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ROMANIA AND THE ECONOMIC CRISIS – AN EVOLUTION FILLED WITH PROMISES
AND INCONCLUSIVE RESULTS
CRISAN Silviu,
Professor, PhD Faculty of Economic Sciences „Lucian Blaga” University of Sibiu
Telephone: 0269/21.03.75, email: [email protected]
Abstract: The way in which the state authorities have understood and dealt with Romania’s complex
social and economic phenomena, both internal and external, phenomena which contained several unknown elements
has not always influenced favourably the transition to the market economy, the functionality of market economy
mechanisms and the constitution of the state of right. The consequences of this situation can be found, on the one
hand, in the costs which have significantly exceeded all expectations and in the ability to bear them, and on the
other hand in the results, much below what was necessary and expected.
The economic and financial crisis following many years of economic growth has been the most difficult
challenge our country has been faced with since the moment an option was made for a new social and economic
system.
How has this crisis been managed, what good and bad solutions have been put forth, what are the
successes and especially the failures of this period, constitute both isolated and as a whole the object of this
material.
Key words: economic and financial crisis, management, commitment, anti-crisis program, results
JEL classification: F15
The recent history of our country has shown that, more or less rightfully so, Romania has
stopped being merely an insignificant part of a significant economic and social reality for the
evolution of humankind. Romania, albeit with a certain hesitation, has begun to generate hopes,
actions and possible accomplishments. The last two decades of sometimes not so successful attempts to
establish a connection with the realities of other countries which have represented and still represent the
true engines of technical and scientific progress and of durable social and economic constructions, have
revealed a truth beyond doubt regarding both the present and the future of humankind. The great truth
beyond this period in the evolution of nations is that, achieving real values in economy and society,
values which until not so long ago were only desiderata for our country, and too little or not at all
accessible or achieved, is not possible without true initiative, effective involvement, responsible
commitment, entrepreneurial realism, political will and as little populism as possible.
One of the important gains of those countries which 20 years ago abandoned a mainly
anachronistic socio-economic system is an awareness of the fact that there is a coherent and dynamic
system of written and unwritten rules which guide the present-day performance of the democratic and
economically developed world. The economic and social performance of these countries also shows
that economic, social and political decisions are determinative for any nation. The immediate or
long-term effectiveness of these decisions is possible only if their level of importance is the same, a high
one, even if their adoption has to be done and is actually done differentially.
As a result, an adequate analysis of the current situation in the economically developed
world, with established democracies on the one hand, and of the emerging economies of the other
countries on the other, suggests that:
¾ regardless of a country’s level of development and progress, the two components of the
economy must be correctly and reciprocally related: microeconomics and
macroeconomics. At the same time, one must take account of the fact that „any attempt to
reconcile microeconomics and macroeconomics must be treated with caution” 1 . And this
because, although any macroeconomic approach should take into account possible
compatibilities with microeconomics, situations in which „certain microeconomic models of
1
Munday, S.C.R. (1999), Idei de avangardă în economie, Bucureşti: CODECS, p.62.
