When you're able to do stupid things but can't really fix them

When you're able to do stupid things but can't really fix them

Social protection, which is so talked about during times of crisis, is the highest risk problem of Romania. At any time, the pension or unemployment benefits systems can default. The reason is the social fracture that has occurred during the last two decades. There are currently four assisted persons for each employed one. The gravity of the situation is not so much due to the large gap between "active" and "inactive" citizens but to the fact that a good part of the taxes and duties paid by the few remaining employees don't make it to the state budget. Why? Well, after the 1989 Revolution, Romania didn't get into economy but into politics. And bad politics. There was never economic decision making taking into consideration weird things like profitability. What always prevailed was the social aspect of the problem. The explanation is very simple. In Romania, not even large state companies have economic and financial power. Their main characteristic is the hefty personnel surplus. Out of fear of social disturbances and an erosion of voting capital, the political parties that have been in power so far have preferred to silently promote their own interests rather than straighten things out in the economy. Many state owned enterprises pay salaries for personnel they don't really need. Giving salaries only for coming to work wouldn't be that bad if these payments weren't being made from money said enterprises should be using to pay their debts to the state budget. So, what happens in these kinds of cases? When the money that would have gone to social insurance isn't enough for salaries, our governing officials have no choice but to eliminate some of the excess personnel. Some employees are retired, others - terminated. But the state can't protect one or the other because those that have run the state have not only been unable to reduce tax evasion, contraband and the privileges of political clientele, which are all a calamity to public money, but they've actually helped grow these to unbelievable levels. Need we really ask why, over the past ten years, the state has been unable to collect, on average, more than 31% of GDP? How does the state get out of such a bind? Well, it either takes money from other budget chapters (education, health, defense, public order), or it takes out loans. In Romania, our Government can't use the first option for the very simple reason that there's nothing left to take from elsewhere. That is why our public debt is on the rise and, with it, the tab the population is going to have to pay. Because the state is the one borrowing the money, but those that pay for the damages are the tax payers. We're living in an ever more impoverished society, which is barely operational after the debt accumulated during 20 years of populist policies, all apparently in favor of the citizen but actually acting against him. The most dramatic and recent example is that of raising the pension point from 31% to 45% of average salary. The pensioners rejoiced, but their happiness was short lived because the Government realized very quickly that such a raise doesn't have permanent financial support. The attempt to bring back the pension point to a more sustainable level failed, because you can do really stupid things in Romania but you can't really ever fix them. They say that no country in Europe has cut pensions, although all of them have taken some austerity measures. That is correct. Only difference is that they have smart governing officials, who don't go breaking the most elementary of mathematical rules. Operating changes on the actual roots of the problem was unacceptable, but they closed their eyes when it came to an extreme solution that bumbles up everything in the economy. Before the decision to raise VAT five percentage points all the studies conducted both here and abroad showed some sort of reasons for hope. The belief was that inflation would be within the National Bank target, that the Romanian Leu would remain relatively stable and that GDP, which would know zero or a little negative growth, would come back to positive growth in 2011. But after the hefty rise in VAT, all those forecasts are going to be negatively revised, and the outlook for when our economy is going to come up for a breath of fresh air is going to get more distant.

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