Bogdan Preda in Bucharest -

What seemed almost impossible in Romania a year ago is about to happen by the end of this year: the country's public coffers are running out of the money needed to pay state pensions and salaries for the end of this year. This means the government will have to resort to borrowing at higher-than-normal interest rates from domestic banks, pushing up interest rates for everyone.

Amazingly, the money for the millions of pensioners and state workers is missing because the country's politicians took their latest feuding to such lengths that they failed to have in place a proper functioning government and state budget that included economic reforms for 2010, forcing the International Monetary Fund (IMF), World Bank and European Commission to temporarily stop loans worth as much as €3.5bn for the last quarter of this year.

The fierce political battle ahead of presidential elections on November 22 is about to turn into major social unrest and even the state's bankruptcy if authorities fail to pay people in November and December. Thus far, neither incumbent President Traian Basescu and his supporters nor the opposition can agree on a new government capable of fulfilling the country's promises to the IMF for the money, which was to help the country cope with the global economic crisis.

Prime Minister Emil Boc's government, which fell in a no-confidence vote on October 13, is ironically still in power because parliament rejected another new government put together by central bank expert Lucian Croitoru, who had been nominated as premier designate by Basescu. Basescu has now picked another premier-designate, Liviu Negoita, mayor of Bucharest's third district and a leading member of the Liberal Democratic Party (PDL) that supports Basescu, who faces a confidence vote in parliament in the next few days.

However, opposition lawmakers are again threatening to block Basescu's nomination. Although Basescu could dissolve parliament if his second proposal for a new government is rejected, he said he will propose a third one. That would leave Boc's acting government still in office until after the presidential elections on November 22. Another round is likely on December 6, though, since none of the presidential candidates is seen making 50% plus one vote in the first round. The main contenders are incumbent Basescu and his main challengers: Senate member Mircea Geoana, who heads the Social Democratic Party (PSD) and Crin Antonescu, head of the National Liberal Party (PNL).

IMF closes the till

An IMF delegation led by Jeffrey Franks on November 6 said it would freeze its latest €2bn loan instalment to Romania pending approval of the state budget by December 10, after which the Fund will discuss the country's situation at its board meeting on December 15.

Again, almost incredibly, lawmakers aren't prepared to find the time to vote on the state budget, as all parties are focused on supporting their presidential candidates' electoral campaigns and winning power, which, as a result, will give them more economic power and personal advantage. But what they seem to fail to understand is that if Romania misses out on the €1.5bn from the IMF and another €1.0bn from the EU, it will have to seek even more money at the beginning of 2010, anywhere from €4bn to €5bn. The country has so far received €8bn of its €20bn emergency loan from the IMF, EU and World bank.

Meanwhile, the government has decided it will force state workers to take eight days of unpaid leave in November and December, thus saving about €400m, to help narrow the budget deficit to the 7.3% target agreed with the IMF for this year, interim Finance Minister Gheorghe Pogea said. The government additionally banned pay rises for more than 1m public workers to keep the deficit in check. Next year, the IMF wants Romania to further narrow its budget gap to 5.9% of GDP, a figure it wants nailed down in the state budget for 2010 before December 10. All of this is taking place while the country is already seeing the direct effects of the global crisis, with hundreds of thousands already losing their jobs. The IMF predicts unemployment of as much as 10% in 2010, up from about 8% this year. The Romanian economy contracted an annual 8.7% in the second quarter, the most ever, and the IMF predicts a 7.5% contraction for this year.

If it weren't for the hard times that Romanians are experiencing and the even worse times still to come, the political battle in the country would look strangely comical. But the reality is overwhelmingly sad, because most politicians and even some media outlets are trying to secure as many votes and viewers by capitalizing on people's fears and hopes.

None of the leading players in the ongoing political feud seem willing to give in to proposals from their challengers, never mind those that might be wise, simply because they fear such attitudes would make them look weak before voters. Or so they think. Basescu rejected proposals from an ad-hoc majority of opposition lawmakers to accept the mayor of the city of Sibiu as the new PM, while the lawmakers in turn rejected Basescu's nominations, precisely because each of the two sides feels that such "concessions" would be regarded as a sign of weakness.

The irony is that such behaviour will most likely result in an extremely low turnout in the presidential election given that Romanians are now tired of politics. This means only voters with a lower degree of political and economic awareness will cast their ballots November 22, exactly the audience that politicians are targeting with their feeble shows of force.

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