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corporate behaviour supply completely different macroeconomic implications from others” 2
are not necessarily exceptions;
¾ the compliance of a competitive economy with the necessary parameters of existence and
performance forces a country’s legislative and executive authorities to promote, develop
and exercise an institutional system that encourages and supports free economic
initiative, this representing the main element of real and competitive economic
development;
¾ that which is important, sustainable and enduring in economy and society must be
managed through concrete, coherent and well-timed actions that should meet the
demands of the present. Equally important is the realistic and responsible evaluation of the
short- and long-term evolution of economic and social phenomena;
¾ even in the conditions of an inherent economic cyclicity resulting into smaller or larger
involutions, an economy’s viability, strength and consistency can be ensured if
measures are found and applied that are based firstly on economic and financial
resorts and only secondly and exceptionally on administrative measures of the state;
¾ solutions should be put forth and applied not only with acumen but also with
determination, so as to ensure a maximally efficient management of resources that are
available or can be attracted by society. Depending on the circumstances, this management
should be equally efficient both for situations of economic growth and of recovery from
crises, crises whose emergence and impact are theoretically demonstrated and confirmed by
the economic reality;
¾ the current trend in science, technical and technological evolution, which generates an
interest in moving production out of developed countries to countries where labour
costs are low or very low, can begin to be considered from the perspective of emergent
countries, too. This statement remains true even if it is unlikely that some countries’
dramatic economic growth of 2008 will be repeated soon;
¾ the increase in budget deficit and public debt becomes a growing problem for
economically developed countries (USA, Japan, Great Britain 3 ), too. In this situation, in
countries representing the first and the third world economies (USA and Japan) or the
second European economy (Great Britain), solutions are sought to reduce the effects of the
economic crisis, the most recent and serious of these being a rise in budget expenses and a
decrease in budget revenues;
¾ in the conditions of the current economic crisis, whose intensity has exceeded the most
numerous and authorised forecasts, and in the situation in which possible W recessions* are
beginning to appear in some countries, protectionist intentions on the part of large
economies are not totally excluded. This is taken into consideration even though in the
recent past a rise in protectionism has been largely prevented. In its weak form,
protectionism can still represent an option. If we take into account the fact that solving the
unemployment situation in developed countries can remain at the level of a desideratum,
resorting to protectionism can be a possible, though unlikely solution;
¾ the sharp and fast increase in the GDP of emerging countries such as China, India or
Brazil will lead to their increased role not only at an economic level, as these countries
will be able to claim that „they deserve a more important role in the IMF” 4 or in other
economic, commercial or financial organisms having a regional or global representation;
¾ the avoidance of the economic crisis, a correct evaluation of its causes or a good
management of its effects are no longer privileges of countries with a tradition in the
market economy and with well-established democracies. In this respect, an example is
Poland, which although went, or better said, came back to the market economy only 20 years
ago and has been a member of the European Union for only six years (1 May 2004), being
2
Munday, S.C.R. (1999), idem p. 62.
According to „Financiarul” of 8 March 2010 (the article „Greece is being pointed at, but the planet’s heavy
weights have bigger problems” by Emilian M. Dobrescu), in 2011 the USA’s federal debt will exceed 14,000 billion
dollars, Japan will have a public debt twice the size of its economy and this year Britain’s budget deficit is forecast
to reach 13.3% of its GDP.
* A W recession is characterized by the fact that after a sharp decrease, the economy may record a series of
contractions and expandions
4
Dominique Strauss-Kahn, Standard.ro, 30.03.2010.
3
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faced for the first time with an extensive economic and financial crisis and recording an
economic growth of 1.7% in 2009, has shown that it possesses the decisional capacity to
manage its resources and actions so as to avoid recession in a year when in most countries
this was at a high or very high level 5 . As Wojciech Zajaczkowski, Poland’s ambassador at
Bucharest stated, the country’s economy grew in 2009 „due to the strength of the domestic
market, strict regulation of the banking sector, non-intervention of the state on the market,
exports support by zloty devaluation, EU funds and investments made for hosting the 2012
European Football Cup.” 6 Even if, obviously, the effects of the financial crisis have been
felt in Poland, too, their impact has been greatly attenuated by keeping consumption at
a high level. To these, one can add the fact that the Polish government did not intervene in
the business sector, not granting any assistance neither at the corporate level not at that of
economic branches;
¾ a possible end of the free market model does not represent a totally negligible
scenario. Such a supposition can be taken into consideration if we accept the theory put
forth by the American billionaire George Soros, who according to the famous economic
news portal Bloomberg said that „the current economic crisis is rooted in the 80s, in the
period of the liberalization of the financial system, and represents the end of the free market
model, which had dominated capitalist states until then” and that „the world financial
system has literally disintegrated”, this meaning that „there is no solution to the crisis in the
near future”;
¾ the intervention of the International Monetary Fund, the World Bank, the European
Union or of other regional or international organisms is meant to support emerging
states showing increased vulnerability in front of economic difficulties to manage economic
and financial crises more efficiently and correctly. Although this kind of intervention is
necessary, welcome and with positive results, the scenario put forth by Mojmir Hampl, the
vice-governor of the Czech Republic’s central bank and presented in the Austrian newspaper
Der Standard, should not be altogether rejected. Referring to central and east European
countries, the Czech official stated that „ what is ridiculous is that it was the IMF which
accelerated the whole crisis. Apparently, it was an attempt to save the entire region. Before
the crisis, the IMF had actually no clients. With the crisis and Dominique Strauss-Kahn’s
appointment, the fund found a new job and attracted more money.” 7
Starting from the above-presented evaluations, evaluations which took into account the general
social and economic context in which the economic and financial crisis appeared and spread in the last
period of time, it is natural to be interested in the way in which our country has dealt with the crisis,
the way in which the authorities have taken responsibility for their actions, what was wanted and
necessary to be done, what the obtained results are, what else should be obtained and the extent to which
these results meet the requirements, obligations and commitments.
