2009 the year of Economic crisis in Romania

Economic Crisis in RomaniaROMANIA IN 2009- YEAR OF THE CRISIS.


2009 will be the year of crisis for Romania. In this 12 month Romania will have to cope with the effects of the powerful   economic crisis that grips the European Union, will have to go by two electoral process (European parliament elections in June 2009 and presidential election in November 2009), will have to accommodate a governmental coalition of two major parties and to cope also with political turmoil in this two major parties (Social Democrat Party and Democrat Liberal). 2009 will be a very interesting year for Romanian, the year when the political class will have to give his maturity exam in front of the most fear teacher in the world: the economic crisis.


2009- The year of economic crisis.

At the end of 2008 already the signs of economic crisis started to be present in the Romanian economy. In last two months of the year the Romanian National Bank (B.N.R.) loosed more than 1 billion euro string to support the national currency in front of the euro. Unfortunately this reduced the BNR reserved from 25 billion euro to 24 billion euro but with no effect, the Romanian national currency is at this moment at the lowest point in front of the euro from the last four years. Also the Romania national debt increased by 10 percent, in just two months, suffocating the economy. The internal debt also increased by 12% percent and the extern al trade balance also gets worsened. The growth of the economy projections were reduced from 6% to 4, 5% but other experts consider that the Romanian economy will be shrinking by 1% minus this year. Also the budget for 2009 is made on unrealistically projections as 10 billion foreign investments (from this 10 billions 1.5 billion are investments projected by Ford company, investments that will no longer come), also the collection of taxes already decreased severely cutting the governmental projections.

Real estate and banking –the worst hit.

In 2009 the worst heat will be real estate sectors. The decrease in home value and real estate property was 20% in 2008 and will be more than 40% (moderate projections) in 2009. Already in 2007 the square meter constructed in Bucharest was 2.000 euro, in 2008 decreased to .1500 and will further decrease to 900 in 2009 ( for new buildings) and under 400euros in old buildings. These sharp decrees will cost the real estate industry more the 5 billion loses in 2009 and projects of investments of more the 3 billion will be stopped in waiting of better times.     The crisis in real estate will hit hard construction company and construction material industry (they already announced a sharp cut in the prices by 50% from 1 January 2009). The banking sector will soon feel the hit, already two major Romanian banks requested aid from the Romanian government, all the banks that invested in real estate in booming years or opened special banks for real estate credits are suffering losses in there actives of more than 50% percent by the end of 2008 and the loose will worsen in 2009. The Romanian banking  system is very vulnerable to the crisis , is  depending by support of major European banks that are in major deficit this year , are confronted by a reducing market in Romanian and the rate of insolvability is rapidly increasing in 2009. This year we will surely see some major banks failing for bankruptcy in Romania.

Political crisis.

The end of 2008 has seen the birth of an unholy alliance, Democrat Liberals and Social Democrats after 4 years of name calling and suburban accusations of fraud and corruptions and dictatorial behaviors has decided for a governmental alliance. The only reason is transparent, access to governmental founds in time of economic crisis. But no one in this party is really satisfied. Social Democratic Party it is very large , with many interests in the economy and with a strong support from the local industrial key figures who are expecting a large part of the state help to bust there business in this harsh period. Social Democrats hoped that there electoral score will enabled them to govern alone. After  30 November elections they found them self’s having to share a squeezing budget with Democrat Liberals another strong economic party and the division of the budget in 2009 will make the life in the coalition more difficult then expected.    The new Emil Boc government is build by low politician figures, in-experience ministers that are disposable. Theodor Stolojan, the first named prime-minister, understood that this is an experimental cabinet for 9 months that will use only minor personalities and erode their political image for good. The Boc cabinet will be  responsible for unpopular measures ( frozen of governmental posts, reducing investments, bank bankruptcy, investors collapse, unemployment, surging inflations etc.) and all the members will found there political career compromised.   Mr. Theodor Stolojan will remained the secret weapon of the president for worsening economic crisis, to lead a cabinet of tehnitions and specialist to confront at the end of 2009 the economic crisis and help president Basescu  to win the elections. The first moment of difficult will be the June 2009 European Parliament elections on which the Democrat Liberals and Social Democrat will have to confront one another and still be in the same governmental coalition. Everybody will watch the electoral scores of National Liberal Party-PNL (main opposition) and if the P.N.L. will score well in this election, the coalition will collapse, because no party will like to pay for the damage of the economic crisis.  

So 2009 will see at least a change in the governmental formula, depending on the economic crisis, and two much contested elections.

Presidential contest.

The main event that all the political class in watching closely is the effort by President Traian Basescu to secure another mandate in November 2009 elections. The president makes the entire necessary step to have no serious opposition to this election. Because of the economic crisis and the hostility of the main mass media towards him the president has a special strategy for 2009 elections:  to eliminate all serious competition. To this aim the president makes the governmental alliance with Social Democrat Party to be sure that the main party will not put a serious contender in the presidential elections. Also the President put in the new government some Democrat Liberals with high profiles that could challenge his rule inside the party (Radu Berceanu, Vasile Blaga); this nominations will compromised them and removed them from serious competitor lists.   Also in 2007 the civic society launched the bid for presidency of Mr. Klaus Johannis, the mayor of Sibiu. Mr. Klaus Johannis is a very competent, honest and apolitical figure that will have real chances for a presidential candidature. But President Basescu suppressed this potential danger by offering Mr. Johannis a position in his Liberal Democratic Party and neutralized him. Another important contender is Mr. Sorin Oprescu, the highly popular, efficient and influential mayor of Bucharest. Mr. Oprescu is supported by civil society, by Social democrats and Liberals and democrat Liberals alike and also enjoys the support of Ion Iliescu former president of Romania. Until now President Basescu could not assure for him by any offer the neutralization of Mr. Sorin Oprescu candidature.  All the polls suggest that a race between Basescu and Oprescu is a draw one with no clear winner. A new danger is the rise of PNL leader, former Prime Minister Calin Tariceanu. A highly unpopular figure a few months ago becomes very rapid the key figures of Parliamentary opposition and as economic crisis and failures of Emil Boc cabinet are increasing he becomes more popular by the day. Enjoying high support in the financial world, foreign investors and key mass media owner Mr. Tariceanu becomes day by day an important challenge to President Basescu grip on power.     The victory of 30 November election and building a pro-Presidential cabinet in time of severe economic turmoil could cost President Basescu his new term in office. 

So Romania is heading to a very difficult year with no clear economic agenda, no budget (first time in the last 8 years that the country does not have a budget), no experienced ministers and a highly degree of miss trust in political class. Harsh times are a head.


Professor Anton Caragea PhD,MA,FINS 

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: