The next crisis – context, missed opportunities, unlearned lessons

The signs of the crisis

Unfortunately, the countdown for the “ball” that follows after the “carnival” already started and will debut in a not so far horizon. Even though it is not nice to be the prophet of the crisis, I think that we shouldn’t get stuck, we need to be clear-headed and to look it in the eyes as a reality of the contemporary economic world we are periodically facing and from which we should learn. Maybe we should understand that the decline of the economy is inevitable and even necessary in order to lead the world towards performance and progress. I do not think that we, Romanians, the businessmen of this generation, used with a hostile environment will not be able to successfully surpass it. The crisis will not be similar with what happened in 2007, but it does not mean that it will be painless, both for the population as well as for the entrepreneurs. A crisis corrects the imbalances that reach the paroxysm and can bring certain benefits not just losses, we can learn from, especially those that govern and take decisions regarding economic policies. Like any crisis, this one has exogenous as well as endogenous causes. Further on I would like to comment only on the things that concern us, the economy and the Romanian society, that looks more and more unprepared and disengaged from the global economic realities. Today, the Romanian economy is confronting unbalances and major gaps and a bigger rift appears between the real economy and the governmental decisions of the actors from the politics scene, that can only end in a new crisis.

We surpassed timidly and with delay, in the last 4-5 years the sub-prime crisis, that affected us profoundly from an economic stand point and especially affected the real estate and banking industry but also the Romanian’s quality of life. During the last four years we reached high levels of GDP growth, over 5-6%, among the biggest in Europe, that could have helped us to reduce the differences between us and the developed stats from the European Community, if they were built on a healthy foundation. Unfortunately, these rhythms, although necessary, I don’t think they are sustainable, since the essence of this spectacular growth is artificial, predominantly based on consumption, and almost not at all on investments. This is why, I think this momentum of the economy, with this type of growth rate, is not likely to be maintained in the near future. In the forecasts of the analysts the GDP increase for 2019 is estimated to be a little over 3%, therefore an almost 6% decrease can be considered a difficult landing, that we experienced also in 2009, with such unpleasant consequences on a social level. Here I am also referring to the recent news about the fact that the decrease of the GDP is expected to be below the forecast, that will be felt at the end of this year and will probably go on in 2019. This concerning evolution of the economy takes place despite desperate governmental attempts to sustain the rhythm, including with the recent forced increase of the minimum wage, in order to stich the budget and to give a final impulse to consumerism. With that being said, I would like to remind you that 60% of the employees of the private sector work for minimum wage, which I think is a crass callousness, the effect of the disastrous policy of the Labour Code. Almost 3 decades ago we passed through a similar event, we were promised a growth of RON 100 of the salaries, but now, fortunately, we are not so desperate anymore.

Romania, is lead more than ever by a political class, with its governmental representants that are of an unconceivable mediocrity for the Europe of the third Millennium. Unfortunately, neither this economic growth based on consumerism did not stimulate the internal production, but stimulated imports, which deepened the deficit of the commercial balance, with direct effects over the exchange rate.

Romania, is lead more than ever by a political class, with its governmental representants that are of an unconceivable mediocrity for the Europe of the third Millennium. Unfortunately, neither this economic growth based on consumerism did not stimulate the internal production, but stimulated imports, which deepened the deficit of the commercial balance, with direct effects over the exchange rate.

We could compare this disastrous policy with the populism that lead countries such as Portugal, Greece and recently Italy towards the generalized crisis that looks like it has no end.

In order to reach the essence of the problem I want to talk about, the lack of public governmental investments and significative projects with European funds, excluded the solid positive factors of long-term economic development, sustainable for an accelerated rhythm of GDP increase. This even under the conditions of a favourable taxation.

The cheap populism with which certain social categories are enticed should not be neglected, such as the employee from the public sectors and retired persons (a pharaonic increase of the pension fund from 8 to 80 billion EUR is expected within 4 years), this being the second major cause that will start de crisis. Unfortunately, these two categories, the most vulnerable, shall fell the most, as always, the effects of the crisis. Here we can observe once again that cyclical policies and especially the increase generated by one pillar, the consumption, are not sustainable, fact that was confirmed by the evolution of the crisis in the other EU member states.

These arguments showing that governing bodies understood nothing from the previous crisis, make me believe that there are big changes of going into another crisis, even before anyone else, and this will create a feeling of being the first that will be unpleasant for all of us.