The real political and trade unionist plot, which currently exists in Romania, blocking any effective restructuring of real economy has affected Mugur Isarescu as well.
Though the Premier has exceptionally negotiated an agreement with the International Monetary Fund (IMF), which, for the first time, stipulated regulations meant to impose changes in real economy, nothing was accomplished, after all.
The expected salary revolution within regies, national companies and state owned enterprises generating losses lost its breath before getting to be put into practice, while the scheduled, unrealistic reduction of arrears turned into an increase, according to a famous joke saying “yes, it was about a prize, but it was a prize to be taken, not to be given.”
The Premier remains confident, but he cannot hide his concern, as long as economy seems to gradually come back to former bad habits of the years after December 1989, after having, for a short period of time, seemed to behave like a real market economy, in an incipient state, nevertheless, but still a market economy, after all!
Following a lack of physical financing, imports decreased over about a year, as a normal consequence of output decrease, Romanian economy seems to have adopted over the past couple of months the old habit of converting in imports any foreign money, effectively or only potentially available.
Consequently, commercial deficit has, following massive imports, become again a menace, though exports registered serious increase.
The anti-economy within the economy started to have disastrous consequences. Dramatic price increase continues, in spite of consumption decrease. The economic anomaly “increasing prices against decreasing consumption” currently has really disgusting aspects in the domain of public utilities (electric and thermal power, water, public transport and phone services).
Moreover, there is another nonsense that has lately become customary for the Romanian economy. Savings are decreasing, and money on the market is physically ever fewer in real terms. Paradoxically, the cost of this money is not increasing; on the contrary, it is decreasing. Interests are cut down.
Banks, state and investment funds are fighting over fewer and fewer money, but they also pay less and less money! Interests’ cut down having dangerously reached a level lower than inflation rate can blow out the fragile and unstable macroeconomic stability. The race for the dollar threatens the exchange rate and consequently domestic inflation can get out of control. Compromising savings by incidence would destroy any perspective for starting again investments as a basis for the expected economic growth.
A too long domination of anti-economy in the Romanian economy is again showing its consequences.
After monetarist recipes had imposed the absurdity of interests that were almost double as compared to inflation rate – allegedly meant to fight against inflation, which they hardly managed to “tickle” – banks got used to exist without taking any risk, that is without lending money to real economy anymore, but only to the state by acquiring government bonds, living in fact out of the respective revenue, differential as compared to inflation, which they usually derived from society.
Lack of economic and especially industrial restructuring supported their choice of not having anything to do with them. Thus, banks became helpless when interest rates went down due to an unusual event in Romania, but commonplace elsewhere. NBR’s (National Bank of Romania) monetary policy and Government’s fiscal policy were, for the first time, congruent, exactly when the Governor became Prime Minister.
Banks are full of money they don’t need so they urge the state to issue bonds with convenient rates, which keep providing a differential rent against inflation. This is why, though there is ever less physical money on the market, many of it seems to be excessive. T
hose who need it cannot get it, while those who have it don’t need it. This is square anti-economy. While there are no resources to honour on time the payment of pensions and salaries, while the army has no food, the police has no gas, hospitals have no drugs and companies have no credits, the banking system has plenty of money it does not know how to use.
There isn’t any mechanism that might, on a profitable basis for the economy, irrigate droughty places with money derived from the swampy ones.
As a last option, the state will issue bonds with “convenient” interest rates, so that the ruining rush to the dollar might be stopped, putting again on the shoulders of population the burden of the differential rent for the banking system.
The state will probably resort to this formula because the monetarist networks, such as the IMF, which are responsible for this situation, do not have any solutions.
Should we believe that these are the only manifestations of anti-economy? Not at all! Here is another one. The aid fund for the unemployed ran out of resources. Not because of the excessive number of unemployed, but because money for pensions was derived from this fund, as for years on end, people retired to avoid being laid off!
We don’t know if somebody will learn from this nonsensical situation created within the Romanian economy, which seems to be a dead end. Let’s not fool ourselves, the Isarescu economic growth, based on external deliveries’ increase but lacking export offer’s restructuring, cannot be a solution.
A new economic policy is needed, as the one that has already been applied, more or less systematically, cannot save Romania from a disaster. Even if such a policy could have led Romania to healthy economic growth at a certain moment, this opportunity was wasted, as things were not done at the right moment.
Now, Romania needs different measures. Without heroic sacrifice meant to provide new resources for investments, the vicious circle will never be broken.
Demolition without construction leads to nowhere. Reform without investments is nothing more than another Communist-styled “Chant of Romania!”