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November 28, 2021

Economic platitudes

When it took over power in 2008, the Emil Boc government publicly, and repeatedly, condemned the precedent Tariceanu cabinet for its burdensome legacy of cash-strapped treasury, important debts to private suppliers and a deficit beyond 5 per cent GDP, from the 3 per cent GDP demanded by the European Union. The finding came in a year when economic growth reached 8 per cent of the Growth Domestic Product (GDP), one of the highest growth rates Europe-wide. Now, at the end of its’ term’, after less than one year in power, the legacy of the Boc government is even worse than its predecessor’s. The treasury is just as cash-strapped, debts to private companies are even higher, the budget deficit will likely revolve around 7.5 per cent GDP, and economic growth is…negative: minus 8 per cent GDP. Further more, Romania has contracted loans equal to EUR 20 bln from the International Monetary Fund (IMF), the World Bank and the European Commission, not to build motorways, modernize the infrastructure or hospitals and so on, but to pay pensions and the salaries of public employees, for consumption that is. And the bill will come in soon.

In 2010, loan payments are also due, which analysts say equal roughly one-fifth of budgetary revenues.

If at the time of the agreement with the IMF, President Basescu and Finance Minister Gheorghe Pogea were saying the EUR 20 bln international financial aid was meant but as a ‘safety belt’, today, Romania is entirely dependent on foreign assistance, as state revenues are no longer enough to pay for the pensions and salaries in the public sector. Hence the not at all rosy perspective for the next government to lay off up to 20 per cent of the public servants. In a first stage, no fewer than 100,000 public sector employees are expected to be given the slip. Otherwise, salaries would be cut by 20 per cent. None of the alternatives would be swallowed easily by employees or trade unions in those fields.

Romania sits on a powder keg actually. The economic outlook for 2010 is grim, according to the majority of analysts. The pinch of the economic and financial crisis of 2009 will only be felt next year. This makes unemployment to act as the main valve aimed at releasing economic pressure, yet, how the cabinet to get installed at Victoria Palace will handle the mounting social pressures is yet to be seen. Anyway, Romania no longer can afford to keep drastic economic measures on the back burner if it wants to duck major drifts and even avoid going bust. The other day, World Bank officials cautioned that bouncing back to positive economic growth would be a tall task and the current economic and financial crisis in Romania is made worse by the high level of hard currency loans on the Romanian market. On the other hand, international rating agencies are in stand by, as the political crisis extending further and the country failing to meet the pledges in the IMF agreement could lead to a downgrade in country rating. The consequences, which are difficult already, would get even worse in terms of foreign investments and the country’s good standing abroad. Under these circumstances, the enthusiasm shown by certain people is difficult to grasp, as is the willingness of some political parties to join government, since, no matter who takes the helm of the Executive cannot stake their bet on economic and financial recovery without making painful cuts, economic, social or fiscal. A governance as that being sketched now – consisting of the Democrat Liberal Party (PDL), the Democratic Union of Hungarians in Romania (UDMR), minorities other than Magyar, and the ‘independent’ group (political defectors actually from the parties in whose names they were elected, in order to have access to power alongside PDL) appears to have a frail backing both in parliament and society at large. The Democrat-Liberal Party will be fully accountable politically speaking for ruling this country. UDMR is an ethnic minority party that will not lose its voters, neither would the representatives of national minorities other than Magyar. As to the ‘independents’, we should rather skip the issue….

With President Traian Basescu confirmed by the Constitutional Court, the next premier is expected to be nominated soon. Irrespective of who this might be and his open legislative endorsement, the word goes, the next cabinet will get validated by the legislative body. For how long parliament would back it, given economic and social pressure are most likely to grow increasingly strong, is a question yet to be answered. Or, a majority made up of 3-4 lawmakers is not comfortable by any means.

The upcoming measures are to stir the Romanian society up, already split after the recent presidential elections. The time has passed for political fervor of proselyte-minded lip-service partisanship. The time has come for an economic realism that shows no mercy for those failing to comply with the basic rules of a market economy, a much debated issues in the 1990s, with so few results so far. Yet, these are but platitudes. The voting was an impulsive, passionate one. The time has come for becoming aware of realities on the ground.

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