Three opposition parties holding 37 of the 101 seats in Moldova’s parliament have signed a no-confidence motion submitted against the government on September 27.
The opposition has criticised the government for its plan to repay the MDL13.6bn (€610mn), or 10% of GDP, stolen from three failed Moldovan banks from the public purse. A draft law on the repayment plan was part of a package of bills the government attempted to push through using emergency procedures, sparking the no-confidence motion.
The central bank said in a note issued on September 27 that investigators from Kroll have identified more than $600mn siphoned off from the three failed banks and dissipated to several foreign countries during the second stage of their investigation. Kroll says that it is cooperating with authorities in the foreign jurisdictions in order to take action towards the recovery of the money.
The Socialist Party (PSRM), the Communist Party (PCRM) and the Liberal Democratic Party (PLDM) submitted the no-confidence motion on September 27. Lawmakers are due to vote on it by October 6, according to the initiator of the motion, PSRM leader Igor Dodon, who also leads in the polls for the October 30 presidential elections.
Separately, the extra-parliamentary Dignity and Truth (DA) party asked President Nicolae Timofti call a public referendum on the controversial payment of the €610mn emergency loans given to the failed banks using public money.
The three opposition parties took advantage of government’s attempt to quickly enact the bundle of laws including the one stipulating the servicing of the MDL13.6bn emergency loans extended by the central bank in 2014-2015 to the three failed banks from the public budget. The settlement of the loans was on the government’s to-do list sketched with the International Monetary Fund (IMF) when the staff-level agreement was reached in July. The Fund’s executive board is expected to discuss the three-year agreement with Moldova, which would unfreeze financing from other IFIs, in October.
Previous governments led by Iurie Leanca and Chiril Gaburici endorsed two emergency loans for Banca de Economii BEM, Banca Sociala and Unibank in 2014 and 2015. The loans were extended “to secure households’ deposits”, the central bank and the two prime ministers claimed at the time. In fact, they were used to cover the non-performing loans (NPLs) previously extended by the three banks. The recipients of the NPLs were firms in the group of companies related to Ilan Shor, Kroll, which was employed by Chisinau to investigate, has found. However they were not necessarily the final recipients, Kroll concluded after the first phase of its investigations.
The government claims the money will eventually be recovered, although this seems an extremely remote scenario.
The three parties that submitted the motion do not plan to form the core of a new parliamentary majority. If successful in their attempt to dismiss Prime Minister Pavel Filip, they are likely to invite the incumbent majority come up with a new cabinet.
At this moment, there is hardly any politician willing to replace Filip and handle the hot potato of the MDL13.6bn debt. In effect, this is a guarantee for the incumbent majority that no other majority is going to replace it before the debt issue is settled.
Dodon had no option but to submit the motion, or he would have lost his credibility among voters. However, Dodon is focussing on the presidential elections and does not necessarily want to overthrow the government immediately. Further delays or failure to have the motion endorsed by parliament would equally serve his plans, by generating unrest related to the banking sector frauds and directed against the ruling majority.
The topic is also an uncomfortable one for Dodon’s main rival, Maia Sandu, who was a member of the cabinet that endorsed one of the two emergency loans.
The Liberal Party led by Mihai Ghimpu and Leanca’s European Popular Party of Moldova have not expressed views on the motion, but this is understandable. Both presidential candidates are members of the ruling coalitions that endorsed the emergency loans and furthermore both are still members of the parliamentary majority.
Although politically unacceptable, there is no realistic alternative to repaying the funds stolen from the three banks from public money. Recovering the money is a remote scenario at this moment. The central bank’s capital would turn negative if the government refused to adhere to its commitment to issue MDL13.6bn worth of bonds.
Even if the government goes forward with its plans and issues the bonds, the monetary authority is likely to cash at least part of them if it has to defend the local currency. This would be done at a loss, but the central bank has already de facto paid from its own pocket part of the losses at the three banks by the exchange rate differential between the time of extending the loans and the time the government issues the bonds.