What is going on?
The list is long and mouth-watering: from Hidroelectrica, Electrica S.A., CONPET, ROMGAZ, Oil TERMINAL, ANTIBIOTICE SA to minority stakes controlled by the state in companies such as OMV-PETROM, ROMTELECOM, Enel, E-ON, CHIMCOMPLEX. The Fund is seen as a “public investment vehicle s…t that will have a multiplication effect for the economy, ensuring sustainable development and acting as a catalyst in mobilizing and directing available financial resources towards the economy and profitable projects.”
Energy sector organizations and EU representatives came up in arms demanding the Ordinance to be scrapped altogether, arguing that the said piece of legislation fails even the very reasons for which it was created: i.e. lowering the energy prices home users. Everyone in the sector acknowledges that, in less than two months, the new piece of legislation managed to: a) breach the EU legislation on energy and competition, b) limit the energy companies’ ability to fulfill their investment plans, c) postpone any desire to invest in the incipient Romanian off-shore gas resources d) increase Russian gas imports; e) increase electricity prices f) increase petrol price; g) increase home gas bills. It is hard to find in recent history another law that managed in such a short time to bring such a perfect chaos to an industry known to be very sensitive to sudden moves.
The financial sector is not in a better position either. Faced with the real possibility of closing down operations and leaving Romania, private pension funds’ administrators bowed to the government’s request to fund PPP projects. It is unclear what kind of PPP projects may be eligible for money from the private pension funds, but it’s rather odd to use someone else’s private money to pay for projects picked and chosen by politicians. The latest PPP project showcased by politicians, the ill-fated Comarnic – Brasov motorway, has been deemed un-bankable on three occasions, so I rest my case.
Amid all this, here comes the latest Government phony: “Bring home OUR gold deposited with the Bank of England! We should make it work for the Romanian people!” Aside from the fact that just by being there the Romanian gold works for the Romanian people, let me ask you this: would you let a person that has been convicted (I know he can appeal the court’s decision) for hiding gold bars in graveyards to take care of the family’s jewels? What would one want to do with Romania’s international gold reserve here? I know! He wants to transfer the gold into “crypt-currency!”
Well, some may say that it may not be a good idea to bring together in one basket all the eggs that form (large chunks of) the country’s critical infrastructure. Others question the wisdom to create such a Fund after most of its assets have lost almost 25 percent of their market value precisely because someone expressed his intention to tax them heavily and cap gas prices for three years. Someone, inadvertently, opened the gates for someone else to buy cheaper into and control Romania’s energy sector.
The financial sector is not in a better position either. Faced with the real possibility of closing down operations and leaving Romania, private pension funds’ administrators bowed to the government’s request to fund PPP projects. It is unclear what kind of PPP projects may be eligible for money from the private pension funds, but it’s rather odd to use someone else’s private money to pay for projects picked and chosen by politicians. The latest PPP project showcased by politicians, the ill-fated Comarnic – Brasov motorway, has been deemed un-bankable on three occasions, so I rest my case.
The banking sector is under siege, too. The onslaught is led by an (i)liberal Senator, whose brother – according to some press reports - had difficulties returning a bank loan, and by the Prime Minister’s adviser, a person who claims he doesn’t have a bank account or a credit card, but has been found stashing money and gold bars in cemeteries. They both claim that taxing banks heavily will mean no harm to their customers, and that, by the end of the year, interest rates will be halved.
Hey, people, what the hell is going on? Are we preparing to isolate Romania from the rest of the world? Are we going to war? Are we preparing for international sanctions?
As many times before, the wake-up call comes from abroad, namely from the rating agencies. The prospect that S&P might downgrade Romania’s rating to “junk” had a sobering effect on some decision-makers in Bucharest. Let’s see if the fortnight’s respite they managed to buy will be enough for them to come up with wiser and economically sound ways of bringing-in more money for the state rather than straightforward fiscal robbery.
The interview is also available in our print edition of Business Arena.
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