This solution has been successfully used by many countries, Western-European, as well as by Romania’s neighbors.
But what works for Germany, Sweden, Italy, the US, as well as for the Czech Republic, Poland and Hungary, does not seem to work for Romania.
The representatives of the Finance Ministry have struggled in the past few years to find arguments against the re-introduction of a mechanism abandoned in the early 2000s.
The non-official explanation for this is that bonds dedicated to individuals would compete against bank deposits. Banks don’t want added pressure, and their stance is upheld by the International Monetary Fund.
Poland uses the largest state-owned bank to distribute bonds to the population, and even sells papers with ten-year maturities with a nominal value of 100 zloty (around 100 lei).
The Czech Republic resumed retail bond sales in November 2011, with acquisitions already exceeding 5% of the portfolio of medium and long-term bonds denominated in crowns. Hungary wants the household investments to rise to 10% of the public debt, and even has bonds in euros in its offer, while Slovakia is pondering various distribution options, one of them being through postal offices.
The Romanian state not only excludes the population from being a potential important investor category, but has even made it more difficult for individuals to buy such bonds by setting the nominal value of a bond issued by the Treasury at RON10,000.
On the other hand, direct investments in government bonds are exempt from tax, while investments made through investment funds are subject to taxation. So in Romania the acquisition of government bonds is reserved to a narrow group of individuals – usually private banking clients – who can afford to invest upwards of RON10,000. They are rewarded by the Finance Ministry, which exempts them from tax.
“If government bonds for the population were issued, people would have a direct way of penalizing the state. When the state wastes money and spending increases, inflation rises, which erodes yields, the population sells its bonds, so their price declines. The relationship between citizens and the state would be more direct and more active than it is now, when citizens only penalize politicians once every four years, at election time,” comments financial analyst Florin Citu.
(English version by Daniela Stoican)