Thursday, 27 January 2011

Medicine

IMF has resorted to medical analogies when discussing the surface of Romania’s financial reality. The patient was operated on, but it is not stable and no real life signs detected…
The forays into such medical metaphors have caused, of course, some furor in the national press – but once again, all this is basically a storm about the surface.

If one digs a little bit deeper, then immediately realises that neither party is interested, nor in any way pre-occupied, with the actual problems. Latter are underlying structural problems, quite different from the main interest of the IMF (quick and regular patching up via numerous loans that can successfully drive any country into the ground) or of the Romanian government (long terms plans? underlying financial problems? who cares??).

The one moment of honesty comes when IMF says that one of the methods to increase liquidity (which they remark is a key issue) is loans. The other ways to increase liquidity (notice IMF’s immense power of stating the obvious and elementary) is population’s savings and foreign investments.

So if we take the extraordinary latter two insights (and skip over the matter of loans, that solve absolutely nothing in Romania’s actual financial problems – just think of the matter of public pensions)…

Population’s savings… considering the economic situation, everyday finances and minor matters like inflation (that put Romania again in shameful top ranking positions on EU tables), does the IMF have any grasp whatsoever on the population’s financial situation in Romania? Which then in term, has direct effect on level of savings, too… Well, rhetoric question…

Foreign investments… In conditions where, for example, Mercedes-Benz ran like hell out of Romania after first inquiries, due to what they simply called real estate sharks, or when myriad foreign investors either don’t come or pull out due to the immense taxation system and bureaucracy… what is IMF’s grasp on reality, or predictions for the future? On recent counts, the number of taxes and approvals needed for a foreign investor to really set foot in that country ran up to a 3-digit figure… As other example, whilst other countries, including the UK, have approached China with ‘begging’ for collaboration and investment projects, when China actually considered to put up with the breathtaking Romanian machinery gating foreign investment, and offer a huge project, Romania said no…

So we have a great match, an organisation who only looks at short-term quick fixes that patch a wound on the surface (to stick to medical analogies), and a government that also has no longer term plans. Romanian government, as usual, only concerns itself with immediate-to-short term issues, because they know they won’t be around for long…

Also, we have an organisation that has no grasp on the actual economic realities at street level when talking about a country, and a government that, well, has same lack of basic understanding on the same subject. A match truly made in Heaven.