Not since Iliescu’s miners stormed the capital and savaged protesters calling for democratic reforms in 1990 did Romania manage to receive such negative attention from Western media. The dubious methods used by the USL (the social-liberal alliance) in trying to remove President Traian Basescu from power and the plagiarism scandal involving Prime-Minister Ponta are the present focus of negative attention. However, in order to correctly understand the present situation, we must first put things the wider context.
Romania, like others before, entered the E.U. on a wave of unfounded economic optimism and despite severe systemic problems such as widespread corruption and low productivity. The Romanian economy began to grow, but not because of sustainable development and long-term investment projects. Like Greece and Spain, but on a smaller scale, growth was artificially based on credit and production capabilities stagnated. Additionally, the consumer boom was supported by the huge amounts of money sent back by Romanians working abroad.
The international financial crisis found the Romanian government indebted and almost unable to pay for its internal obligations. Thus, in May 2010, President Basescu and the Boc government reduced the salary of all public workers by 25% and pensions by 15%, measure which made the Democratic Liberal Party highly unpopular. While austerity was a clear condition imposed by the IMF in order for Romania to receive financial aid, the amplitude of the cuts could have been smaller if the state’s treasury was not being leeched by corruption on a scale difficult to imagine. Its two main areas of manifestation are as follows.
The first dimension of corruption is represented by the state-run or state-supported companies, many of them relics of the communist era. Their financial losses are paid by the state, meaning with taxpayer money. Hidroelectrica (electricity production), Oltchim (chemical industry), the obsolete coal mining industry and others dry up the state’s treasury and offer poor service and products in return. Instead of privatising them, the state suspiciously preferred to maintain the status quo. Given the 1990’s ‘scramble for Romania’, in which well placed ex-communists or Securitate agents ‘re-oriented’ themselves to capitalism by organizing a mass theft of industrial and infrastructural assets, we can only suspect who the CEO’s of these companies are and why they are apparently immune from prosecution. Thus, the average salary for a truck driver at Hidroelectrica is 2,700 Euros per month and their personnel expenditures have shockingly increased by more than 4,451,000 Euros from 2011 to 2012. We can only suspect how much the director’s salary is. By contrast the average salary in Romania is 471 Euros per month, and the minimum social pension is 77 Euros per month. The state-run Romanian Railways (CFR) was recently given a 1bn Euros bailout, and yet the quality of the Romanian rail services has changed little since the 1970’s. In wintertime, crossing the country on train can take an entire day, and some tracks and bridges have not been changed for decades. If almost no investment has been made, how come the company has such a huge debt? No political party is prepared to honestly answer this question.
The second dimension of corruption is represented by dubious contracts between the state and ‘private’ companies. Contracts for public projects are given by unknown criteria and usually the company that wins the contract is not the most market-efficient, but the one owned by the ‘right’ person. For example, Bucharest’s streets are far from being in a decent condition, yet the curbstones throughout the city have been uselessly changed over and over again with public funds. Who owns the company that provided the construction materials? Correct. Adrian Videanu, ex-minister of Economy, ex-Mayor of Bucharest and vice-president of the Democratic Liberal Party. There are so many other examples of the state giving contracts to companies owned by government officials (so to themselves), that it would take a book to present them all.
The financial losses produced by these phenomena are staggering, and numbers are not yet fully revealed. In this context, it is hard to argue that Romania has a truly free-market economy. Economic activity involving infrastructure and industry are still, de facto, controlled by a corrupt state which essentially does business with itself on public expense. In this context, recent political events have threatened to upset this internal balance of power, and have caused a frenzied reaction to restore the ‘right order of things’. (To be continued).
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[…] Theoretically, the will of the Romanian people in the legislative field is represented by a bicameral Parliament, with a total of 471 members in a country of just over 18 million people. However, most parliamentary voting is secret: the public do not have access to voting history for parliament members. This is as outrageous as it is ignored: essentially, there are no solid criteria on which voters can make their decisions and assess the candidates. In order to become elected you need funding for the campaign and in the context of Romania’s struggling middle class and widespread poverty, this gives access solely to the corrupt oligarchy, whose source of funding was pointed out in our previous article. […]