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February 9, 2023

Happy and unhappy Romanians

Officials reassure us that we will get the next instalments of the IMF loan. Finance Minister Sebastian Vladescu tells us not to worry, Economy Minister Adriean Videanu sends us the message that everything is going to be Ok and Prime-Minister Emil Boc gives us the relaxing news that there will be money to pay pensions and salaries because the IMF would disburse the next loan instalments in February. What could be more invigorating for the common Romanian bent under the burden of his concerns about tomorrow? So there are also happy Romanians sure of themselves for having achieved something good, certain that things will go better if they stick to the chosen path.

OK, so we’ll get our next loan instalments, so we’ll have money for salaries in the public sector and for retirement benefits. I nevertheless happen to think that the utmost important concern of the government that includes the three mentioned officials should have been the overcoming of the downmost point of the economic crisis that we are going through, and loans from the IMF, WB and EC are certainly no guarantees in that respect. At most, they can delay a verdict or help us past a difficult period. And, since we have committed ourselves to some huge loans amounting to EUR 20 bln, plus more taken out from local commercial banks, I believe another primordial preoccupation (meaning concern) should be how to pay them back. But the Boc Cabinet seems to be minded to just ‘pass to the other side’ in 2010, the prospect of the following years being to far away for them right now.

In addition, assuming we get the loans, we surmount the most difficult economic moments, the money will still have to be repaid, also with interest. Drawing the line, what will be in it for us after this enormous effort we are making? Nothing. Absolutely nothing. No hospitals, schools, infrastructures, tourist facilities will be modernised. I am among those people with serious doubts about the benefits of the loan taken by the Boc Government last year. Sooner or later, we will still have to punch another hole in the belt. Provided it had a responsible leadership, I think Romania could have avoided a loan like this. I also think analyst Ilie Serbanescu is right to a large extent in what he suggests – Romania has been pushed towards the loan in order for the foreign banks to be able to curb their exposure in the country, and it is still the Romanian tax-payer to stand the racket. And least, the same amount of money raised from the international financial institutions would have paid for the completion of all motorway development projects with unquestionable benefits both at the level of the country’s external image and from an economic point of view – road tolls, transit tolls, openness towards the West in terms of tourism, business and commercial freight speed. Nothing of all this will be improved after the loan will have been entirely spent. The question is if these institutions that now seem to be rather bounteous with Romania would have lent us the money to build motorways instead. The government does not appear to be worried about repaying the loans. But other people are. This year we will be already paying interest on the instalment released in 2009. Insignificant amounts, one would say – EUR 130 M – if we think about what is next. In 2012, the state will have to pay EUR 1.99 bn only to the IMF and, beginning with 2013 (if all loan amounts are received), the principal and interest will be EUR 5.7 bn, or nearly 10 per cent of the forecast budget revenue. Media sources say a Finance Ministry bond issue of EUR 447 M is also falling die in 2013. 2014 won’t be any better either, because the repayments of the IMF loan will reach EUR 5 bn. The payments will only become sensitively smaller in the last years of the term.

We are wondering how the government (whatever government we may have by then) will cope with a missing 10 per cent of the budget as long as now, following a more or less 8 per cent economic decrease in 2009, it must resort to massive loans and increase the budget deficit to over 5 per cent GDP…

It’s good that we have some happy Romanians to rule us. But there are also not so happy Romanians, as shown by a recent Eurobarometre. Romanians expect 2010 to be worse in terms of life in general, local economic situation, financial circumstances of households and the jobs. A massive 88 per cent think the economic situation in the country is worst than in the other EU countries and 53 per cent anticipate a deterioration of the job situation.

There are many such little encouraging data, reflecting Romanians’ pessimism. However, the mentioned Eurobarometre was taken in November 2009, before the presidential runoff election. Why is time important? Because candidates and other officials only started mentioning massive layoffs in the public sector and expense cuts in a variety of fields after the election. It was the time of enthusiastic promises foreseeing a fast recovery of the economic sectors and public investments. All that came to pieces in a matter of weeks. A similar poll taken at the present time when people have lowered their expectations would surely show an even more accentuated pessimism among Romanians. Among those Romanians who are not as happy as those who take care or should be taking care of their needs are.

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