Romania’s economy is already taking a battering as investors fear that George Simion could become president, a European funds expert, Adrian Benţa says.
Some investors have already started to withdraw their capital from Romania, fearing that if Simion becomes president, he will install Calin Georgescu as prime minister and nationalize companies, News.ro reports.
Among measures already announced by Georgescu and Simion tandem is a requirement for all companies in Romania to be controlled by the state or a Romanian citizen, unacceptable for foreign investors, Adrian Benţa said.
He outlined the possible scenarios depending on the outcome of the May 18 runoff. A Nicusor Dan win would probably be followed by a government led by interim President Ilie Bolojan government with more competent ministers than the current government and better economic policies.
A victory for George Simion would mean one of two options: either the new president fails to implement his campaign promises, or he implements them to catastrophic consequences.
Foreign investors would leave, tens of billions of GDP would evaporate and hundreds of thousands of people would be jobless. Taxes would spike dramatically as the EU cuts European funds.
This is a entire interview for News.ro:
“A large part of the investors are worried about the potential president of the country, Mr. Simion, who would implement a Georgescu government. Some investors withdraw their capital and the economy will probably suffer in the coming period. The main concern is about the idea that the state or a Romanian citizen owns at least 50% of the companies. These foreign investors consider that we are talking about a disguised nationalization”
Matei Udrea: The leu has depreciated against the euro and the dollar in recent days, and the stock market has been declining since Monday, May 5. What should we understand that is happening in the Romanian economy at the moment?
Adrian Benţa: A large part of investors are worried about the potential president of the country, Mr. Simion, who would implement a Georgescu government. And if we go and look a little at Mr. Georgescu’s economic programs, there are some very, very worrying elements. And some are very fanciful. And the main worrying element for a foreign investor starts from the idea that either the Romanian state owns at least 50% of a company, or a Romanian citizen owns at least 50% of a company. These foreign investors take into account that, in fact, we are talking about a disguised nationalization here. And if you ask me, as an economist, it is a fatal error, in the sense that the Romanian state is not able to manage its own society like the world. The example is the Mangalia construction site, where the Romanian state took over 51% of the shares and from 2,000 employees there are still a few hundred and they have entered insolvency and bankruptcy. In general, a foreign company that wants to have control does not accept property titles, does not have the right to vote there or even 100% of the shares. So, probably, some of these investors withdraw their capital and the economy will suffer in the coming period. However, I would make an observation: the depreciation of the leu is not a strictly two-day thing. For years, economists have been saying that the leu has been a bit overvalued. The National Bank defended it. The point is that too much currency has been spent now to maintain the exchange rate.
Matei Udrea: I really wanted to ask you about it. It was announced by sources on Tuesday that the NBR would have put in 2-3 billion euros to curb the fall of the exchange rate. How long can the NBR hold this dam?
Adrian Benţa: In general, you should not bet against the market rate. Something has been tried, but we must not spend so much currency from the country’s reserve to preserve a currency that is depreciating anyway. Because, in fact, a solid currency benefits importers, a weaker currency is a disadvantage to importers. Each of the business models must protect, in the end, the entire population, that is, to protect the citizen. And then it is not normal for the National Bank to spend more than necessary to protect the currency, especially when this is the trend generated by the economy.
“No matter what Mr. Georgescu or Mr. Simion say, Romania has received tens of billions more from the EU than what we have contributed. The moment someone cuts your macaroni and says ‘Do as you know, because you yelled at me that I, Brussels, don’t know what I’m doing to you, I’m not good for you’, then we will have an economic downturn.”
Matei Udrea: One of the candidates, namely George Simion, who in the last few days has softened his speech, announced until recently that he will go to Brussels to bang his fist on the table, that he will nationalize the companies that own Romania’s natural resources, will force banks to give loans with 0% interest and other issues of this kind. What can be achieved from this program?
Adrian Benţa: The problem is how much you deviate from Brussels’ line of thought. We remember that the first consequence, after many warnings, both in Poland, before the start of the armed conflict in Ukraine, and in Hungary today, is the suspension of PNDR funds (National Rural Development Program – ed.). That is, the suspension of European funds. No one pays attention to you! If you don’t have European funds, do your best! Or, at this moment, regardless of who says it, where Mr. Georgescu or Mr. Simion says, Romania has received many tens of billions more from the EU than what we have contributed. So, we are on the winning side! We have several billions received from the EU for investments, for modernizations, for various infrastructure works. Including the modernization of the ANAF infrastructure, yes? Better tax collection! And then, the moment someone cuts your macaroni and says “Do as you know, because you yelled at me that I, Brussels, don’t know what I’m doing to you, I’m not good for you”, then we will have an economic downturn. And look at Romania’s trend in the last 5 years! Per capita, we have surpassed Poland, as far as I know. Anyway, we have surpassed Hungary per capita, in terms of GDP. The question arises whether, indeed, this policy of Mr. Simion is just one of attracting some votes of the citizens who believe that the Dacians really made those tunnels from Dacia to Mesopotamia, so it was simply a campaign to attract votes, or maybe he simply thinks that this is the economic trend, which will be a disaster if they apply it!
Matei Udrea: How long does Romania last without EU funds and without money borrowed from various banks?