Because there is a science of the well-done thing, and because what was going to be done was
not only difficult to accomplish, but it was also difficult to be in the position from where to do it, the
actions undertaken by the state authorities had to contain a certain awareness of the country’s
crisis situation, an accurate and correct definition of the character and dimensions of this crisis and
especially the setting up of a coherent and proactive system of economic and political decisions which
should lead to a necessary and efficient way to manage the economic and social processes and
phenomena generated by the crisis.
All these had to take into account the novel character of the situation, the fact that this was
the first time our country has been and still is faced with a financial and economic crisis of global
extent and recurrence. It is a crisis whose solution has not been and is not possible in a context requiring
only internal actions, but also has to take into consideration many external requirements.
The attempt to manage the crisis has become the more complex and difficult as it has to be
taken into account that our country’s previous performance was characterized by several years’
economic growth (2000-2008) and that, in the last period Romania’s economy had overheated. As a
5
By comparison, in the same year, 2009, Romania’s 491.27 million lei GDP saw a 7.1% fall as compared to 2008.
This cannot be due only to electoral causes (the elections for the European Parliament in June and the presidential
elections in November and December), the lack of any strategy for crisis management being a reality (Financiarul
newspaper, 22.03.2010 and ECONOMIE 2010, 03.03.2010).
6
„Financiarul” newspaper, 22.03.2010.
7
„Evenimentul zilei” newspaper, 06.04.2010.
200
consequence, there was an increase in gross GDP which exceeded the economy’s real and normal
capacity to produce goods and services.
To these one should add a significant idiosyncrasy which has increased the complexity and
difficulty of Romania’s general situation. This is the electoral campaign, which largely dominated the
year 2009 and was accompanied by a governmental crisis that was superimposed onto the acute stage of
the economic and financial crisis.
