In 2009, 2010 and 2011, by expanding his executive attributions, the president was the state authority that directly negotiated with foreign creditors, decided and announced wage cuts, VAT increase and the illegal tax on pensions. This last decision was actually one of the most important accusations of infringing the Constitution that led to his suspension by the Parliament.The ruling programme of USL merges the relaxation of austerity measures, by indexing pensions and resuming some social protection measures aimed at the most vulnerable categories of population, with the implementation of policies aimed at improving living standards, based on the accord with Romania’s foreign creditors. However, even if the government wants to enforce them, these decisions can be modified or postponed if the IMF considers the relaxation measures (differentiated VAT on basic foodstuff, lower tax on labour, the reduction of parafiscal taxes etc.) will affect the macroeconomic stability. So, the main challenge for the government will be to convince the IMF team that will come to Bucharest on January 15 about the sustainability of the measures stipulated by the ruling programme, with emphasis on those provided by the draft budget for 2013. With this respect, the government relies on the substantial increase of incomes from taxes and dues (a trend that started last year under the first Ponta cabinet, by doing away with the corruption at the top of ANAF), a higher absorption of European funds in parallel with saving internal public funds for investments; these all translate into saving sums in RON and reducing the dependence on external financing. But the government must be cautious and walk a thin line in 2013 and 2014, especially as Romania will have two peaks of repaying its external debts these years. The government must attract some EUR 25 bln each year to finance public debt and the current account deficit. Although analysts predict the economy will benefit in 2013 from a recovery of consumption, which will significantly increase after salaries were restored and pensions increased in 2012, the price hikes of goods and utilities, especially energy and fuels, will act as a brake to consumption and will affect the economic growth, which is expected to reach 2 pc this year.