Adrian Benţa: It depends a lot on the level of taxation. Certainly, Romania will not collapse! The problem is that it is no longer increasing and decreasing. So, this is Romania’s real problem! Not that it does not survive, but that instead of increasing, improving the standard of living of citizens, it will begin to decrease. Because, let’s not forget: our state is a budget-hungry state. Either they have to reduce budget spending, which I don’t really see them capable of, they didn’t succeed… It was PSD-PNL – well, more PSD in charge – non-work was stimulated more than work, inactive people in society were rewarded and those who are active were overtaxed. So, the first situation is the reduction of budget expenditures, which I do not see them capable of. Plus he also throws his fist on the table, “Buy weapons worth 5% of GDP, because look what’s happening in Ukraine” and the situation is to be taken very seriously. And then, in order to balance these expenses a little, you will increase the taxation. This means much higher VAT, this means much higher income tax, much higher corporate tax, less money for citizens. This will translate into a reduction in European funds. Unfortunately, that’s it!
“If Mr. Nicusor Dan will be president, he will probably keep his word and propose Mr. Bolojan, they will put in place a government that will be a little more enlightened, to take some better economic measures”
Matei Udrea: Basically, we are now at a kind of crossroads, as a country. Depending on what happens on May 19, we can take two paths. What do you expect to happen economically and financially with Romania, depending on the two options we have, President Nicuşor Dan or George Simion? Looking, of course, at what they kept saying they intended to do.
Adrian Benţa: The problem we all have is who we vote for. In the end, we return to Caragiale: who do I vote for? Do I vote for Mr. Nicuşor Dan or for Mr. Simion? Each of them is on totally opposite paths and, from my point of view, probably none of them should have reached a presidential final. But that’s my opinion! The opinion of the citizens – and the people are always right – was different. Well, certainly, if Mr. Nicuşor Dan will be president, he will probably propose a prime minister from this right-wing, slightly right-wing, moderate right-wing area. He will probably keep his word and propose Mr. Bolojan, who, however, did quite well in the position of interim president. I would say much better than the previous president for a certain period of time. And they will probably put in place a government that will be a little more enlightened, to take some better measures in terms of economic activities, to stop hiring so many electoral handouts. But if the next president of Romania will be Mr. George Simion, then my view is that we are at two ends. End A, end B. End A is that Mr. Simion does not implement the plans he presented publicly, being only a measure to bring votes, and to be a little more realistic: “Yes, sir, I scared you, but now you know that I want to join the EU, and I want to join NATO!”, because that’s what he said, “I want there to be more justice for Romania.” Maybe he is even right on this subject. Or B: he will apply the economic program of Mr. Călin Georgescu, which is a phantasmagoria! It will only lead to the elimination of foreign companies, that is, there will be several hundred thousand unemployed, tens of billions of euros will disappear from our GDP and we will be, as they say, the pariah of Europe. We will be isolated again! That this is what was wanted, isolationism. But let us hope that the people will decide wisely, as they have always decided. By the way, there are at least three cases when a candidate who had 40% lost the final to the one who had taken 20% in the first round. Therefore, the people are always right. And I hope that this line of European values will be preserved, however.
Matei Udrea: I saw that you wrote the other day, on your Facebook account, that the level of the current ministers is equal to that of the drivers that Basescu and Adrian Nastase had 20 years ago. Are there no more competent people? Or do they exist, but they don’t have a place in these governments that have succeeded each other in recent years?
Adrian Benţa: Yes, there are many competent people. The problem is that they no longer take responsibility, nobody does any more, because they are denigrated. They are denigrated because those around them are poorly trained professionally. In 2016, together with some young friends, colleagues from high school, from college, we founded a party, it was called the Oak Party. Then, in 2016, I really wanted to get into politics. We didn’t want to deal with traditional parties, but we wanted a new idea. Of course, in the meantime nothing was chosen of that idea because you need help to reach the soul of the people and you can only do it in a more well-known party. Or, when you, as a good specialist, go and are asked in the following way: “But I don’t care what the country’s budget is like, increase their salaries, because you don’t give it to you!” and you make some wrong laws, you are actually disturbed too! So, my opinion is that there are a lot of private specialists who don’t get involved because they don’t want to be in an area that is less intellectually friendly.
Matei Udrea: Can the return to Russia and China represent a solution to replace the partnership with the “globalists” in the EU? We are given these examples: “This is how Vucic does it in Serbia, how Orban does it in Hungary! They hire contracts, they take cheap gas from the Russians, they bring the Chinese to build them highways, atomic power plants, to repair their stations” and so on.
Adrian Benţa: Our adversity towards Russia is not generated by the trade relations that were as they were, better, worse, or that they robbed our country after the Second World War as a result of the payments of war reparations. They are generated by the fact that this neighbor of ours has always wanted wars on the territory of Romania! And there are about 20 such wars. In those wars, Romanians died and the Russians behaved badly. That’s the problem! Foreign armies have been on the territory of Romania before, right? Think of the German army. The German army behaved exemplarily, it was given as an example of good behavior. When the Soviets came, they killed, raped, stole and behaved like people who are not people. And then that’s actually what we hate. Oh, that you can very well exploit a mineral resource, buy it cheaper, that you can very well build a reactor, it’s wonderful! The problem is the daily safety of the citizen. Between the integrity of Romania, between the integrity of the country, the good of the citizen and a reactor bought for 2 lei cheaper, I prefer to pay 2 lei more for a reactor bought from the Canadians, made with the Americans, than to assume to be visited again by our neighbors to the East, who do not bring light.
