Vote for justice could bring Romania’s expats home

by Radu Nechita* Millions of Romanians have left their country, […]

by Radu Nechita*

Millions of Romanians have left their country, either permanently or temporarily, since the overthrow of leader Nicolae Ceausescu in 1989. Despite their nation’s move away from communism and its accession to the European Union and Nato, corruption is endemic at all levels of society, writes GIS guest expert Radu Nechita. But former teacher Klaus Werner Iohannis unexpectedly won the presidential elections in November 2014 with an anti-corruption campaign. It was a significant vote for the rule of law.

Vote for justice could bring Romania’s expats home

Romanians – both residents and migrants – opted for the rule of law when they voted for Klaus Iohannis in their presidential election.
This was their nation’s missing ingredient 25 years after the fall of communism.

More than two million Romanians, 10 per cent of the population, have left their country as migrants in that time after losing hope of reform.

Their interest in the November 2014 presidential elections was highlighted in the European Union, US and Canada, where they were able to vote – some having to queue for several hours. It proves that many of them want to go back, provided there is a chance of change in their native country.

The polls raised two questions in particular:

In the most pro-American EU country, how could the winner of the first round of voting, Victor Ponta, declare, ‘I don’t like America, I prefer China’?

Electoral gifts

And in a country almost completely abandoned by its German minority, how could Mr Iohannis, an ethnic German, beat Mr Ponta – who played heavily on national and religious themes – by 10 per cent in the second round?

The first paradox is explained by Mr Ponta’s almost perfect electoral campaign during his last two and a half years as a prime minister in a coalition led by the centre-left Social Democratic Party. His ‘electoral gifts’ and promises covered the entire political spectrum, under the general principle that ‘there is something for everybody’.

The solution to the second paradox is the fact that the elections had two main topics. The dominant one was the independence of justice and the pursuit of an anti-corruption programme.

The second was Romania’s strategic orientation – to the West and its values, rather than towards a regime characterised by Hungarian Prime Minister Viktor Orban and Russian President Vladimir Putin.

City mayor

Almost two-thirds of electors voted and 54.43 per cent of them considered Mr Iohannis more credible on both issues, thanks to his unique political profile.

Born in 1959, he is a former physics teacher from Sibiu, a city of 150,000 people in southern Transylvania. Mr Iohannis was a founding member of the Democratic Forum of Germans from Romania (DFGR) in 1990 and became the president of this political and cultural association (2001-2013).

He ran for mayor of Sibiu in 2000 and surprised everybody by winning in the second round against the local candidate of the Social Democrat Party (SDP) with 69 per cent of the vote. He has won every election since, with 88.7 per cent, 83.2 and 77.9.

This explains partially the persistent invitation from the centre-right National Liberal Party (NLP) to him to become a member and then presidential candidate (2013).

Under investigation

His reputation as an efficient administrator reached a national audience when Sibiu, along with Luxembourg, was elected European Cultural Capital for 2007.

In 2009 he was proposed as a candidate for prime minister, but was rejected by the man who was his predecessor as president, Traian Basescu of the centre right Democratic Liberal Party.

Nationwide fame came at a price: since 2009, he has been under investigation by the National Anti-corruption Directorate (NAD) and the National Integrity Agency (NIA).

He was cleared of all but one charge – an accusation of ‘incompatibility’ by the NIA, on the grounds that he acted simultaneously as mayor and a representative of the municipality in a stockholders’ assembly of Sibiu’s water supply company.

This case will be judged by Romania’s supreme court, the High Court of Cassation and Justice, after Mr Iohannis won at lower judicial level.

Romania’s elections concern the ‘Western camp’ of the EU and Nato because in its region, it is the last standing outpost in the face of any Russian offensive and a diminution of Western influence.

The nation is surrounded by countries where Russian influence is long-lasting – Serbia, Bulgaria, Moldova, Ukraine – and increasing in Hungary. And the troubles on Nato’s south-eastern flank, in Greece and Turkey, increase the value of Romania’s stability.

In the current geopolitical context, with fluid political maps and frozen conflicts, and where energy is rather a weapon than a mere utility, Romania’s natural strengths are still only relative, but more obvious.

It has a strategic position on the Black Sea and along the Danube; between Russia’s close and not-so-close neighbourhood including Ukraine, Moldova, Serbia, Bulgaria and Hungary; and not far from the usual ‘powder keg’ areas of the Balkans, Caucasus and Middle East.

State resources

Thanks to its hydro, nuclear, oil, gas and coal resources, Romania is the third most ‘energy independent’ EU country – an important asset when a large share of such reserves is controlled by unpredictable governments.
Some of its energy resources are privatised, but many are still owned by the state and poorly managed, including hydroelectric plants. Other resources are yet to be exploited, including oil and natural gas.

