As perfect storm is building, Romania needs historical deal between major parties to prevent impending crisis

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Financial markets fear a global recession caused by the new coronavirus epidemic, doubled up by the oil war sparked by Saudi Arabia. Romania would enter such a crisis almost as vulnerable as it did in 2009: burdened by major debt, increasing deficit and lacking money for investments needed to support the economy.

Major decisions are needed to prevent Romania going astray. President Klaus Iohannis has a constitutional role to mediate a deal between the main political stakeholders, while the leaders of these parties – the Social Democrats (PSD), the Liberals (PNL) and the Save Romania Union (USR) – as well as of other parties have a moral duty to reach a deal to postpone a set of measures that would undoubtedly lead Romania to the brink of prolonged recession. But these measures are aimed at bringing votes – and Romania votes twice this year, in local and general elections.

Such a moratorium should include measures such as:

• Postponing or spreading a rise of pensions over a longer period of time. Legislation provides for a 40% increase of pensions by September 1. Warnings of the European Commission, the IMF, the central bank and others pointed to the devastating effect of the law, which would push the budget deficit to over 7% in 2021-2022.
• A doubling of child allocations, a measure which has no support in the budget planning. It was postponed by the latest Liberal government, but pushed again by the Social Democrats in a first vote in Parliament
• A definitive dismissal of an emergency ordinance (OUG 114) approved by the previous Social Democratic government more than a year ago, which caused shock waves across many business sectors
• An agreement over a set of solutions to support investments for an economy which is already affected by the coronavirus and its domestic and international effects. The solutions should cover issues from tools for Covid-19-hit entrepreneurs to Black Sea energy.

One can hardly imagine a more politically complicated timing for such a moratorium than the current one. President Iohannis is still pushing for early elections to get rid of the SocDem majority in the Parliament. Interim Social Democratic Party leader Marcel Ciolacu wants to win a permanent job and has to prove before his kin that he’s resisting Iohannis and the Liberals. Liberal leader Ludovic Orban, whose government was dismissed in a censure motion, wants a new Liberal team led by a different PM nominee to fail in Parliament, so he has all interest to dodge the coronavirus issue as much as possible so that it did not prove the need of a full government.

All these political interests are extremely strong centrifugal forces threatening to destroy the already fragile economic stability of the country, while the political crisis also needs urgent closure, by voting a new government, or organising early elections, or postponing such elections until the coronavirus crisis is over.

Chances that these leaders, as long as those of other smaller parties, reach a deal are minimal. But the experience of the deep crisis of 2010 is still vivid for all. Romania is in real need of a moment similar of that of June 1995, when all political rivals of the time signed a pact to support the EU accession of the country.

The coronavirus crisis, which is just beginning, is the wake-up moment that needs the political leadership of the country to prove how wise it has become as a whole.

Time is not lost. Panic is hurting the markets and Romania feels the aftershock. Small entrepreneurs have already started to call for help. European governments are announcing economic stimuli to diminish the impact of the crisis. The play of early elections to which the Liberals play and that of economic populism to which the Social Democrats stick to in Romania are criminal.

Unless mature decisions are taken, consequences would be dire and would cost us another decade. The risks are high with the crisis: the path is laid for the appearance of a populist party to feed on the need of revenge within the society.

Edited in English by Costin Ionescu