Faced with new challenges which were not only imperative but also vital for the present and
future development of our country, the executive had to prove it had the ability to manage Romania’s
economic and social situation differentially. Thus, the state authorities had to prove that, if in a period
of normal economic activity „the main goal set by every government is to handle the economy so as to
work at the highest parameters” 8 , in a period of crisis, the government had to prove that it could ensure
„the movement of the economy beyond the recession point” 9 in the conditions in which „national
economies have become extremely interdependent, from the point of view of reciprocal commercial
exchanges.” 10
Through all its actions, the executive has to ensure a certain level of performance for the
national economy, a level that should allow „a certain economic improvement” 11 with a view to
economic growth in the nearest future. This should happen in the conditions of an increased level of
„interdependence at a European level” 12 and a large part of the European Union countries may „return
to economic growth.” 13
In this context of largely general opinions, an analysis of the way in which the economic and
social situation was approached in our country before and after 2008 could show that:
¾ the economic and social realities of the past decades have shown that the whole of a
nation’s true values can be achieved and perpetuated in time only if, besides the
existence of favourable conditions of expression, most efficient means are found to
ensure a healthy economic development, based in its turn on those structural changes that
can allow resource orientation and allocation to those fields of activity having a high
productive potential and high productivity;
¾ of great importance from the perspective of Romania’s future performance, the option for
a new type of society, in which, on the one hand it is possible, necessary and compulsory to
promote established democratic values, and on the other hand it is stringently necessary to
create and develop an economic system based on the working mechanisms of the market
economy, has made it necessary to find new interpretations and approaches to the
phenomena, processes, events and situations that appear, exist, develop, progress or
disappear at all levels of a nation’s existence, that is macroeconomic and microeconomic,
of society as a whole, of regional and local communities;
¾ the both voluntary and indispensable connecting to a world, even though not entirely
unknown, surely subjectively and wrongly perceived, has proven to be not only difficult
but also lengthy, engaging big and very big efforts and costs which are not going to be
borne entirely by the present generation;
¾ of the many new elements the Romanian society has been faced with, through their
existence and expression, one is standing out as regards the implications is has had and still
has. This is competition, true competition which is most often tough and very tough
notwithstanding the environment in which it takes place, economic, financial, banking or
monetary, as it represents one of the main characteristics of the market economy;
¾ the emergence and consolidation of certain social, economic and leadership
structures has involved a complex process which took place mainly against the clock, a
process in which changes, be they important, radical, less significant, implicative or less
implicative, had to be correctly and efficiently managed in a period in which the
economy with all its positive or negative aspects was increasingly acquiring the distinctive
marks of internationalization and globalization;
8
Munday, S.C.R. (1999), idem p. 340.
Munday, S.C.R. (1999), idem p. 81
10
Munday, S.C.R. (1999), idem p. 81
11
Munday, S.C.R. (1999), idem p. 81
12
Munday, S.C.R. (1999), idem p. 81
13
Munday, S.C.R. (1999), idem p. 81
9
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¾ in the competitive environment Romania has become part of, economic and social
phenomena are characterized not only by complexity, variety and varying degrees of
intensity, but also by the uncertainty of their occurrence. Among these more or less
extensive and intense phenomena of the market economy, a special place is held by the
economic and financial crisis;
¾ the difficulty, accompanied by a series of errors, in the management of the current
economic and financial crisis has old causes that have deepened, or new causes not well
enough identified, understood and considered. Among the elements that have made Romania
not only economically weak in the confrontation with the economic and financial crisis but
also politically confused, the most representative are the following:
z the privatisation process, even if not coherent enough and incomplete, should have
been free of administrative interference from the state. In reality, even after privatisation
businesses remained largely dependent on the economic and power structures of the state;
z the parasitization phenomenon in companies where the state holds a majority
interest has increased, reaching such a level of expression that the economic and
managerial vulnerability of state-owned companies has become obvious and alarmingly
damaging for the national economy;
z the privatisation of state-owned companies which despite constant aids from the state
budget and in the absence of social and economic causes have not managed to become
performant and profitable, does no longer represent a priority for the government.
