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January 20, 2022

May 2008 – May 2009

This time last year the economy was “roaring.” This is, at least, what the former PM Calin Popescu Tariceanu was seeing for Victoria Palace, wherefrom he was launching optimist signals every few days. The foreign investments were at high levels, the same as the entries of capital. The “strawberry reapers” were sending from abroad tens and hundreds of millions of Euro which contributed to the reduction of the major current account deficit. The employers were confident, the banks were delighted with the steadily rising level of the credits taken up by the population for houses, cars and personal needs. The electrical household shops were selling on credit only subject to the ID. The people were planning their future, and their demands increased every day especially in the civil servants sector. Holiday or Easter bonuses, premiums, all sorts of benefits (from the confidentiality to the… antenna ones).

It was good to work in the state sector, a lot of people probably thought.

The claims increased exponentially and similarly the expectations. Actually, analyzing the period which ran from May 2008 until May 2009, I believe that we can better understand the whole evolution both economically, politically and socially. While the crisis was starting in the United States and was beginning to slowly encompass other states of the world, including those from Europe, Romania seemed to live in a oasis of prosperity in which only the President-Premier political disputes were troubling the quietness. The former premier Tariceanu was probably one of the first to understand that the explosive growth was drawing to the end. But since in Parliament PNL had only 20 per cent and depended on the support of the Social-Democrats, he accepted the drifts towards populist policies, unjustified salary and pension rises, etc. The maneuvers did nothing but stimulated even more the social demands connected with the rise of the revenues, the growth of the public expenditures, etc. Like in a real vicious circle, the populist demands of PSD and of the opposition also advanced at a quick pace. Instead of resigning, more than honourably and for the benefit of Romania, stating clearly that the budget cannot support all the claims of the political opponents, Tariceanu got caught up even deeper into the game. With an economic growth of over 6 per cent of GDP, the Government spent in the last months of 2008 even more than he obtained from the additional receipts to the budget.

In the political and economic context of the middle of the year 2008, characterized as an enthusiasm without coverage, Tariceanu lost the dispute with Traian Basescu. The citizen believed the President when the latter said that the government can but does not want. The accusations against the Liberal Premier eroded slowly but surely his popularity and credibility. In the moment when the Social-Democrats went to Parliament with the proposal to increase the teachers’ salaries by as much as 50 per cent, the public opinion was convinced that the idea could be fulfilled. Uselessly did Tariceanu try to say that the resources were missing, that the rise of the pensions had already exceeded the limits that the state budget could afford. The Romanians wanted more, and Parliament obeyed them. It voted unanimously for the increase of the teachers’ salaries.

In the meantime, the first signs of the international financial crisis began to be felt. The last quarter of the past year meant a fall vs. the first half of the year. But, except the government, nobody was seeing it, nobody was feeling the crisis (with a few isolated exceptions, too little taken into account). The electoral campaign was beginning and the parties were vying with promises. The PSD leader Mircea Geoana was promising EUR 20,000 for each Romanian who would return to Romania to work here; the PDL leader Emil Boc was saying loudly that the first measure that he would enforce if his party wins the elections would be to increase the teachers’ salaries by 50 per cent. And President Basescu was delivering speeches at Cotroceni Palace attacking the Premier and saying that the enactment of the law regarding the 50 per cent rise of the salaries is a correct measure and the executive was that which would enforce it. In spite of the present stands, much more nuanced and restrained, even opposed to the stands from that time, we are sure that all the political actors were aware of the serious problems which were drawing near, from the Social-Democrats to the Democrat-Liberals and the Head of State. But the stake was so big, that at that time the fact that they were making uncovered promises mattered too little for the politicians.

Where are we in May 2009? In the situation to see that the economic recession is a reality, not an abstract concept. The international institutions, the banking ones, the rating agencies vie with one another to anticipate deeper and deeper economic declines. First there was a fall of the GDP of 2.5 per cent of GDP, then of 4 per cent in 2009, and now CitiBank comes to predict a decline of 6 per cent. And this happens after Romania borrowed EUR 20 bln from IMF and another EUR 5 bln are expected from the European Commission, which should provide a bigger international confidence in the Romanian economy.

The unemployment is rising, and the biggest fears are turning towards the economic skidding and especially the social one derived from the first. Over 130,000 small and medium sized firms are expected to suspend their activity or to be simply cancelled. This is the first and most visible result of the policy promoted by the Finance Ministry regarding the introduction of the lump sum tax. In the attempt to fill up the ever bigger holes of the budget, the Finances resort to absolutely inefficient methods, which allegedly combat tax evasion. Is it a good thing that over 100,000 firms, especially small family companies, close down because they are unable to pay EUR 500 per month to minister Pogea? In exchange, the redundant persons will appeal to the unemployment aid paid by the state. What a fight against tax evasion!

The crisis is tough for many and means, painfully, a return to normal life. The banks are in stand-by in regard to crediting and avoid the risk of maintaining prohibitive interest rates for most of the Romanians or of the Romanian firms. The sums sent by the Romanians from abroad have dramatically decreased, and some of those people return to Romania even without the “electoral” sums promised by Mircea Geoana. The investments remain at an acceptable level, but far from the recently bygone period. The employers have lost their confidence and prefer to proceed to layoffs in order to maintain their business floating. The exports have also decreased by one third. Fortunately the imports remain on the same decreasing trend. The sales fall, the Romanian citizen tries to spend less, as the premiums and the bonuses disappear one after the other.

The economic analysts have not warned us in time about what was coming. With very few exceptions, almost no one has anticipated the extent of the economic regression from 2009. Why? If he did it, but nothing would have happened, the respective person would have been cornered by the guild of the economists. On another hand, even if he warned about the imbalances from the Romanian economy, who would have taken him seriously at a time when every Romanian was dreaming to houses and cars?

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