Victims of Romania’s crisis

June 1, 2010

Claudia Ciobanu, a correspondent for Inter Press Services based in Bulgaria, reports on how Romanian state workers are responding to cuts in pensions and benefits.

THE ROMANIAN government plans to cut 25 percent from the salaries of state employees and 15 percent from pensions and state assistance (including unemployment benefits and mothers' allowances). Romanian President Traian Basescu announced the cuts in early May, after negotiations with the International Monetary Fund (IMF) delegation.

The government is adopting them, without a parliamentary vote. On May 31, education staff will start a general strike, with administrative staff and railway and metro workers going on solidarity strike. Strikes are scheduled to continue throughout the week to support an attempt of the opposition to pass a motion of censure against the government.

In 2009, Romania took a 20 billion euro loan from the IMF and the European Union (EU). An installment of this payment is due in June, and IMF officials warned that the money is conditioned by limiting the 2010 budget deficit at 6.8 percent. Without any measures, the deficit is estimated to go beyond 9 percent of GDP.

Romanian President Traian Basescu
Romanian President Traian Basescu (Lucian Crusoveanu)

The president explained that the IMF money is crucial because lending on the financial markets would be too costly for Romania and could lead to a rise in the indebtedness of the country to over 60 percent by 2013. With the specter of Greece haunting southeastern Europe, such a perspective is worrisome.

But even the head of IMF, Dominique Strauss-Kahn, declared on May 20 that the IMF "had said NO" to the announced cuts, and proposed instead tax hikes and differential taxing of incomes combined with smaller cuts in salaries to contain the deficit.

The IMF, with a history of imposing harsh financial conditions on its debtors, says the government is too tough. This is serious cause for concern.

THE GOVERNMENT'S plan met with considerable opposition across the country.

Over 4 million of Romanian pensioners have monthly incomes of less than 300 euros, so the cuts would be devastating for them. Young doctors and young teachers make 250 euros per month; take a quarter of that off, and there is no reason for these people to work in the country anymore. This year, more than 5,000 doctors have submitted papers to leave the country or are in the process of resigning, according to the National College of Medics.

Even some business leaders were critical. No VAT increase should be good news for the private sector. But some business leaders argue that cuts alone, without any measures to stimulate the economy, would just lower consumption and lead to tax increases later on.

There were no discussions with unions or business representatives and certainly no public debate over these measures before they were announced. All opposition parties are against the cuts, if only out of populism. Even the Democratic Union of Hungarians in Romania--allied with Basescu's center-right Democratic Liberal Party in government--had said it disagrees with cuts of the smallest pensions.

Trade unions organized a protest in Bucharest that brought more than 30,000 people to the streets on May 19. This rally followed daily protests (attended by hundreds) from pensioners, mothers with babies and teachers in all major cities in the country.

The government did not budge, except to say that the minimum pensions (of around 80 euros monthly) and minimum wages (of around 150 euros monthly) would not be diminished. Such determination could be considered a sign of strength from the government. Actually, it's a sign of weakness.

The president said the cuts would be accompanied by reforms meant to improve tax collection rates, heighten transparency in public acquisitions, reduce fraud in accessing social assistance and eliminate unnecessary administrative staff--without specifying these measures. Certainly, such reforms are needed.

But who in Romania believes they will indeed be implemented now if they haven't before?

In fact, no one does, not even the government. The government doesn't trust itself and the state apparatus it manages to implement state reform or a mix of measures that would involve both income cuts and tax hikes. This is why it has chosen the simplest way, cuts across the board, even though cuts would solve nothing but this year's deficit problem, while bleeding the most vulnerable.

In Romania's case, the cuts signify more than a neoliberal preference for austerity rather than Keynesianism among the leaders (though this is certainly the case with the governing Democratic Liberal Party and the EU and the IMF from whom they take their advice on financial strategies).

It's also an issue of the inability of the government and the state apparatus to handle more sophisticated approaches which would include targeted investments, making public spending more transparent, combating corruption in state bureaucracy, alongside differentiated tax increases.

The poorest are made to pay for the leaders' weakness. And poor Romanians are angered. But Romanians are also quite resilient, unlike fellow Greeks to the south. Their political culture doesn't include taking to the streets. Some 30,000 people attending a protest in Bucharest is a large number for this country, but it remains to be seen whether there is enough energy here to sustain a longer struggle.

Those attending the unions' rally in Bucharest called for the fall of the government. Yet people know they cannot trust other parties either, since they have all been in government before, sharing the responsibility for the inefficiency of the state.

For a person making 200-300 euros monthly in Romania these days, a difficult call lies ahead: to protest or to keep silent, knowing each day of strike means one day of pay less when the salary already drops by a quarter. That the poorest don't get mobilized is a norm in political science. It will be tested in Romania soon.

Still, there are positive signs. Unions are acting together and brought out large numbers of people. The Socialist Party, under new leadership, spoke firmly in defense of the poor and against the vices of capitalism, after two decades of ideological ambiguity. And poor people are finally questioning whether all the sacrifices demanded of them as necessary are indeed so. This is all rather new for Romania.

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