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Opinion
June 21, 2019 www.intellinews.com I Page 20
COMMENT:
Romania reaches new historical levels of foreign debt
Alexandru M. Tanase in London
Since February 25 when my last comment on Romania’s foreign debt was published by bne IntelliNews, many dramatic changes have hap- pened on the country’s political scene. The presi- dent of Romania’s largest party who was also the president of the Chamber of Deputies was sent to prison. The race for the presidency of the Social Democratic Party (PSD) is wide open. On May 26, the Romanian electorate gave a stark warning to the leftist parties of the country during the elec- tions of the 32 Romanian members of the new European Parliament. Support for the PSD was clearly on a declining trend, with especially the vote outside the country (by the Romanian dias- pora) being cast in favour of new political forces. Meanwhile, nobody paid any attention to a much more concerning trend, namely that of the fast increase of the Romanian foreign debt. More seriously, perhaps, some Romanian political and academic circles took the view that Romania’s for- eign indebtedness could be much higher. Nothing could be more wrong or dangerous!
In two comments published by bne IntelliNews
in September 2018 and February 2019, respec- tively (A concerning increase of Romania’s foreign debt and Romania: Two 100s and still counting), I expressed clear concerns regarding the increas- ing trend of the Romanian foreign debt (in parallel with domestic debt). If anything, since then, as mentioned above, the trend has continued una- bated and at a faster pace. According to the fig- ures published on June 13 by the National Bank of Romania (NBR), the total gross foreign debt of the country reached €103.1bn, which was above the
Romania's total gross foreign debt has reached €103.1bn, according to the National Bank of Romania (pictured).
level reached in April 2013 of €102.7bn, consid- ered so far an absolute peak. In absolute terms, this is a sizeable increase of €3.7bn as compared to end-2018. However, despite all of this, Roma- nia’s foreign debt is still treated by the current Romanian political authorities as a benign issue. During the last three years alone, total foreign debt increased from €92.9bn as of end-2016 to €98.5bn as of end-2018 before reaching €103.1bn as of end-April 2019. Such a fast increase will have lasting and/or dramatic consequences and it will be a clear burden on generations to come. In addition, the emigration of the young Romanian workforce (some 5mn have left Romania) gave also a heavy blow to the country’s industrial, agricultural and, more generally, to its economic potential.
This worrisome increase was a direct result of very populist measures taken by the PSD govern- ments (supported by its coalition partner ALDE) to increase salaries in the public sector (their average is currently higher than that of the private sector), to grant higher and/or special pensions to larger and larger segments of the Romanian society and to increase the subsidies for politi- cal parties for various elections past (May 2019) and future (November 2019). The cost of special pensions granted to parliamentarians, magis- trates and other categories is estimated at €1bn per year and even more concerning is that this
is envisaged to be extended to a wider range of beneficiaries at local levels (mayors, etc.). Their elimination and/or higher taxation is imperative. The state budget was finally approved very late