Thursday, November 19, 2009

FEATURE-Romania's huge public sector weighs ahead of election

By Luiza Ilie and Marius Zaharia

BUCHAREST, Nov 18 (Reuters) - One would expect union boss Dumitru Costin's main job to be making sure people stay employed.

But with the Black Sea state's behemoth public sector so deeply ridden with waste, inefficiency and corruption, he says the situation is not so simple.

This week's presidential election is expected to lead to a government that could axe up to 150,000 state jobs next year, but few believe the sector can quickly solve a raft of problems that have plagued it since before the fall of communism.

"We have communities of 6,000 people whose town halls employ the same amount of people as communities of 200,000," said Costin, head of one of Romania's most powerful unions, Blocul National Sindical, which represents about half a million people in mainly the public but also the private sector.

"They could be relatives, boyfriends, lovers who do nothing and get paid for it."

Romanians hope the ballot, which starts with a first round on Sunday, will end a standoff between President Traian Basescu and his opposition rivals that has halted reforms and threatened a 20 billion-euro International Monetary Fund-led rescue deal.

The victor, to be decided in a Dec. 6 runoff, will have the power to name a new prime minister, who must then address IMF recommendations including the job cuts and a state-wage freeze.

But those measures cannot fix everything. Lack of training means those who stay on may still take too much time on their tasks, while no central computer filing system means job cuts could remove workers who now shuffle papers from floor to floor.

Meanwhile, triple-digit pay hikes for top officials have created resentment among those who, 20 years after the execution of communist dictator Nicolae Ceausescu, see similarities in an elite that has enriched itself while normal Romanians suffer.


Romanians complain of hour-long queues for buying train tickets or sending things at the post office, and of enduring clerks who take endless coffee breaks and personal phone calls behind their windows, ignoring customers.

Private firms are forced to pay hundreds of small central and municipal fees every year in offices packed full of haughty clerks, while bodies like those meant to tap billions of euros in EU structural funds and fuel progress, remain understaffed.

Costin said 80-85 percent of state-run hospital budgets are spent on wages, and his union has also found one county with three times as many high schools than it actually needs.

"Cutting jobs will not necessarily solve the efficiency problem of the public sector," said ING Bank chief economist in Bucharest Nicolaie Alexandru-Chidesciuc. "It is not, in general, a competitive environment."
The 1.3 million public workers make up about a third of total employees, more than in any country in the OECD rich nations' club and far higher than neighbours like Hungary, whose big state sector accounts for some 18 percent of jobs.

Part of why that is such a big amount is because Romania's employed population is just 5 million of its 22 million people, far less than other EU states.

But politicians often add jobs, according to experts, to reward supporters and earn kickbacks after elections. Roughly 162,000, or almost 10 percent, were signed on from 2005 to 2008.

That is compounded by a murky web of cooperation in which diplomats say some politicians team up with cronies to siphon off funds from state-owned firms and investment projects despite sharp protestations from the EU.

"It transcends parties. Once they get into power, they just try to get as much money into their pockets as possible," said Alina Inayeh, head of the Black Sea Trust for Regional Cooperation. "Even the very serious signals sent by the European Commission have not worried anyone too much."

On Tuesday, Transparency International ranked Romania the EU's most corrupt member, alongside Bulgaria and Greece.

Romania joined the bloc in 2007 and although several member states have warned it needs to enforce reforms and curb graft or face development fund cuts, so far the European Commission has stuck only to stern language with no actual penalties.


Pay is another problem. Public workers often earn more than private sector counterparts, particularly through intransparent bonuses which last year made up half of total public wages.

State employees have won bonuses for such issues as dealing with stress, avoiding corruption and speaking foreign languages. But some have also received bumps for smiling, raising horses and dogs or parachuting, finance ministry officials have said.

Experts say such practices drain cash that could improve services and boost the earnings of those who are most effective, as well as free up resources for investment.

Costin said top state employees can make up to 30,000 lei ($10,410) a month, a huge sum for Romania, and senior officials often flaunt their wealth by building luxury villas, buying Porches and Ferraris and sporting Gucci handbags.

But little of huge raises -- public sector salaries grew by an average 79 percent in 2005-2008, bonuses by 136 percent -- have trickled down to lower level state workers like Valerica Gruia, a 53-year-old subway technician who took decades to build up to a monthly paycheck of 1,200 lei ($415).

The disparity reminds her of the harsh living conditions under Ceausescu, who rationed food to near starvation levels while he held lavish parties and built monuments to himself. He was overthrown and shot by a firing squad in 1989.

"Why did we shoot Ceausescu if things have not gotten better?" Gruia said.

(Additional reporting by Ioana Patran; Editing by Michael Winfrey and Sonya Hepinstall)

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