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May 26, 2022

Budget too can be a political weapon

The Parliament voted on Thursday in favour of changing the government regulation law, which would allow the interim government led by Emil Boc (dismissed through the no-confidence vote of October 13) to present in Parliament, for approval, the state budget and the budget of state social insurances for 2010. Thus, interim or not, with powers reduced in the act of ruling, the “dying” executive led by Emil Boc may come with the draft budget in the Legislative. What kind of budget might this be? Well, this is a completely different matter.

As it is known, the delegations of the IMF, World Bank and the European Commission recently left Bucharest. The political crisis of Bucharest can be seen both in Washington DC and Brussels. The delegations of the three institutions tried, as hard as they could, to get things clear about the political will of the parties with respect to assuming and observing Romania’s commitments. The answers were positive and the Parliament, in its turn, passed a resolution asking the Executive to keep these commitments, thus allowing Romania to carry on its stand-by accord with the IMF and the other agreements with the WB and the European Commission. But…

But the message left behind by the three institutions is less than reassuring. If the political crisis was considered to be within the limits of democratic normality, the same as the fact that a Cabinet in his full powers is not in place yet, the aforementioned message is clear: the budget for 2010 must be urgently passed, so that IMF can approve in December the release of the third loan instalment to Romania.

The political crisis is far from being solved. The nomination by President Traian Basescu of the second premier in the person of Democrat-Liberal Liviu Negoita cannot be a solution, as long as the parliamentary opposition (PSD+PC, PNL, UDMR and the national minorities) continue to support Klaus Iohannis. The nominated premier has only minimal chances to pass in Parliament. The head of state apparently wants to keep in place the acting interim government, which would allow PDL to organize the presidential elections. But such tactics are a two-edged sword, with possible serious consequences for the economy.

On one hand, extending the political crisis and the antagonistic positions of President vs. Parliament maintains uncertainty at all levels, also as far as companies and business plans for next year are concerned. On the other hand – and even more serious – they endanger the national economy by increasing the risk that the IMF does not release the loan instalment in due time. This is an issue worth EUR 1.5 bln, plus the sums from WB and the EC. Adrian Vasilescu, counsellor of the Central Bank’s governor, warned a few days ago that Romania needs no less than EUR 5 bln at the end of the year, just to cover its regular expenses.

Pensions and salaries in the public system are in danger of not getting paid, so we clearly need the money from the IMF. In this context, prolonging the crisis and delaying the vote over the state budget for 2010 seems absurd. Yet, in spite of all these considerations and even of statements made by legislators and other officials, there is a general feeling that nobody wants to see the budget pass in due time.

Let us explain this opinion. “Due time” would mean by the end of November, i.e. before the second round of the presidential elections, set for December 6. If the Emil Boc interim government stays in place, this would be beneficial – as mentioned earlier – because the second round will be organized by the same government. However, changing the government’s regulation law would mean the acting team should also bring the draft budget for approval. The Finance Ministry says it already completed the draft budget, but will it have the courage to do it before the second ballot? Any government in place needs much courage to submit to Parliament’s approval the state and welfare budgets for next year. Opposition parties hope it is one of their candidates who will win the presidential chair. So, no matter how interim Finance minister Gheorghe Pogea’s budget may look (in line with the indicators set by the IMF), the next government will urgently proceed to modifying it. For the opposition, passing the budget now only has minimal risks, but for the Democrat-Liberals – in their position of interim rulers – this bears maximum risks. The loan instalments from international institutions are uncertain. The treasury is empty and the state is heavily indebted. There is no doubt that the draft budget will include increases of taxes and excise duties, and will cut public investments, plus it will more than likely freeze salaries in the public sector, along with severe cuts in personnel expenses (meaning layoffs) etc. Hearing about such a budget for 2010 will rejoice the parliamentary opposition. The budget will give it all the arguments it needs in the last minute political battle before the second round of the presidential elections, allowing it to set all cannons on the failures registered during Traian Basescu’s five-year term in office. Thus, it is hard to believe that interim premier Emil Boc and his Finance minister Gheorghe Pogea would be willing to bring the budget in Parliament. As installing a new premier is delayed, the same will happen with the budget, to the detriment of Romanians, of the national economy and of the country’s prospects for the future. The budget too seems to be a political weapon – and a very strong one, we might say. So dangerous that it is preferable to put it under lock.

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