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March 29, 2023

Requiem for Romanian economy

We see a real competition going on between officials, and institutions too, to put on the market the most discouraging figures possible regarding Romanian economy. What a contrast as compared to late last year, when, with electoral campaign in full swing, Romanian politicians put upbeat data before the public and promised the moon if they won. At the forefront Democrat-Liberal and Social-Democrat leaders Emil Boc and Mircea Geoana respectively, and President Traian Basescu too, a fierce and relentless critic of Liberal Premier Calin Popescu Tariceanu.

In power now, the two parties, Social-Democratic and Democrat- Liberal; and President Baescu is readying for the campaign in the run-up to the presidential election this coming autumn. As I said, the contrast is nonetheless sharp to the picture at the end of last year.

The same president that said then he could not grasp why the Tariceanu government would not pass 50 per cent salary rises for teachers, now says he had to enact the bill into law. Traian Basescu openly announces we are in recession and urges patience for the social categories worst hit by crisis. Finance Minister Gheorghe Pogea is not encouraging either, quite the opposite, saying economy might dive 6 per cent this year, if the trends in the first two quarters hold. I don’t know how the minister calculates it, since, we’re in the second quarter already.

The choir of past government critics is also interesting to hear. We don’t mean economic analysts such as Ilie Serbanescu, who constantly drew attention to the danger posed by economic expansion relying on debt consumption. The focus is on the politicians who took advantage of the economic growth in 2008, such as the Social-Democrats, who backed the National Liberal Party (PNL) in Parliament, blackmailing it by demanding salary and pension rises, and is now lamenting about the scarce budget. We also refer to Democrat-Liberals, who said the salary increase decree would be the first document they would sign once in power. And the list could go on and on. Are they entitled to such fierceness as long as during their first six-month tenure in power they’ve made no proof of their ability to take the country out of the crisis?

Yet the list of those who toll the death knell of the Romanian economy is longer than that. In the last months of 2008, the National Commission of Prognosis (CNP) spoke about an economic growth of 2.8 per cent in 2009, while the World Bank and the European Commission put it at about 2 per cent. The International Monetary Fund was the only institution that predicted an economic downturn. Now they all speak of the Gross Domestic Product (GDP) going down 4 per cent and the outlook is downbeat too.

The recent World Bank report ‘Global Economic Perspectives 2009’ confirms the negative prospects not only for Romania, but also throughout Central and Eastern Europe. Romania’s current account deficit will decrease from 12.4 per cent in 2008 to 8.4 per cent in 2009, and shrink further, to 7.5 per cent in 2010.

More recently, Raiffeisen Bank spoke of a 6 per cent drop in GDP, and businessman Dinu Patriciu forecasts a contraction of 10 per cent in 2009.

It is politicians who could nonetheless do something to reverse the trend. Despite the ‘grand’ programme launched by Premier Emil Boc, anti-crisis measures are lacking altogether. The effect is quite the opposite, as the measures appear to sink the citizen and companies even deeper, let alone to boost the economy. The liquidity crunch makes the state delay the Value Added Tax (VAT) payments, which creates huge difficulties to native enterprises, especially those who took bank loans. The levying of the minimum tax only made company life worse, as it forced small enterprises to close their gates or lay off their employees. Finally, the much-trumpeted cut in the number of taxes does not improve company life by any means, as far as there are fewer, yet higher taxes.

We are still awaiting an anti-crisis plan to emerge. The two ruling parties are more concerned with personal or group haggling than with going down to work. Their image is being gradually sketched into an inept government, despite the more than comfortable majority the ruling coalition enjoys in Parliament. Instead of tolling the death knell for the economy, we should leave the presidential election this autumn aside, which appears to catch all the politicians’ attention, and see what could be done to effectively help citizens and private enterprises – the taxpayers of which the state functions. Programs such as ‘first home’, ‘junk car’ or ‘building insulation’ are simply not enough to boost domestic economy.

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