Friday, December 18, 2009

FT: Romania struggles to move on after 20 years

By Chris Bryant and Alec Russell in Bucharest

Published: December 17 2009

In pride of place in Petre Roman’s office hangs a resplendent symbol of Romania’s revolution, a threadbare national flag with a hole punched through the middle. On a chilly night 20 years ago such makeshift banners flew over barricades in the centre of Bucharest as Mr Roman, then a university lecturer, and hundreds of demonstrators took to the streets to challenge the most repressive regime in the then eastern bloc.

Mr Roman, the scion of a prominent communist family, remembers all too well the euphoria of witnessing the flight of Nicolae and Elena Ceausescu from the Communist Central Committee building the following day. He was the first to address the ecstatic crowds from the balcony – a scene watched live on television by an awestruck world. The euphoria, he recalls, lasted for only a few more days.

On Boxing day, the day after the summary trial and execution of the Ceausescus, he became prime minister. It was only then that the scale of their economic mismanagement emerged. It is a challenge that overshadows Romania today – quite as much as the legacy of decades of living in a repressive police state.

“Under Ceausescu we had been in a long descent into hell,” Mr Roman says. “I asked top researchers to give me quickly a synthesis of the state of the economy. Within a few days they came back with an answer: 80 per cent of industrial output could not sustain market competition.”

Twenty years after the revolution, as Romanians assess the fruits of democracy, their recollections are more reflective than triumphal as they consider the missed opportunities of the past two decades.

“The expectations were enormous,” concedes Mr Roman, who after six months of turmoil in 1990 introduced a reform programme. “But the reforms meant not a new prosperous life but sacrifice. The liberalisation was huge the sacrifices were huge. There are now huge imbalances, huge inequalities, and huge social failures. There is still a lot to do.”

Having joined Nato in 2004 and the European Union three years later, Romania witnessed a surge of optimism and foreign investment. Eight per cent annual economic growth and rocketing real estate prices became the new norm. But these years of prosperity and excess now feel like a distant memory in Bucharest. This year the Romanian economy is set to contract by at least 7 per cent, forcing the government to go to the International Monetary Fund (IMF) and EU in the spring for a €20bn ($29bn, £18bn) bailout. A difficult situation was exacerbated by the political void that emerged in October when the government of Emil Boc, prime minister, collapsed. A bitterly fought presidential election pitted the incumbent Traian Basescu against Mircea Geoana, the Social Democratic former foreign minister and ambassador to Washington.

Mr Basescu, a former sea captain and mayor of Bucharest, was confirmed as victor but rivals have accused his party of electoral fraud and went to the courts to try to overturn the result. “We have a perfectly divided Romania facing the crisis,” says Dorel Sandor, a political analyst.

Mr Basescu rose to power on the back of his popular anti-corruption stance but his bullish style has left him with few friends in parliament, which could make forming a government even harder. Without a budget in place, the IMF has delayed a €1.5bn tranche of assistance. Romania had a structural deficit problem before the crisis and its bloated public service now faces a period of huge uncertainty. The pain is being felt by 1.3m public sector workers who will be laid off for eight days this winter.

A small IMF team returned to Romania this week and there are hopes that a tranche of financial assistance will arrive in January. The government is still able to borrow on private capital markets and Mr Boc, who has been nominated to form a new government, says there will be no difficulty paying wages, pensions and social allowances in December.

Mr Roman, who is now a consultant having had to step down as premier in 1991 amid protests at his reforms, concedes that Romania’s progress has not been as it might have been. “Romania has made a huge positive jump from the wrong side of history to the right side. European values again predominate. But we still have huge problems.”

Right at the outset of the new era, the execution of the Ceausescus was a mistake, he says, as it fed conspiracy theories that they were shot to stop them revealing compromising secrets about their successors’ past. Too many former secret policemen have been allowed to stay in senior posts, he adds. Also, the reforms have been mishandled and are corrupt, he argues.

In the medium term economic growth will return, and Romania will resume its efforts to catch up western Europe.

Romanians can celebrate winning their freedom this Christmas but on the streets of Bucharest other battles are still left to be won.

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