He was in Washington in the first part of 2009, when Romania decided overnight to take out a huge EUR20 billion loan from the IMF and the European Commission, initially presented as a “safety net,” which was subsequently used even as a source of financing the budget deficit through a derogation from the standards of stand-by agreements with the IMF.
Romania is now at its second consecutive arrangement, but no funds have been drawn from the second loan.
“The successive arrangements with external funders, the IMF included, have led to the stabilization of the economy, to the narrowing of internal and external deficits, to the start of an articulated program of structural reforms and to a return to economic growth,” says Tanasescu. He says expectations for a faster and more solid return to economic growth have been high and that it was not always very well explained why this was not possible.
“But these partnerships with the IMF and the other external funders have helped Romania adjust its pre-crisis deficits,” says Tanasescu.
Since the effects of the worldwide crisis show no signs of relenting more than 4 years after the crisis started, he says it is important for Romania to continue its partnership with the IMF, and that this can act as an additional pillar of stability and predictability.
“We have proven in the past two years that Romania can finance itself independently from the capital market. The money collected from the IMF and the European Commission has not been used, but has been kept in case of major turmoil on external markets. External uncertainties linger, so I think Romania should use this advantage of continuing a program with external financers in order to strengthen its domestic capacity.” He says in case of a potential future collaboration Poland’s partnership could be used as a model. “But this entails an acceleration of reforms and a more predictable implementation of the commitments taken on.”
Based on the signals already sent by the Ponta government on the prospects of sealing a new arrangement next spring, most analysts are already taking this step into consideration when evaluating Romania’s performance in the context of the crisis.
It remains to be seen whether Romania will qualify for a “flexible credit line” type of arrangement used by Poland, which entails a more relaxed schedule for evaluating the performance, on a half-yearly basis rather than on a quarterly basis, and easier access to emergency funding.
Tanasescu says Romania doesn’t need any more austerity measures, and that they must not be mistaken for measures of financial discipline, which are indeed necessary and should lead to better spending of budget resources based on a good prioritization.
“Romania must definitely not implement any more austerity measures, it must spend its existing resources more efficiently and accelerate reforms, including in the field of fiscal administration in order to attract additional budget resources. Under the current international circumstances, Romania must maximize its efforts in order to be able to use its advantage of attracting free-of-charge European resources by improving its system of public acquisitions and by strengthening both its local and central administrative capacity.”
Tanasescu, who was Romania’s finance minister during the first phase of economic growth at the beginning of the last decade, believes Romania will soon be able to start a new cycle of sustainable economic growth if it accelerates structural reforms and implements them in the right way.
As for the target of adopting the euro in 2015, Tanasescu says it is ambitious, but that keeping up pressure to meet the requirements entailed by the switch to the euro is the right way to accelerate reforms.
“Meeting the convergence objective primarily means accelerating reforms in all sectors, which should give the economy sustainability and predictability, and retaining this objective is also linked to a political will to meet convergence criteria, which offers a sense of predictability.”
The Romanian authorities have sent rather unclear signals in this regard in the past year. The latest signals have come from president Traian Basescu, who insisted on the need to retain this objective to keep Romania from missing an opportunity that might never arise again.
Formally the 2015 target has been kept in the annual convergence report, but economic analysts are extremely skeptical as to this plan, which they consider unreliable, both in terms of meeting the criteria and in terms of the willingness of the euro zone to expand its borders given the current turmoil it is facing. In theory, the process of preparing for the switch to the euro is followed by an interministerial committee for the switch to the euro led by the prime minister, which also includes central bank governor Mugur Isarescu. But this structure has never made a public statement, with its timeline and content of its meetings not being known. There is also a preparation committee within central bank BNR, which also works behind closed doors.
“We have to state clearly that Romania’s will to be part of the single European monetary system is irreversible, and the efforts we have to make are in consonance with the objective we want to reach. I think the Euro-2015 needs to be a joint national program and public policies need to be defined in accordance with this crucial objective for Romania.”
Before joining the euro zone, Romania has a crucial battle ahead in order to be given a say in the projected European banking union, set to primarily include banks in the euro zone.
(English version by Daniela Stoican)