The following passages are excerpts from 'European Economic Integration', a new book by senior Romanian diplomat Radu ?erban. His publication analyses from a Romanian perspective the state of Europe's economy, looking into prospects for growth, a 'Tobin tax' on financial transactions and the role of ratings agencies among other issues.
Radu ?erban is a senior Romanian diplomat and a former co-secretary of the EU-Romania Association Council. He is currently serving as Minister Plenipotentiary for Economic and Financial Cooperation at the Romanian Embassy to the United Kingdom.
He is the author of four other books on Europe in addition to 'European Economic Integration'.
Why this book?
"The book brings a Romanian insight, honest and open, signalling that we are here in the EU, with our good and bad sides, with our own understanding of the European Community. I am also trying to understand the EU's place in the world economy and Romania's place in the European economy.
What are we learning from the present recession? After all the pain it has inflicted, what opportunity is there ahead for Europe and particularly for Romania?
We need our thinking, our opinions, our food for thought, specific to Central and Eastern Europe, specific to the new member states, specific to Romania. Many think-tanks in Brussels and in different European cities are lacking the Romanian insight. Professor Dariusz Rosati in Poland is a good positive example, or 'best practice' to follow.
We need to be, steadily, more vocal, we need our opinions included in the deliberations of the European institutions. We need more self-awareness about our role in Europe; we need more self-confidence in our capability to improve the EU in some respects."
On the European Globalisation Fund
"Mahatma Gandhi allegedly said 'if you don't ask, you don't get', which might explain the lack of funding towards rebuilding Romania's economy. Romanians too have similar sayings, such as 'if you ask, you won't die'. If we only followed our own wisdom, we could extricate ourselves from this conundrum, resembling Euclid's theorem that two distinct, non-parallel straight lines meet only once […] just what Romania and the EGF have done so far."
On Romania and the Tobin Tax
"The Tobin tax is back in the news because of the global economic crisis. Sifting through the debris of the crisis, we seem to notice a shining precious stone that is currently under scrutiny so we can determine whether it is a real diamond or a shard of glass.
Compared to outlaws, the Tobin tax is less known in Romania. However, the tax was embraced by the country's president during the European Council of December 11th, 2009. The support message submitted to the IMF has been endorsed by all the heads of state and government in the EU.
During the autumn of 2008 the Romanian leu suffered from speculative attacks, an incident that illustrates the validity of Tobin's theory. The risk that the speculators would suddenly withdraw their currency from the market threatened the nation with a dangerous chain of harmful economic developments, including higher interest rates and soaring inflation. But the National Bank of Romania proved strong and able, thereby avoiding major risks. Had a Tobin tax been in effect, we might assume that speculators would have been less tempted by the Romanian market."
On Romania's role with the G20
"The European Union has become a key area of convergence for Romania's interests. If it had not become a member, then the country would have been merely a spectator before this impressive infrastructure of global economic cooperation.
As a part of the European construction, Romania contributes to formulating objectives and positions on behalf of the Union in the G20. Prior to the Pittsburgh summit, European heads of state and government met in an extraordinary session of the European Council in Brussels on September 17th, 2009. The objective was to harmonise their positions and ensure that the European delegation has a coherent, unified mandate. Romania participated in these deliberations too!
In preparation for high-level reunions for finance ministers or central bank governors from the G20 countries, EU members meet to consult. These are fora that allow Romania to state its positions and policies, pursue its interests and influence the final EU mandate."
On Kent Street and the rating agencies
"Among Romanians, Kent is one of the most popular British geographical names. Unfortunately, this is due not so much to the tourist and academic attractions in this county, but to the cigarette brand that served as a currency at a time when the Romanian market was heavily constrained. Because the quality cigarette supplies were missing from the free market, they were mostly exchanged on the black market.
The street in Bucharest where such transactions took place was known as Kent Street. Kent Street eventually disappeared from Bucharest's map, after the cigarette market had been liberalised. Following a reverse course, and perhaps oversimplifying things, we will draw a parallel with the offer of the credit rating agencies.
Even if ratings were prohibited, high quality rating would still be in demand and clients would purchase it regardless of the strict regulations. This means that we would have a black market or a Kent Street for rating services. It is likely that rating agencies foresee such a development, which may explain their embrace of the new EU regulations. However, the rules were carefully written so as not to push the ratings market underground."
On the European Financial Stability Facility
"Why does Romania, with a debt level of 23.7% of GDP (ranking fourth among the 27 members), raise more concern than Italy, indebted at 115.9% of GDP, or Belgium, indebted at 96.7%? Why do rating agencies rate Romania, which is outside the euro zone, better than they rate Greece? Why is Germany, indebted at 73.2% of GDP, considered more solvent than Estonia, which has a debt of only 7.2%?
The answers to such bold questions can be found in a complex analysis of the states' economic potential, discerned also from the capacity to manage annual budget deficits, to balance the states' revenues and spending, overlapped with long-term growth potential. Neither the deficit nor the rating agencies' ranking reflects real solvency, which remains an unknown variable in the EFSF's equation."