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September 30, 2022

Nothing about the crisis

With the presidential election campaign in full swing, Romania seems to no longer be affected by an economic crisis. Financial, economic policy topics, strikes or investments have completely vanished from television screens. Politics absolutely absorbs the minds of Romanians, who forget about being in danger not to be able to pay their bank loan installments, bills or car insurance. Since presidential candidates too did not really bother to tackle so difficult an issue such as this economic crisis, it appears we are living in a time warp. Business community representatives noted Tuesday that the absence of the word ‘crisis’ is the most serious reproach that could be brought to the discourse of the two presidential runners, the president of the Romania Businessmen Association, Florin Pogonaru, warned.

And still… after the second round of presidential elections we will get back to Romania’s real problems. The momentous anxieties and illusions will be forgotten and, with the head of state first and foremost, we will get down to work. How? In what way? What to focus on? These are the difficult questions that need to be answered once the president, Traian Basescu or Mircea Geoana, is elected. For now, what we are concerned with is forms without substance. Since electing a president, no matter who that might be, is not a goal in itself. The president, government, parliament are institutions whose role is to act in the citizen’s name towards reaching some goals. For Romania, they are mostly related to economic development and well-being. Elections present the citizen with the opportunity to choose the way they see the best so those goals are attained. They are not a scope in itself by any means – although given the way citizens and opinion makers react, we may say that time stands still waiting for the verdict: the new president is…

Despite debates on various issues, the president’s role in the economic field and domestic policy in general is a limited one. This role has however been exacerbated by the unique and ‘interesting’ approach given by the incumbent head of state. It therefore got to a point when presidential election decides not only the holder of the highest office in the land, but also the government and everything connected to its policy.

The Emil Boc government ignoring the crisis in 2009 is most likely to cost Romania this year an economic decline of 8 per cent, a budget deficit of over 7 per cent GDP and an unprecedented high foreign and domestic indebtedness. These are the data the next president starts from after December 6. And not only that. Unemployment is on the rise and risks approaching one million people. The national railway authority CFR alone will lay off ten thousand employees in the first two months of next year, while other thousands of people may be made redundant. The loan terms set by the International Monetary Fund (IMF) have so far been ignored, which resulted in the next tranche being put off. There are slim chances for the state budget to be passed until the next meeting of the IMF board in mid December, which means Romania will have to make ends meet without foreign money for a couple of months, with government not knowing which way to turn from lack of funds and the specter of unpaid salaries and pensions growing increasingly close. After the elections are through, things cannot stay the way they are. The government needs to take the bull by its horns and drastically cut personnel-related spending and other expenditures as well, operate layoffs and take measures aimed at increasing budget revenues. This is why 2010 is very likely to bring a higher Value Added Tax (VAT) or flat tax rate, despite all the candidates denying that would happen. An avalanche of price rises is on its way nonetheless. Local, auto, property taxes, alcohol, tobacco and fuel excises, energy and gas tariffs – they are all due to go up from January 1, 2010, adding to which are the indirect effects. Trade unions sit on a powder keg, waiting for a new government to be installed in order to renew their push for higher salaries. Last but not least, delays in VAT payments due to companies jeopardize economic operability in itself, the peril of a financial deadlock being increasingly obvious.

Given such circumstances, what the next president can do? Close to nothing, given his constitutional prerogatives. He is entitled to appoint a premier to be voted by Parliament at the soonest and take over his duties as soon as possible. It is hardly then that the real ‘battle’ with the crisis, demands and the reality at large begins. Yet, in order for that moment to be reached, Romanians must vote on December 6. And this is where the great outlook differences arise between the two contenders remaining in the race.

After the Emil Boc cabinet was toppled by Parliament, Traian Basescu named first a politically independent premier – Lucian Croitoru. A respected economist, yet, with no political backing in the legislative body. The president ignored the parliamentary majority and wished to have it his way. A second appointment followed, Democrat-Liberal Liviu Negoita, a premier-designate who is yet to present his government and program before Parliament. He wasn’t given the chance to do so, as elections entered the home straight. If Traian Basescu wins, the following alternatives are likely: continuous support for Negoita or appointing another political premier. The Klaus Johannis alternative – endorsed by Liberals and Social-Democrats – is much less likely, as it will be tantamount to the president giving in to his political foes, even if Traian Basescu has not completely shut the door to such possibility. Finally, the last version would be for the new-incumbent president to dissolve Parliament (if his fresh nominee is rejected), according to Constitution, and call early elections.

Does any of the said alternatives help resolve the crisis or open the way towards fighting the economic crisis? Is there any formula outlined by which the average citizen is assisted one way or another to overcome the effects of this crisis?

As to the other candidate, Social-Democrat Mircea Geoana, once he receives the Liberals’ endorsement, he can act fast. According to his promise, he will appoint independent Klaus Johannis as prime minister. The Democratic Union of Hungarians in Romania (UDMR) and minorities other than Magyar too back him. If Johannis is quick to put his cabinet and governing program forth and Parliament validates it, some major measures could be taken by year’s end. Among them, the passage of the state budget, obviously, in a form negotiated by the parties which endorse the Sibiu mayor. Is this a formula to give us hope? Could it contribute to swift economic actions?

At this election campaign moment, this appears to be the political picture with all its likely variants. If the citizen may be least interested in state reform, foreign policy, constitutional reform, government membership or other topics, they cannot overlook their short and medium term interests. Irrespective of the alternative they might choose, the economic crisis needs to be overcome. Then, Romanians should get down to work, as they say. They may negotiate the form, yet not the substance.

I wonder who would investors vote for?

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