Who stands to lose? Romania, as usual

(story to be published in tomorrow’s issue, April 4)

The election campaign promises to occasion a bitter clash between the main political forces on both sides of the barricade. Considering the grave economic and social situation, the opposition will objectively attempt to place the electoral confrontation on this ground. While the current government will, also objectively, try to shift this confrontation into collateral issues, at best into foreign affairs, where the coalition believes it is better placed in terms of international credibility. Perhaps not coincidentally, we have witnessed the short-circuits of the so-called “red telephone.” Against this background, political forces in power, especially PN?CD and the Cotroceni Palace, are mounting an offensive to warn that Romania might miss the train to the European Union and NATO if PDSR and especially former President Iliescu return to power after the elections. It is interesting to point out that the media support of this idea was joined by some political personalities in the West, such as the American Senators Wolf and Smith, and, much more importantly, representatives of international rating agencies such as Standard&Poor’s, which issue sovereign ratings and therefore determine access to foreign financing. These agencies in their turn warned that Iliescu’s return could block reforms, which are weak today and not irreversible, and under such circumstances foreign financing for Romania would be suspended permanently. Useless to say that foreign financing is crucial for many years henceforth, and with special meanings in this electoral year. According to the Government and the National Bank, with the reserves available and with the funds that are known for certain to enter the country, Romania will be able to finance its foreign service this year – both the foreign debt and the current account deficit – probably even thinner than last year. But Romania needs foreign funding to relax the burden of payment as domestic public debt, either by squeezing the loop around the people’s neck, or building at least something, because it has been demolishing all around without putting anything back into place. If, as last year, Romania does not again lack access to foreign resources, it will have to transfer to the populace every payment in the account of foreign and domestic debt. The impression of some circles monitoring Romania that this year there will be no additional restraints compared to last year, is correct only to the extent to which it refers to Romania as a financial entity, but is inexact when it refers to Romania’s population. Without net foreign funds, Romania’s population, unlike the previous years, will have to underwrite the burden of net payments for this year’s foreign debt, as well as the burden of payment for last year’s public debt. Without foreign resources, this overall burden may not weigh as much on the populace only if it is accepted that Romania ends the year with less currency reserves, but this will mean an end to any outlook for the year 2001. It remains to be seen how the populace will take this burden. Most probably, with social outbursts. The social balance in Romania is already hanging on a thin thread. And it is predictable that the only alternative to a major social upheaval will be a major inflation, which, lacking real foreign resources, will be the only way to put off the cost of the constraints. Without foreign resources, it is economically impossible to have low inflation and social stability in 2000! How do these demands for foreign funding and their economic and social implications relate to problems created by the electoral campaign in general and the turn it has taken through the said confrontation between the power and opposition over credibility in the West? The situation is ridiculous, with so many things to laugh about had they not been deplorable. Circles of the current power are warning that if PDSR returns to government, there will be no more foreign financing. But above that, there is no money coming even before the elections. In a hilarious way, there is the attitude of foreign personalities and even rating agencies warning that if the opposition returns to power, Romania will no longer have foreign funding, but this money is not being offered under today’s political conditions, when the opposition is still in the opposition and the government is led by those who, at least indirectly, enjoy greater credibility. Clearly, without foreign funding, the elections will unfold with the eyes on the real state of the economy. Therefore, the handicap will belong to the power, while the wildcards – to the opposition. From this standpoint, the opposition receives an unexpected gift. If the foreign money was coming or would be coming, a certain economic beautification could or could have been done and the gift would have gone or would have belonged to the current coalition. Politically, it is much more correct without this money, but socially, it is dangerous! With the current state of the economy, social explosions are always possible. But obviously, Romania’s social problems are not the West’s concern, only Romania’s! The reality is that foreign money is a national stake that is too important to be turned into an electoral game. It is enough to put on the shoes of a private foreign investor. Whether it comes from abroad or from Romania, the signal perceived by the investor, who has the right to doubt the political path Romania might be taking, is that a waiting stance is in order. Not one move until the elections! We will see then. If we are told, from the very inside of Romania, to watch out, we will have to sit and wait! And we’d better watch out, because, as the polls are revealing, the opposition and not the coalition stands to win the elections! This is how foreign investors are really staying out of Romania, and they will not come at all until the elections. This is how, until the elections, the coalition is affected, because before the elections, it would need foreign money to at least paint the fence with. After the elections, the current opposition could be affected, if it wins. Overall, however, the Romanian economy is the one really affected, before and after the elections.