Romania turns its back on the past

Date: 12/06/1997

HANGING in Romania's embassy to the EU is a rather wistful blue painting. It portrays a man sitting on a wall, plagued by guilt, with tortured souls wheeling about his head.

“It is a Romanian legend which in many ways is an allegory for our country,” explains the country's Ambassador Ene Constantin. “An architect, Manole, is trying to build a church. But every night the walls fall down, until a dream tells him he should entomb his wife in the wall. He does this, and the building is completed, but in remorse he jumps off the wall and kills himself.”

Apparently, this rather miserable fable tells us that only when your soul is put into a project will it succeed. Constantin does not dwell, however, on the fate of those who follow this maxim.

Unintimidated by such legends, though taking their moral to heart, Romania's architects are currently involved in one of the most ambitious reform programmes attempted in the post-Soviet world.

Putting an end to years of half-hearted market economics and reluctant privatisation, Prime Minister Victor Ciorbea has launched a package of sell-offs and austerity measures which promises to turn the country around.

Its aim is to free-up prices, liberalise the foreign exchange market, reduce tariffs on agricultural goods, contain Romania's consolidated budget and eliminate hidden subsidies in the country's economy.

At the same time, privatisation has been given a new lease of life, state-owned enterprises are to be restructured and the agriculture sector reformed.

These bold changes have been rewarded with around 1-billion-ecu worth of macro-financial assistance from the International Monetary Fund (IMF), the World Bank and the European Union - and political acclaim.

More importantly, private foreign investors have started waking up to Romania's untapped opportunities.

Around five times as much capital has flowed into the country during the first half of this year as in the whole of 1996, says Constantin, and business leaders are upbeat about future opportunities.

These include some big prizes such as Romtelecom, the country's state-owned telecoms giant, which is due to go on sale in 1998. Around 3,600 enterprises should have been privatised by the end of this year under the reform.

Investors used to dismiss Romania as a country ruled by ex-Communists moving towards capitalism at a snail's pace and riddled with corruption.

Now they are beginning to notice its 20 million well educated people, attractive location (with Black Sea ports and access to the Danube) and some prize industrial bargains no longer to be had in other countries in the region.

Nevertheless, most of Romania's advances have been in terms of public relations rather than hard economics.

While adopting the reform package was a big step, it will be a far bigger one to put it all into practice and large-scale investors are likely to wait for longer-term proof that things have changed.

“The situation looks pretty hopeful in terms of policy direction,” says David Boren from US-based merchant bank Salomon Brothers. “But it is still early days. The real test of the government's commitment to reforms is not its agreement to them, but its implementation of them.”

A recent flurry of interest in Romania's treasury bills was, for example, cut short by the discovery of investment restrictions. Although the government promises to change that imminently, it still has some convincing to do before the country is embraced by the market movers.

In the meantime, things will definitely continue to get worse for the ordinary citizen.

While Romania's people have accepted a 'social contract' with the government to tighten their belts for one and a half years, they have already been hit by a 30&percent; drop in living standards since the reforms began and patience is starting to wear thin.

The country's gross domestic product is set to shrink by 2&percent; or more this year, and annual inflation is predicted to be over 100&percent;. The trade balance and current account remain firmly in the red, infrastructure is very underdeveloped and there are fears that the banking sector may be on shaky foundations.

This has already translated into a diminishing political stomach for the price of reform, say journalists, and politicians from within the ruling coalition as well as the opposition are beginning to make reticent noises.

“Certainly, people thought things would be easier than the realities turned out to be,” says Constantin.

But he nevertheless staunchly defends his government's record. “We are not so far behind and, after all, this was a very big package.”

For the time being, people do seem willing to give the country the benefit of the doubt. Perhaps a few IMF deadlines have slipped, but there is no question that there has been a political sea change since the defeat of the ex-Communists last year.

This has also been accompanied, say Romanian diplomats, by a change in popular mentality. Where they used to resent foreign capital, Romanians now welcome it as a ticket to both a better lifestyle and European integration.

Nevertheless, there are still hangs-ups from the old regime and altering attitudes is one of the government's biggest challenges. “If the people adopt a European spirit, then the reform will go smoothly,” says Constantin.

To achieve this, the government is trying to lead from the top. At last there are moves to curb the notoriously corrupt bosses left over from before independence and a number of high-profile trials of powerful criminals are restoring confidence in the rule of law.

While the justice system is far from trouble-free, with an occasionally harsh police force, the judicial system is becoming more independent from executive control and an appreciation of civil liberties (in private and working life) is growing.

Except for the Roma people, who remain isolated and badly treated, and homosexuals, who face up to five years' imprisonment, the government “generally respects the rights of its citizens”, concluded a recent US state department report.

Press freedom is improving following last year's introduction of a penal code and the country has a large independent written media.

Nevertheless, the constitution prohibits 'defamation of the country' by journalists and the country's libel laws - used to protect the former Communist elite - have been condemned as too harsh.

In foreign policy, recent friendship pacts with Hungary and Ukraine have both been welcomed as important signs of a new-found Romanian maturity, and the country's leaders are applauded in international fora.

All of this adds up to a mixed but encouraging picture for a state that was all but written off by the West until last year.

There is still a long way to go, however, before Romania achieves its dream of European Union membership. Even its diplomats admit that the country will not be ready for a decade and warn of the dangers on both sides of premature accession.

“Our horizon is the year 2000, but as we all know, a horizon keeps on moving away as you approach it,” jokes Constantin.

In the meantime, Romania's biggest foreign policy goal is membership of NATO, which it has an outside chance of achieving at the alliance's summit in Madrid next month.

As long as Bucharest is invited to start negotiations with the EU next year, and progress is made on issues such as the lifting of visa restrictions, Romania's people - the most enthusiastic of any Union applicants - will accept that they are on a slower road.

If there is one thing Romanians have learned in their troubled history, it is patience. After all, in spite of everything, Manole eventually got the church built.