BLACK SEA BLOG: Romanians stick with the devil they know

By bne IntelliNews December 9, 2009

Bogdan Preda in Bucharest -

Romanians re-elected President Traian Basescu for a new five-year term December 6 after the dirtiest and most intense electoral campaign this country has seen since it broke with communism 20 years ago. Now, Romanians are back to square one, with a minority government and the same president, only there's less money around.

Basescu, whom many predicted would lose to Mircea Geoana, the head of the Social Democrats, won by a mere 60,000 votes or so, leading to a final result of 50.33% to 49.66%, the thinnest margin ever in any elections in the country since 1989. Then again, the country also produced one of its record turnouts in the past decade, with almost 60% of voters turning out.

Geoana, a former foreign minister and ambassador to the US, whom three exit polls indicated would be the next president, had been celebrating victory, but what he and his alliance of parties that included the Liberals, the Conservatives, the ethnic Hungarians and even the nationalist Greater Romania Party, didn't take into account were the tens of thousands of votes that Basescu had received from Romanians living abroad. Now Geoana and his party are contesting the election result, saying Basescu's party faked ballots and paid for votes.

Unexpected trigger

This presidential election pitted Basescu, supported by his governing Democrat Liberal Party, which has about 35% of the seats in parliament, against Geoana, backed by almost all of the other remaining parties. Simple arithmetic said Geoana, who heads the country's Senate, would win. But he made mistakes - the coalition behind him made too many promises and were guilty of too much manipulation, leading to an adverse reaction from voters, who felt they were being fooled.

Actually, it was less a case of Basescu winning and more one of his challenger having lost. The news programmes of the two main news TV stations Realitatea TV and Antena 1 were full of criticism of Basescu and his government to the extent that news anchors had seemed to forget the rules of unbiased journalism. Even three of the country's most powerful tycoons, Dinu Patriciu, Sorin Vintu and Dan Voiculescu, criticized Basescu and openly supported Geoana. TV stations aired footage of what they claimed was showing Basescu punching a 10-year-old child in his electoral campaign in 2004; Basescu denied the accusation, claiming the tape was counterfeit.

Seen through the eyes of an outsider, Geoana seemed most likely going to win. But what such monitors could not see, and what Basescu's opponents failed to understand, was Romanians' resistance to manipulation by ad-hoc political alliances of parties that had previously been foes and had a long history of electoral promises that were never kept. The only TV confrontation between the two, just days before the final vote, also saw Basescu score hard against Geoana.

Basically, Romanians reacted adversely to attempts by Basescu's opponents to sully him. If Geoana's supporters had limited themselves to just boosting their candidate and emphasizing just how the country would benefit from a majority of parties in parliament supporting the same candidate, Geoana might have won. Then again, Geoana's Social Democratic Party derives from a party that is perceived by many Romanians as the cradle of former communist officials, including former president Ion Iliescu, himself a former communist minister.

The fact that Basescu, until recently more popular among Romanians, won by such a thin margin is worth noting too. Basescu won the presidential race against Adrian Nastase of the Social Democrats in 2004 by accusing Nastase and his party of corruption and of ruling over Romania as if it were their own backyard. However, Basescu seemed to have forgotten his previous stand when he persuaded his party to support his younger daughter Elena, 28, in her campaign for the European Parliament this year. Then again, Basescu lost more popularity on criticism that he promoted female members of his party such as Tourism Minister Elena Udrea by their looks and for having allegedly turned a blind eye to the disappearance from the country of an Arab businessman who had been convicted for kidnapping.

Still, he eked out enough votes to make it as president for a last time with a bit of help from a referendum he attached to the first round of the election, in which he proposed a smaller number of lawmakers and a single-chamber parliament in order to cut down on red-tape, lengthy legislative procedures and corruption, which Romanians voted in favour of. He also won on promises that he would not repeat previous mistakes, which on one occasion even led to attempts by lawmakers to impeach him.

What lies ahead

So now Basescu has won, what must he do? Firstly, he has to put in place an efficient government to replace the interim one of Premier Emil Boc, who was ousted in a no-confidence vote in October but has served as such until now. That new government must quickly make sure it passes through parliament a budget for 2009, in line with agreements with the International Monetary Fund, the EU and the World Bank, in exchange for more financing from the €20bn loan agreed with the three institutions earlier this year. Without that financing, Romania is in danger of either defaulting on dozens of domestic payments or having to borrow money from banks at high costs, something it already did in November to pay public wages, pensions and other obligations. However, in order to achieve that, Basescu needs a more stable government, and that can only happen if it has enough support from parliament, where most parties are opposing him and his party.

One way or the other, Basescu has to find a way to cope with his foes, this time for slightly longer than he did with the previous loose coalition he had with the Social Democrats.

An IMF delegation led by Jeffrey Franks on November 6 said it would freeze the latest €2bn loan instalment to Romania from the IMF and the EU, 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.

It will be interesting to see what wonders Basescu and the parliament can engineer after the fiercest electoral battle in 20 years in order to meet the IMF's expectations or persuade the Fund to show even greater understanding for the country that joined the EU in 2007 but still massively lacks accountability.

Since it has lost the opportunity to win the money from the IMF and the EU in November and December, Romania 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.

That money can't come from higher taxes, because Basescu and the Liberal Democrats vowed to leave both the flat tax and the value-added tax unchanged, at 16% and 19%, respectively. The only solution is hard work in terms of real reform to create the efficient absorption of EU funds for investments in agriculture, energy and infrastructure that will create jobs and increase productivity.

For example, a major source of income to the state budget, the sale of carbon allowances, remains untouched this year because the government has proved either too inefficient or too greedy to deal with it properly. Romania could even now secure as much as €2bn from the sale of such carbon allowances if it quickly puts in place a new government as well as the legislation and structures needed for such tenders. If those ingredients had been in place at the beginning of this year, Romania could have cashed in as much as €3.5bn, according to the business daily Ziarul Financiar.

Seeing such a lack of interest, one can only surmise there's more than just carelessness linked to this, maybe even a failure to decide who-gets-what out of such public tenders, thus leading to conflicts of political interest and decision blockages.

One way or another, Romania this time around must prove once again it can attract foreign investors by cracking down on corruption, too often accommodated by public clerks and even government officials.

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