A serious disease

The first meeting on the agenda of IMF head Dominique Strauss-Kahn’s visit to Romania, namely that with PM Emil Boc was most interesting. Coming from the previous leg of his tour through Eastern Europe, the IMF managing director told us he understands Romania’s problems and the pressure put upon the budget. “We understand this crisis has hit your citizens and this situation should be remedied and, therefore certainly these days there is a pressure on budget. (…) So we are capable of understanding this and we try to see together with you how we can keep balance, given the needs you have,” Strauss-Kahn said.

The position of IMF Managing Director has a great economic, even political influence at global scale. The conditions, pressure and “unpleasant factors” imposed by IMF to credit seeking countries are the job of negotiators and heads of department.

The Managing Director must be a person who speaks very considerately, avoiding both excess and speculation. This is why the IMF chief is a professional diplomat who issues signals or warnings, depending on each situation. In the case of Mr. Strauss-Kahn, his past career as a French Socialist politician and possible presidential candidate in 2012 may serve him well in his present position. Furthermore, let’s not forget that the IMF is an international institution that came under fire, in the past, for controversial measures it imposed to various countries, in exchange of loans. Thus, at full height of economic recession, the IMF sent a conciliatory message to countries in trouble, assuring them about its wish to cooperate. However, nobody should be so naive to imagine that the Fund radically changed its ways and demands.

Tuesday’s visit precedes a new IMF evaluation mission towards the end of April. It is certain that Dominique Strauss-Kahn neither wished, nor could voice obvious criticism in his meetings with Romania’s president, premier and Central Bank governor.

However, he sent the message that “IMF is a doctor for a sick country.” We must therefore understand that we are in convalescence, at best, rather than a marathon runner, hence we must press on the efforts to improve the situation and overcome the crisis. This is precisely why the IMF chief told us: “We are here to try to help you get back on the right track.” Continuing on the path of analogy with a sick man, he said that “the medicine here is the money and the doctor teaches you that you have to change your conduct because otherwise you get ill again.”

The really interesting part is what Premier Boc thought he should do in the meeting with the chief of the IMF. Instead of a considerate approach, he chose propaganda, more suitable to approach Romanian electorate than the head of a major international financial institution. Mr. Strauss-Kahn certainly is very well informed about Romania’s situation, perhaps even better than Mr. Boc. He therefore needed no propaganda lecture about the Boc Cabinet’s “great achievements.” But apparently the chief of the Executive in Bucharest saw things completely different. He explained that two were the reasons behind Romania’s decision to sign the two-year accord for EUR 12.95 bln: mitigating recession’s negative effects, and laying the ground for structural reforms that have not been made during the past 20 years.

Boc insisted to explain Kahn that his cabinet has kept its international commitments in 2009 and “did not give in” to the political pressure put by the electoral campaign. “The Government assumed the responsibility and unpopular decision of doing what must be done for Romania, and less of what it would have preferred. Our measures are tough with the present, but correct with the future of Romania, correct with the future of 22 million Romanians,” an enthusiastic Boc said.

The most interesting part is about the government NOT giving in to the pressure put by the electoral campaign. We can remember that, during the electoral campaign, we had in place a government dismissed via no-confidence vote, which only managed day-to-day activities. President Traian Basescu’s nominations for a new premier seemed made only to be rejected by the Parliament, so that the Boc Cabinet could stay in place until the presidential elections of November 2009.

Coming to the harsh measures taken by the Boc government… we are still waiting to see what this is all about. Passing laws that are still on debate – like those on blanket salary, pensions or education – does not necessarily mean economic reform. The “indecent” salaries and pensions slammed by the premier lately are still in effect. Sure, authorities have cut a number of premiums and holiday bonuses, meal tickets etc., but only after elections, and when the new PDL-controlled executive got in place. And things are still unclear, as trade unions take it to the street, seeking measures contrary to government’s policies – higher salaries, extra funds etc. Apart from layoffs in the railway system and the announced slashing of 15,000 jobs in education, no significant personnel cuts were made that would have saved a lot of cash to the budget. In terms of anti-crisis efforts, the recent address of the premier in Parliament left analysts still wondering what these measures might be.

Listening to Prime Minister Emil Boc, one may think that everything has been sorted out and social consensus is at a peak. We might even wonder whether it’s not Mr. Boc who’s visiting Romania. Lack of realism is indeed a bad disease.

But it is not just the premier who suffers from it. President Traian Basescu, too, told the visiting IMF official that he wants a long-term collaboration with the Fund. The head of state must have forgotten what his guest said minutes ago, that needing the IMF means you are really sick. Or is Romania indeed in such a serious condition?

The head of the IMF warned, in Parliament, that unemployment will further increase (something no Romanian official dares to admit) and that more time must pass until things start improving.

We will see how serious Romania’s disease is. IMF medicines (as well as those of the World Bank and the European Commission) are still coming. The economy is in convalescence. Unfortunately, the doctor – the government, in this case – seems to feel bad himself.

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