Romania

Before the economic crisis, Romania enjoyed rapid economic growth, averaging 6.5% between 2005-2008. However, some of the foundations of this growth were unsound. Thus, the financial crisis sharply reduced GDP growth rates to -6.6% in 2009 and -1.6% in 2010. At the peak of the crisis, the Romanian export market crashed as a result of decreased demand from other EU member states. Interest rates remained high and domestic consumer demand fell much more rapidly than anticipated. The country’s recent history of rapid economic growth had led to an overconfident economic policy. Relying heavily on foreign investment to finance the current account deficit, public spending was too high in the years leading up to the crisis. This left Romania with a large public debt at the start of the crisis (47% of GDP).

Romania signed up for a €20 billion loan with the IMF, the EU and the World Bank in 2009 to help pay salaries and pensions while restoring the country’s financial viability. As part of the agreement, the government had to take severe austerity measures, which included increasing the sales tax from 19 to 24% and cutting public workers’ salaries by a quarter to reduce the budget deficit.

Modest growth was restored in 2011, based on this financial assistance and some prodding by the EU and the IMF. The weakness of Romanian democratic institutions was clear during the crisis, as policy-making and implementation were not fully successful. However, the government’s economic agenda was in line with EU expectations and in accordance with the reform program that Romania agreed to in return for the IMF loan. After experiencing negative GDP growth in 2009 and 2010 (-6.6% and -1.6% respectively), the country recovered in 2011 to 2.5% GDP growth.

The center-right ruling coalition experienced a great deal of popularity loss over the implementation of a severe fiscal austerity package in 2010 and 2011. Although the government partially succeeded in restoring Romania’s macroeconomic balance and the confidence of the financial markets by implementing important labor, education, social assistance and judiciary reforms, salaries and pensions as well as overall economic indicators remain below pre-crisis levels.

The Eurostat forecast for 2012 shows slow GDP growth of 1.4%.  But more needs to be done if Romania is to return to a path of solid, sustainable growth. The fierce political battles, which slowed down reform and held up progress, have demonstrated a continuing unwillingness to compromise for the greater good of the nation.

Romania’s democratic performance leading up to, during, and after the crisis pales in comparison to some of its fellow member states (the Baltics, Poland, etc.) because of its lack of strong national democratic governance, a fragmented, volatile and corrupt political party landscape, and the absence of good executive leadership or of effective implementation of structural reforms and anti-corruption measures. In October 2009 Prime Minister Emil Boc’s cabinet fell after a vote of no-confidence due to disagreements over the highly unpopular austerity measures he had begun to  implement in order to combat the effects of the global economic crisis. In December 2009 President Traian Băsescu designated him again to form a new government. Boc continued implementing the austerity measures which caused major unrest in Romania and after prolonged political infighting and public demonstrations he was forced to resign in February 2012, citing the need to “defuse political and social tension”.

After Prime Minister Boc’s resignation President Basescu appointed Mihai Razvan Ungureanu as the new Prime Minister. After a two-month parliamentary protest, the opposition managed to pass a motion of no confidence. Mr. Ungureanu was brought down after defections from his unpopular coalition to the opposition Social Liberal Union (USL) group, sending the ruling PDL (Democratic Liberal Party) into opposition. When the government fell, Traian Basescu consulted the parliamentary parties and in May 2012 nominated the formerly communist social-democrat leader Victor Ponta as Prime Minister.

Ponta’s appointment raised concerns that his first move would be to set free Adrian Nastase, a former Prime Minister who is one of the rare high-level politicians behind bars for corruption. Mr. Nastase is Mr. Ponta’s political and academic mentor. He oversaw the Prime Minister’s PhD thesis, which the committee authorizing diplomas had recently described as “plagiarized copy-paste style.” The diplomas committee was swiftly dismissed. And Mr. Ponta is still in office, despite previous statements he would resign if proven guilty. Although Ponta has not freed Nastase yet, critics fear that he might do so if he wins the December 9, 2012 parliamentary elections.

Ponta’s government transferred oversight of the Romanian Cultural Institute from the Presidency to the Parliament and has since taken many further steps to consolidate his rule.  The most dramatic such step was to attempt President Basescus impeachment; the parliament voted in favor of the impeachment, temporarily suspending him until a July referendum.

Ponta’s tactics, employed to try to drive President Basescu from power and to undermine the constitution, have come under heavy criticism from the EU as his actions have raised concerns that Ponta’s government has breached the rule of law and undercut democracy. In the short five months since his appointment Ponta has managed to force out the speakers of both chambers of Parliament and replaced Gheorghe Iancu, the independent ombudsman who had the power to challenge emergency legislation before the Constitutional Court, with a party loyalist. Ponta also provoked a constitutional crisis when he decided to change the rules of the referendum and threatened the Court’s justices with removal before their terms were up, although that idea was dismissed after an international outcry. Ponta also ignored a ruling of the Constitutional Court on who should represent Romania at EU meetings. The official journal, which publishes court rulings and laws, was moved under government control to delay inconvenient rulings by the Constitutional Court– such as the one about who represents Romania at EU meetings. Finally, Mr. Ponta reduced the court’s power and moved ahead with the impeachment, thus creating an additional stress factor and intensifying the political crisis in the country.

Ponta also dismissed directors of a commission responsible for looking into Romania’s communist past and tightened his grip on state television creating overall climate of intimidation towards critical journalists. This political crisis had a devastating effect on the economy, and the value of the Romanian currency reached an all-time low. The severe political and economic uncertainty has driven investors away and raised questions about whether Romania can retain the financial aid package from the international organizations worth five billion euros.

Basescu survived the impeachment votes due to a low turnout. Although over 80 percent of Romanians who voted favored his removal, only 46 percent of registered voters participated. According to Romania’s constitution 50 percent of voter participation is necessary for the referendum results to be considered valid. This was the second attempt to impeach Basescu since he became president in 2004. In a 2007 referendum Basescu received 75 percent of votes. In contrast to the 2007 referendum results, the 2012 vote points to a serious drop in Basescu’s popularity.

Basescu’s return to his Presidential duties has helped relieve some of the uncertainty in Romania, however the serious disagreements between the President and the Prime Minister are bound to continue creating further political tensions in the country, which would in the long term lead to continued delay in passing crucial reforms and deepening of the already severe public dissatisfaction.

Currently, as before the recession, Romania’s democratic performance is mediocre at best. Romania’s Freedom House scores are the worst among the EU-10 and based on Ponta’s actions undermining democracy, these ratings seem certain to worsen.

Although Freedom House still places Romania within the category of “semi-consolidated democracies”, the country risks slipping back to the status of a “hybrid regime.”  Levitsky and Way might even argue that it is on the verge of reverting to a “competitive authoritarian” system[1].  [election commentary will follow]