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May 18, 2022

Romanians, the pessimists of the year

2010 was a year marked by lack of prospects, but 2012 is expected to be one of quasi-general pessimism. At least this is what we are being told by a recent GfK surveyed commissioned out by the European Commission. Over half of Romanians expect their financial situation to deteriorate in the next period, and two thirds of the population does not intend to buy an important item for the home in 2011. On the other hand, two thirds of Romanians were saying in December 2010 that their family’s financial situation was more difficult than 12 months before. But, in what regards financial prospects, over half of Romanians – more by 20 per cent then in December 2009 – expect them to deteriorate. The lack of enthusiasm has a number of different causes, both economic and political. Over a quarter of the citizens are indebted and the immediate outlook of banks’ lending policies is gloomy. State sector employees are in for a period of uncertainty, as the Executive has announced that lay-offs would go on and the hiring will be sporadic – one person replacing seven leaving the system. Private sector workers have no reason to be enthusiastic either, and we do not only have in mind major or multinational companies. Small companies hardly survive and, even if they do not operate any further lay-offs, it is clear that they, too, function in a context of uncertainty. Thousands of companies are reported to close down on a monthly basis. The government’s tax policy is not one encouraging employers either, with business expansion being ruled out during this period of crisis that seems not to end.

The Emil Boc Government is not able to give confidence that things will change for the better. In order to survive, Romania will have to borrow EUR 5-6 bn in 2011. In addition, payments will be made out to the IMF, WB and EC, representing the interest on existing loans. Cornered by financial strains, the Bog Government is looking for extra resources to cover the holes in the budget, although the sources are becoming scarce. The excise duty on tobacco and fuel has grown. Even the new regulation currently developed by the Ministry of Transport on the obligation to equip cars with winter tires as of the autumn of 2011 has a budgetary sub-text, the state expecting to cash substantial amounts in VAT from this new move (some EUR 443 M).

How could Romanians be optimistic as long as the government has a popularity rate not exceeding ten per cent and latest decisions pending between ridicule and uselessness? We find out that the Government Secretariat General alone spends over EUR 24 M every year, that the ‘First Home 2’ programme will swallow in another EUR 200 M, although the success of the measure is debatable to say the least, that the Minister of Development and Tourism, Elena Udrea, intends to spend EUR 320 M on the construction of sports halls and event halls! In the rush of identifying resources – small but better than nothing – the Executive touches the ridicule at its very weekly meetings. They are now discussing health insurance subscriptions even for people with small income, military pensions, shorter and less paid child rearing leaves, normative acts on the calculation of social welfare considering … the number of household poultry and cookers with four hot plates, plus a chicken and duck headcount, based on which the aid will or will not be granted!

All this happens after rather worrying new year news. In spite of PM Boc’s promises, military retirees have received cut pensions, some below the announced threshold of RON 3,000. In the healthcare system the shared cost scheme has been introduced, translating into new taxes payable by patients and hitting pensioners. Medicines are now compensated in increasingly smaller percentages, while the price of food and non-food goods is reaching staggering levels. The official statistics naturally indicates an inflation rate of 7.9-8 per cent in 2010 (the forth year when the inflation target was missed – this time because of the VAT hike from 19 to 24 per cent last year). But the calculation of inflation rate only considers basic goods and energy expenses in a certain proportion. The rest of goods a person buys are not considered. This is why we believe that a statistic describing the decline of the purchasing power would be more useful. We may have the revelation hat it has dropped by a quarter in the last two years…Under such conditions, where the government’s concerns are of a purely ‘fiscal’ nature, without ‘building’ anything, one should not be surprised that Romanians’ enthusiasm about the new year has dropped to minimum levels. Eighty-seven per cent say the economy is falling and 72 per cent expect further price rises in 2011.

Looking at all these trends with detachment, someone may suggest that the solution for coming out of crisis and stimulating the economy would be the attraction of foreign investment (also going down in the last years).

However, it is the opinion of Mark Mobius, President of Frank Templeton (company managing the Proprietatea Fund), that ‘currently, investors receive a very bad and disrespectful treatment in Romania, and no fair treatment in the justice system.’ On the other hand, he says Romania has an incredible growth potential, by even 5-6 per cent rather than 1-2 per cent as forecast, if it manages to gain investors’ confidence.

Oops! Justice again? And we thought that only the EU has some sick inclination towards describing Romanian justice as… perfectible and keeps the MCV monitoring on without a reason (!) Since the missing of the Schengen objective seems highly probable, it is no surprise that Romanians lose their optimist with the every month that goes by. The little light at the end of the tunnel, looked forward to ever since 1989, is still a poor rush light.

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