There are some optimistic estimates concerning shale gas, but prospecting was stopped temporarily after protests over environmental issues. Efficient extraction would interest many EU and US investors, who would be easier to attract in a more business-friendly environment.

Romania’s natural strengths are at least partially counterbalanced by its institutional weaknesses. Despite some improvements, the nation still performs poorly in rankings by Doing Business and Economic Freedom, published by the World Bank, the Fraser Institute and the Heritage Foundation.

Widespread corruption

For example, Romania’s 2014 Doing Business ranking of 73rd out of 189 countries, or 25th in the EU, hides some very low ratings in some sectors, such as paying taxes (134), getting electricity (174) and resolving insolvency (99).

An even more significant drawback is the problem of corruption at all levels of society. Romania is 66th out of more than 170 countries, or 26th in the EU, according to the 2012 Corruption Perception Index published by Transparency International.

Significant improvements in combating this phenomenon were achieved after the creation of the NAD, a prosecutor’s office specialising in combating high and medium level corruption – offences which caused material damage of more than 200,000 euros (US$246,000). November’s elections were, in the end, about the future of the NAD.

The unexpected presidential power-shift represents an opportunity for Romanians to consolidate the independence of the justice system and bring politicians under the rule of law – and in many cases, put them behind bars.

Political change

The even enforcement of the law is probably the biggest factor lacking in Romania’s business and social environment. It is the most important ingredient in any institutional framework favourable to prosperity.

Romania faces some major threats: a prolonged economic crisis and a stop or slow-down in reforms necessary to improve this framework.

The day after the surprising election results, everything seemed possible. In a matter of days, the number of scenarios diminished, but there are still some alternative futures.
The centre-right president will work with a centre-left parliamentary majority. This could change in 2015 through new political alliances, or at the 2016 parliamentary elections.

Either the main political parties will respond to public expectations and reject the most corrupt high-ranking members, or they will try cosmetic changes. In this case, it is likely that new political forces will be founded before the next polls.

Defence policy

Romania’s foreign policy will keep on course – to the West – but some changes are likely. President Basescu was openly against Russia and pro-America. His 2005 warning that ‘Russia treats the Black Sea as a Russian lake’ irritated Moscow and was ignored or mocked by Western politicians – with famous consequences in Georgia and Ukraine.

The new president will probably increase the importance of cooperation with EU partners. He will have a more pragmatic and less provocative attitude towards Russia, but without softening the military commitment to Nato.

He has already mentioned his intention to enforce the organisation’s ‘two per cent of GDP for national defence’ rule, but this depends on government cooperation and budgetary constraints.

It is very difficult to foresee a course of events which could change this orientation. The only alternative scenario could be an analogy with the mid-1990s.

Nato strategy

During the Yugoslavia civil wars the centre-right coalition joined the Western camp, despite the public perception that ‘Serbia is Romania’s best neighbour, after the Black Sea’ and the economic costs of embargoes.

This unpopular strategy was adopted with the hope that Romania would join Nato. It did not happen then and this explained in part the return of the communist party successors in the 2000 election.

Ironically, they were in power in 2004 when Romania eventually joined the alliance.

Nowadays, similar topics would be Romania’s acceptance into the EU Schengen passport-free zone and the elimination of the need for visas for the US and Canada. Any step in this direction will reduce the probability of this less desirable scenario.

As Mr Iohannis demanded during his campaign, the parliament has already rejected the so-called ‘amnesty law’ for jailed MPs and suspended the immunity of half a dozen others suspected of corruption – procedures which had been blocked previously by a multi-partisan parliamentary ‘omerta’.

MPs arrested

The new president explicitly warned his own party that he will neither tolerate nor protect corrupt members.

Everything points towards the anti-corruption drive continuing. Currently, 37 MPs and former ministers are under investigation or arrest. According to the chief prosecutor, the NAD is conducting about 4,800 inquiries, which concern all political parties and could have implications abroad. The 534,000 million euros (US$656 million) border security contract signed with German company EADS is just one of the deals currently being investigated.

Any slowdown in this process will increase the chances of corrupt politicians to outmanoeuvre a president with rather limited constitutional powers in national policy. This pessimistic scenario can be avoided if Romanian public opinion and ‘Western’ officials continue to react to it.

* Radu Nechita is an associate professor at Babeș-Bolyai University, Cluj-Napoca, Romania, teaching microeconomics, money and banking, globalisation and development, and European economic integration.

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The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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