I will begin with the bad. On current trends we are doomed. If
Romania maintains the current rate of growth in its public debt, we
will, within two to four years, hit the same brick wall that Greece
has recently become acquainted with. This will lead to sharp
spending cuts, diminishing already insufficient outlays to critical
sectors such as health, education and infrastructure. Pensions, in
many cases barely enough to survive on, will become even tinier.
Poverty, already a significant scourge in Romania, will
blossom.
Our political class has shown an uncanny capacity to simply not
care or worry about the future. The money it spends is laced with
populist appeal, catering to special interest groups, if not to
their own pockets. Fiscal discipline is hamstrung and budgetary
expenditures are nearly solely composed of expenses as opposed to
investments. The fiscal burden is one of the lowest in the EU,
which is ridiculous given the tremendous need for investment
Romania faces. Speaking of investments, they hardly exist, most of
the funds going to fund public servant salaries and benefits,
pensions and acquisitions of consumables. Not focusing on investing
robs us of the long term returns and benefits (i.e. revenues) which
would ultimately fund the initial as well as ensuing investments.
Merely spending guarantees that we are wasting away one of
Romania’s few advantages: a low public debt to GDP ratio.
This will not change. It will not change because there is no
incentive for the ruling class to change its ways. Its interests
are self centred and short term. Eat today what you can, for who
knows what tomorrow will bring is their mantra! This is true across
the board; no parliamentary party is exempt from this.
The electoral process is not a solution, as the system is gamed in
such a way so as to prevent an authentic alternative from seeing
the light of day. It will take decades, if not generations for this
to change. And sadly we do not have the luxury of waiting this
out.
No, Romania is doomed. Doomed to failure and poverty. Doomed to
seeing its brightest and most disciplined continue to leave. Doomed
to being increasingly irrelevant and dependent.
But perhaps all is not lost. We are a country of unrealized
potential. Romanians when challenged, even by the best, tend to
rise to the occasion. This is true in London, New York and Paris.
Sadly this is not often also the case in Bucharest.
The indolent and kleptocratic nature of our political elite might
also hold the key to our salvation. The recent troubles faced by
Greece and to a lesser degree by Portugal, Ireland, Italy and Spain
might, with a bit of luck, lead to an environment where Romanians
can excel in Romania, as well as abroad.
Let me explain: the EURO is born out of a fundamental structural
paradox. At the core it is a monetary union, without the political
clout to enforce budgetary discipline or set a common level of
taxation. Inevitably some states will exploit this loophole to the
detriment of those that are making the necessary sacrifices. As is
happening now with Greece and others, those profligate spenders
will soon come to depend on the generosity of those who maintained
a prudent and wise approach to public finance, and that generosity
will not come without a price in terms of sovereignty.
Put differently, the Euro’s intrinsic contradiction holds the
answer to its survival: increasing degrees of political union,
including joint fiscal and budgetary policies are the only remedy
which will tame the current imbalances threatening its existence.
Furthermore, leaving the EU is not an option as the economic cost
would be such that it would be unacceptable from all points of
view. The EU has no path to exit the club because none is required.
Leaving would be similar to a patient unhooking their IV prior to
an operation meant to correct a life threatening condition – the
patient would risk death.
Romania’s political class has squandered its chance to prove that
it can govern the country. And given that it is unlikely to
disappear any time soon, it must soon face facts and surrender the
vestiges of power to a more competent supra-national authority. Of
course this will not happen overnight and not without a fight. But
on present trends it is inevitable – sooner or later their
incompetence and greed will put them in a position of incapacity to
further exercise their power.
Already such approaches are being mooted in the case of Greece.
Other nations in similar situations are only a step away from
facing the same music. The EU has turned a corner. As I have
previously written, 2008/2009 will in fifty years be seen as a
turning point, not unlike what 1989 unleashed. Clearly China has
started on a path of increased self-affirmation and importance,
challenging the existing unipolar order. The EU, as well, will be
forced to accept ever deeper integration if its members are to have
a chance at economic and political survival. In this lies Romania’s
salvation, and the more incompetent and greedy our political elite
is, the sooner we are to get there.