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| Restructuring the energy sector 11/05/2011 |
| (2011-05-11) |
| Last updated: 2011-05-12 13:13 EET |
The financial crisis has forced Romania to take out a new loan from the World Bank. This is a precautionary loan, through which the country will be able to access 3.6 billion euros over the following two years, but only in exceptional situations. The question is whether or not Romania really needs this money. Looking at the national economy, the country might indeed be coming out of recession, but could still suffer from the crisis, as projected by officials in Bucharest.
President Basescu announced 1.5 percent growth for 2011 and an upwards trend for the following two years. Statistics, however, give reason for concern. Additionally, there are still unresolved issues stemming from Romania’s sudden transition to capitalism after 1989. Among these issues are the winding up of industrial giants with low profitability and increasing the efficiency of companies with a majority state-owned capital.
These companies record losses equaling some 4 percent of the total GDP, which is the equivalent of the country's health budget for 2011. Cutting losses, changing management and depoliticizing state companies are challenges thrown at Romania by international loaners. Peter Harrold, speaking for the World Bank in Bucharest, said on Tuesday that over the past 20 years the reforms in Romania have been driven by international bodies that the country is a member of – NATO and the EU, as well as the World Bank and the International Monetary Fund.
The economic crisis has given a boost to the reform movement, but so far these efforts have fallen short of what is required. Romania, Harrold believes, needs a national development policy based on the country's own vision of the future, irrespective of political considerations. He suggests that otherwise, the population will continue to suffer from the cutbacks made by the Government. One example can clearly be seen even today.
The precautionary loan with the IMF demands, among others, bringing prices in line with international standards and cutting subsidies for household heating. These measures would affect the entire population. As a compensatory measure, the IMF and the Boc cabinet decided that most taxes will be tailored so as to protect vulnerable consumers.
The World Bank and the IMF underlined that these measures often have a painful effect on the population and will not solve the fundamental problems of the Romanian economy. In the long run, if we don’t see an improvement in the absorption rate of European funds, greater public investment and the re-structuring of loss-making state companies, the reforms will continue to take more and more out of the population's pockets.
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