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March 5, 2021

From Lehman Brothers disaster to Boc governance

Yesterday, the world marked two years since the collapse of the US bank Lehman Brothers, considered as the worst financial disaster in history and the “official” start of the global crisis. Coming in the wake of other bankruptcies in the financial world, like those of Bear Stearns, Fannie Mae and Freddie Mac, at a moment when even giant Merrill Lynch was at disarray, the Lehman Brothers crash paved the way to a new “era” of recession, instability and unforeseeable future.

The US economy immediately felt the shock, soon followed by Europe and other countries of the world. Only few states were somehow spared its effects.

Two years ago, it was obvious even to non-specialists that Romania won’t escape the effects of the global downturn.

However, with the general elections of autumn 2008 around the corner, politicians turned into economic forecast experts and bluntly rejected the idea that Romania might feel the effects of the crisis. From president to party leaders and Parliament candidates, they all made empty promises and denied the imminence of a crisis whose effects were getting more and more obvious each day. Even one year later, when things were obvious, the candidates in the presidential campaign did not take a more prudent stance. On the contrary, they made wild promises, even though the economy was clearly sinking to the bottom. In the local politics, the short-lived alliance between Democrat-Liberals and Social-Democrats abruptly came to an end in September 2009 – a move easy to anticipate, given the advent of presidential elections. Blades got sharpened, cannons were loaded. As it is known, the winner was Traian Basescu, who won his second term in office with the votes of Romanians living abroad. I don’t know what these Romanians are thinking now about this victory, but their fellow nationals still living in the country already suffered a GDP decline by 7 pc that will be followed by a new drop of approximately 2 pc in 2010. Things are unclear about the evolution during 2011. The National Statistics Institute gives mixed signals: Q2 will bring a slight recovery, but the economy will once again go down in Q4, marking a W-shaped crisis. In its turn, the business community is far from optimistic. Business tycoon Ion Tiriac recently said that 2011 will be more difficult than 2010. While other European countries are slowly recovering from shock, Romania is still struggling down in the mud. Everybody wonders why things are like this, but there are many answers to this question.

The most frequent refers to the lack of anti-crisis measures that should have been taken by the five cabinets successively led by Emil Boc. The restructuring has been promised, but it stayed on paper, as authorities kept wasting public money, maintained in place a bankrupt system of acquisitions, drastically cut investments, and increased the fiscal pressure. These are just few of the many concrete elements. Actually, the Boc Cabinet survived (and is still doing it) only by borrowing more and more money. EUR 20 bln from the IMF, World Bank and European Commission, plus other loans taken from the local and foreign markets, at ever higher costs. Some voices already speak about extending the current accord with the IMF. In other words, Romania does not have enough resources to pay pensions and salaries, so it must live on debt. It is hard to say for how long…

If steps in the right direction are hard to anticipate, the social prospect is even bleaker. The widespread opinion among youth is they should leave the country as soon as they can. The absence of any hope, the humiliatingly small salaries paid even to skilled professionals, like doctors, plus the nobodies who are promoted each day in high places and in the media, the kitsch that is present everywhere – these are just a few reasons. And how could things go differently in a country where people were dealt successive blows these years? First, private companies laid off many employees, now the state is doing the same thing. First, private employers operated salary cuts, now the state trimmed public salaries by 25 pc, and the process is continuing. The VAT increase from 19 to 24 pc, the enforcement of taxes on copyright incomes, new taxes and dues, higher taxes on automobiles, buildings and lands… Add to this the planned cutting of subsidies on thermal energy in the near future…

On the other hand, whole sectors are hit by a serious financial and moral crisis. Education is the target of general criticism, after reforms amateurishly decided by each minister that was in charge of this sector during the last years. Teachers are poorly trained, but their low salaries are no stimulus for professional improvement. Their less than “precarious” incomes were now hit by the 25 pc cut that brought them under the limit of decency. The same goes with the health sector, which also suffers from inadequate equipping and – of late – from an exodus of personnel abroad.

In such conditions, speaking about a way out of crisis is indecent, to say the least. Unfortunately, this is precisely what PM Emil Boc is doing, with an eye to the general elections of 2012. In Drobeta Turnu Severin, the premier anticipated that the winner of the next elections will be PDL (the party whose president he is) and its ruling partners UDMR and UNPR. He did not seem very concerned about the fate of the average Romanian, who already lost so much.

Summing up, we might say that the US is recovering, two years after the Lehman Brothers disaster. At home, we can only wonder whether Romania will ever recover after the Boc governance.

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