Severe Cuts Prove Romanian Government’s Weakness

May 28, 2010

by Claudia Ciobanu first published on Socialist worker


The Romanian government plans to cut 25 percent of salaries of state employees and 15 percent of pensions and state assistance (including unemployment benefits and mothers’ allowances). Romanian President Traian Basescu announced the cuts in early May, after negotiations with the IMF delegation. In a final assault against common sense and decency, the government is invoking “national security” concerns to legally justify the pension cuts.

This week, the government is adopting them, without a parliamentary vote. On May 31, education staff will start a general strike, with administrative staff and metro workers going on solidarity strike. Strikes are scheduled to continue all next 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 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. 

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 hunting Southeastern Europe, such a perspective is worrisome.

 But even the head of IMF, Dominique Strauss-Kahn, declared May 20 that the IMF had said no (!!!) to the announced cuts, and had 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 disastrously harsh financial conditions on its debtors, says the government is too tough. This is serious cause for concern, regardless that the IMF is coming out with these statements merely to preserve its image (that is, they expect much worse effects than in previous austerity plans they themselves imposed).

 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 any more. This year, over 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 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 Liberal-Democrat Party in government—had said they disagree with cuts of the smallest pensions.

 A protest in Bucharest organized by trade unions brought over 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 is 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 does not 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 neo-liberal preference for austerity among the leaders (though this is certainly the case with the governing Liberal-Democrats and the EU and the IMF from whom they take their advice on financial strategies). It is 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 does not include taking to the streets. 30,000 people attending a protest in Bucharest is a large number for this country, but people acted obediently, dispersing quickly. The energy did not seem to be enough to sustain many more actions. 

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. 

P.S. In a recent development, the government announced that it will resort to an article in the constitution invoking the need to protect “national security” in order to pass the measures. This is needed because the pension is considered an inalienable property right, hence cuts in pensions would be unconstitutional. This claim of “protecting national security” through cuts is both hypocritical and a further attack on the democratic process in this country (in addition to the completely opaque way in which these measures were decided on and passed).

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