(story to be published in tomorrow’s issue, March 9)
The IMF directors’ decision to deny Romania even a 4-6-week “technical extension” of the standby accord, requested by Prime Minister Mugur Isarescu, clearly shows that we will not get a dime from the Fund this year, as we will not receive anything from the European Union. The IMF experts, who had not spoken for or against the Isarescu cabinet’s 2000 economic programme, have obviously sanctioned the Premier’s attempt to break out of the patterns the Fund applies everywhere in the world, which so far have cost Romania three years of economic decline. First, there are the fiscal reform measures the Government adopted without asking for IMF permission, second, the projection of economic growth directly out of investments, and as early as this year. On the other hand, IMF’s standard programme, applied everywhere in the world, first requires the taming of inflation and deficits. These are essentially good goals, but after an enormous peacetime economic decline, any government’s duty is to be preoccupied by economic growth rather than inflation. Even less comforting to anyone is the forecast of inflation in accordance with the IMF, an obviously unrealistic figure, as proven by the experience of the latest years. The same experience shows that inflation, budget deficit and foreign deficits could not be reduced simultaneously. What could the IMF directors possibly find so wrong with the Government so as to turn down a few weeks of extension for the accord that expires at the end of March? Nothing very concrete; and it’s not that some particular parameters were not achieved. Only the impression that revenues planned in the draft budget seem too high and expenditures seem too low, as well as doubts over the Government’s salary policy. In Bucharest, the impression is increasingly heavy that the IMF is driving in circles and has no intention of giving out any money this year. But the refusal of a simple technical extension – a minimum sign of goodwill that would not have cost the Fund one dollar – has bewildered even those ministers in the Isarescu Cabinet that have grown accustomed to the subtleties of the institution in Washington. Of course, if their experts would carefully run through Romania’s economic figures, they could find plenty of reasons to say no, but IMF accords, although they procedurally revolve around performance criteria, serve rather as a signal for capital markets. In other words, IMF money is little even if one gets it, but having an accord gives the country a plus. Hence, although the institution’s functions and levers are financial, its signals are political. Politically speaking, the Romanian state has earned a minus, telling the rest of the world not to bring money to Romania. We are therefore in a crunch we will have to escape all by ourselves, after it has become clear that even the money promised by the European Union will not come this year, but next year the soonest. Naturally, procedural issues have been the official reason for this. But the EU, even more than the IMF, is a political institution, and allocating money to a country invited to start EU accession talks in Helsinki would have been first of all a positive political signal. As it was clear that the decision in Helsinki was a political gift to Romania, very loosely based on economic performance criteria. Only that, in our situation, statements not backed by financing are little comfort. The decision of the two international institutions should act as a cold shower for the entire political class in Bucharest. At this moment, it becomes increasingly irrelevant whether the EU and IMF refused to make a gift to the Power or made a gift to the Opposition, in view of the elections. If the Isarescu Government will fail to master an economy that has fallen into a deplorable state after ten years of wobbly or mistaken decisions, it will not matter who will ultimately win the elections. More important is that whoever emerges a winner inherits a live horse, not a dead one.