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Numbers that don't add up in the Romanian economy six months into the new government

Six months into Grindeanu's government and I have the feeling that we are still stuck in the electoral hysteria and the governing alliance between ALDE and the Social Democratic Party is still on the campaign trail. After the January 4, 2017 inauguration, I was expecting Mr. Sorin Grindeanu, the new Prime Minister, to head straight to work and start making good on the already highly generous promises put forward by the Social Democrats, but, no, we are still glued to the television screens to be presented with more rivers of milk and honey for public sector workers.
Despite enjoying a comfortable majority in Parliament, the new government has somehow got bogged-down in irrelevant debates and pointless parliamentary enquiry commissions, looking into “the budgetary hole” left behind by the previous tenants at the Victoria Palace, or into the 2009 presidential elections.
According to the official economic data, Romania is doing excellent, topping the European growth charts with an astonishing 5.7 percent hike, exceeding Greece’s GDP. However, despite these seemingly blue skies many fear that – leaving aside the suspicion that the numbers have been doctored in order to accommodate the wage increase in the public sector – a consumption-led economic growth is not sustainable and may lead to a 2008-style crash-landing. I believe that the similarities with the ill-fated seven percent growth in the year 2007 are too ominous: consumption-led high rate growth; over a billion dollars in trade deficit; overheated housing market; tax cuts combined with wage increases; accelerated public borrowing; inability to insure a decent tax collection rate, and the list goes on. Worse, nobody seems to remember what has happened just 10 years ago.
The Grindeanu government seems to have its economic priorities wrong, as it put the public-wage-increase cart before the public-investment-program horses. Labor Minister Ms. Olguta Vasilescu has stolen the limelight by promising wage increases in the public sector that were/are unheard of in the rest of European Union – with the exception of Greece, up until two years ago, perhaps. The proposed wage increase was so unbelievably high that even some union leaders protested against it. On the other hand, the program to build over 400 new kindergartens and daycare centers has been swiftly diched, which may lead us to conclude that there is no real plan to invest in proper public programs that will benefit the communities as a whole: new schools, new kindergartens, new healthcare and infrastructure, new motorways, etc., just money thrown unwisely into short-term consumption.
The minimum wage increase has been widely criticized by many managers and entrepreneurs in the private sector, who allege that such a measure will put more pressure on companies that have not fully recovered from the previous economic crisis. Furthermore, the private sector is not happy at all with the new local authorities’ policies of setting up their own construction/security/waste management, etc. companies, some of them accusing that such a measure would distort competition in bids for public contracts.
Then it was the unified public-sector wage system that has been recently adopted by the Parliament, which – after all – was not that unified and didn’t make good on the promise to improve doctors’ and teachers’ salaries by 50 percent beginning July 1, 2017 either. Only the senators and deputies will have a financial reason to smile come the first pay slip after July 1, while the others will have to wait until January 1, 2018, or maybe later. Many analysts consider that the state’s coffers did not have the resources to support such a pay hike anyway, so a last glimpse of economic reasoning prevented the adoption of the law in its initial form that would have blown the state’s coffers to pieces and sent the deficit way above the three percent threshold.
Then we have been served several funny fiscal ideas such as: transferring income taxation from the employer to the employee; introducing an American-style income tax system serviced by an illusory army of 35,000 fiscal consultants. Paid from public money, they would have had the odd task to advise people on “optimizing” their tax dues with the state’s desire to extract more money from their pockets.  “Don’t rock the fiscal boat” seems to be a proverb that the Social Democrats do not know.
Then we have the diching of the corporate governance principles sand law, by the wayt in several major state-owned companies and thus transforming them, once again, in safe and rich sources of sinecures for party faithfuls with zero expertise in the respective domains.
There is also a lack of public spending on new infrastructure projects. The Drumul Taberei underground project is so much behind schedule that people have even stopped making jokes about it. Bucharest is gangrened with traffic jams, with only a handful of local projects meant to ease congestion, while public transport seems to have fallen off the agenda immediately after the elections. The ill-fated attempt to implement a new bus lane in the northern part of the capital succeeded in uniting for a split second the traffic jam in Bucharest with the traffic jam in Ploiesti. But, on the other hand, we are promised that the communist-era Bucharest - Danube canal will be resurrected.
Then there are no new relevant infrastructure projects financed with EU money; and there are the loans taken by the Romanian State at a significantly higher interest rate.
To conclude, it is hard to imagine that this collection of blunders is just a reflection of the economic incompetence of the Government or of the Social-Democrats as a party. Nor do I suspect Mr. Sorin Grindeanu, a mathematician by trade and education, to be arithmetic shy or unable to see that the numbers do not add up.  I strongly believe that either the government’s interests are other than the economic ones or Mrs. Sevil Shaideh – the real trustee of the public spending – is quietly doing her job far from public scrutiny.

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