Their expansion and possible reorganization are considered to be more necessary and
suitable courses of action, although they have only been successfully finalized in a small
number of cases;
z the dimensions of the 2009 economic crisis are revealed by the 20% decline in the
level of businesses listed at the BVB Bucharest as compared to 2008, through an average
45% fall in profit. „Corporate profitability has been affected to some extent by the
reevaluation of foreign currency debts, as a result of the euro-leu evolution, highly geared
companies being most affected.” 14 ;
z with all the difficulties generated by the crisis there have been companies that have
succeeded in achieving either increases in the level of their business or a certain
profitability, or even gains on the two objectives;
z the banking sector crisis is mainly a result of the sharp increase in provisions for nonperforming credits. The decline in bank profit has been within a broad range, its values
standing both below 10% and close to 75-80%;
z the governmental anti-crisis programs that have been or at least are said to have been
designed and applied, have not had the expected effects in recovering from the crisis. The
causes are, on the one hand, the incoherence and inconsistency of these programs and
probably a certain lack of professionalism, both practical and conceptual, and on the other
hand, the often cited and persistent lack of financial resources. The punctual and general
inefficiency of the measures adopted by the executive concretely means „almost 1,000 job
losses a day, over 500 firms going out of business every day, financial blockage- most
often induced by the government- or the dramatic rise in the number of those who cannot
make their monthly payments to the banks” 15 . In the context of these opinions, there is the
belief that the only true anti-crisis program is the one resulting from the agreement with
international financial institutions;
z the deficient management of IMF and EU credits has led to their not being used for
the settlement of public debts to the private sector, having been directed to the payment of
public sector salaries and pensions. This approach has had as an effect the fact that, on the
one hand, private businesses did not have the necessary support in order to survive in the
conditions of economic crisis, could not keep or continue their main activities, and on the
other hand, it has shown that the much cited process of public sector restructuring and cost
cuts has not reached its objective. Moreover, the errors, incoherence and inconsistency in
„Legea unică de salarizare” (The single salary law) adopted in November 2009 and applied
14
15
„Financiarul”newspaper, 12.03.2010.
„Financiarul”newspaper, 18.03.2010.
202
since January 2010 have strained the relations between the government and trade unions,
leading to an increase in industrial actions, both in terms of number and extent;
z even if there have been successes in fighting the effects of the crisis such as the
attempted stimulation of activity in the field of constructions („Prima casa” programs in
their two variants) or the attempted stimulation of consumption by rethinking the old car
scrapping scheme, the maintenance of the leu-euro exchange rate, of inflation and interest
rates at around the estimated level, the merits should be divided between the
government and the Romanian National Bank, with a higher contribution of the
latter;
z although investment stimulation should represent one of the main points in any
anti-crisis program, Romania has not found the best ways to increase the
attractiveness of the Romanian economy for foreign investors. In the conditions in
which Bulgaria, for example, uses a flat 10% taxation rate for companies, Hungary has the
same 10% tax up to a certain ceiling (an income of 200,000 euros) and Poland is granting
considerable state aid to foreign investors, the 16% flat tax rate in our country no longer
represents that element which used to be deemed attractive and stimulating for investors;
z since February 2009, the government’s intention of launching as apart of its anticrisis program a concrete, 13 billion euros package meant to boost the economy and out
of which 10 billion euros should have gone to infrastructure investments, has not yet been
materialized. Although the causes for not activating this stimulus package are not known
with any certainty, most likely lack of financial resources or the inability to efficiently
manage them might be the main or even the determining cause.
In all this array of causes, of idea and solution proposal and withdrawal, of arguments and
counter-arguments, the opinion expressed by a World Bank official is significant, as it could
represent part of the solutions necessary for recovering from the recession the country is still in, and
which in future might represent the necessary and true resorts of healthy economic growth.
Present in Romania in the period 17-21 March 2010, Peter Harrold, the country manager of the
World Bank for Eastern Europe and the Baltic countries, showed that „these countries were the most
affected in the world” 16 , suggesting among other things that in order to ensure economic growth the
Romanians should work more and better, that it is industrial and agricultural production that
should lead to domestic growth not consumption as it has happened until now, that exports of goods
and services will have to rise sharply.
All these things will be possible only if the still excessively bureaucratic Romanian
administration becomes a truly functional one.
References:
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Munday, S.C.R. (1999), Idei de avangardă în economie, Bucureşti: CODECS;
http://ECONOMIE 2010
http:// standard.money.ro;
www.cotidianul.ro
Ziarul Evenimentul zilei, 2010.
Ziarul Financiarul, 2010;
16
The statement belongs to Peter Harrold, official of the World Bank and was taken over by Cotidianul site of 18
March 2010.
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