Why can’t Romania get through the crisis?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Central and Eastern Europe may have returned to economic growth but this does not include Romania, which needs to face reality and change its policies if it is to emerge from the crisis, writes Romanian MEP Corina Cretu (Socialists & Democrats), a member of the European Parliament's special committee on the financial, economic and social crisis.

This commentary was published on the Guest Blog of the website Blogactiv.eu.

'''Emerging Europe and Central Asia have returned to growth, but there are concerns about unemployment and the sustainability of the economic growth […] The recovery was not at the same level in all the states. Croatia, Latvia, Kyrgyzstan and Romania have not yet returned to growth' – I quote the World Bank Vice-President for Europe and Central Asia, Philippe Le Houérou.

Of course, nobody is aware of this in Bucharest as, starting in November 2009, we have come through the economic crisis every three months, according to the propaganda promoted by the ones holding the power, especially by President Traian Basescu.

Under the heading 'emerging Europe' are hiding, in fact, Central and Eastern Europe: i.e. the former socialist countries. Even though some countries in the region, like Russia and Poland, have managed respectable performances in these conditions, the crisis revealed structural weaknesses of their economies, the fact that even after two decades of economic 'reforms' (the quotes are justified by the fact that reformism was rather an alibi to justify the transfer, often illegally, of public property into private hands) they have not managed to restructure their productive apparatus, and [have] furthermore found themselves converted into marketplaces for others.

Based on consumption, the economic growth was misleading, which should not be an issue to blame, but the consumption was not financed from money emanating from the real increase in purchasing power of citizens, but from consumer credit .

Now, when the financial and economic crisis turned into a public debt crisis, forcing governments to adopt austerity programmes, which dramatically reduced purchasing power and public investment, this engine of economic revival can not be used. Furthermore, deindustrialisation makes these countries unable to be strongly export-oriented to compensate for reduced domestic consumption.

Not only [do] the states in these regions have to reflect on the economic policies [of] the past twenty years, but also the international financial institutions: the IMF and World Bank, who provided the ideological and associated funds to support economic reforms necessary for the transition to the economy market.

The IMF and World Bank have lagged behind in this respect. As shown by the situation in Romania, the old recipes of the Fund have abundantly proved inadequate in the past twenty years. The effects are seen, at least in the case of Romania.

The World Bank, which by the nature of its attributions, is closer to the realities of countries carrying out the programmes, has changed its approaches and priorities in this period, and started focusing on issues that may have greater impact on the daily life of the citizens. In doing so, the World Bank has doubled the credit level, from $3.9 billion [€2.8 billion] in 2000-2008, to $9 billion [€6.4 billion] in the fiscal year 2009, in order to help the countries in the region affected by the crisis.

During the fiscal year 2010, the World Bank gave loans estimated at $11 billion [€7.7 billion] – 10.5 billion from the International Bank for Reconstruction and Development (IBRD) and 0.5 billion from the International Development Agency.

From the discussions I had with the representatives of the World Bank, I could deduct their concern about the presence of economic and social underdevelopment in many EU countries – and not referring only to the countries that have recently joined the Union.

These facts reveal the contrast between our illusions of economic development and individual and national wealth from the early 1990s and the realities of today, which require us to re-think how we structure the priorities and policies in economic and social matters. The World Bank could be a good partner in this process, even just for the fact that is not confined to purely economic aspects of problems and has an increased sensitivity to social issues.

At the moment, unemployment is by far the most penalising phenomenon, both economically and socially. If long-term, unemployment increases poverty and its associated phenomena.

Romania should aim to reduce unemployment; this should be the objective of any economic recovery programme. The Romanian economy is unable to generate jobs. Officially, we have few unemployed persons compared to the European average. But it is just statistics. The reality is different. The appropriate policies must be changed, not crappy slogans.

While we keep on looking at the macro-economic aggregates, without thinking about the real economic facts, we will not get through the crisis and we will still be the exception to demonstrate the risks of bad governance.''

Subscribe to our newsletters