Beyond Corruption? Romania’s Future after the EU Presidency

Years of Growth

Romania was deeply affected by the Great Recession of the late 2000s, fully recovering from the slump only in 2014 when expanding private domestic consumption pushed the rate of growth to 2.8% and set the trend for the following years. ^[6] By the time the Social Democratic Party (Partidul Social Democrat, PSD) won the elections in late 2016 the trend had accelerated. Romanians regained their purchasing power and could once again arrange bank loans, which accounted for a dramatic spike in private domestic consumption and an annual rate of growth of 4.8%. The year 2016 also saw employment catching up with pre-recession figures which had peaked at 4.8 million in 2008. However, it was the low productivity, low wage service sector that created most of the new jobs. ^[7] Successive wage increases in the public sector, a series of revisions to minimum wage legislation (amounting to roughly 317 euros by 2017), higher pensions and unemployment at its lowest since 2000 kept private domestic consumption high in 2017 too. Indeed, 2017 turned out to be a boom year, with a rate of growth recorded at 6.9%. Higher inflation then curtailed consumer spending in 2018 with the result that real GDP growth dropped back to 4%, still well above the European average. Nevertheless, Romania’s consumption-driven growth of the preceding years could not but widen the current account deficit as imports of consumer goods outpaced exports, a fact which triggered warning calls from the European Commission in early 2019 over the long-term sustainability of Romania’s economic strategy.

Many observers of the Romanian economy, including the European Commission, found the increase in the cost of labour over the past years more worrying than the widening current account deficit. Indeed, part of the austerity policy package that secured Romania’s exit from the Great Recession included reform of its labour legislation. The labour laws passed in 2011 decentralized wage bargaining thus weakening trade-unions’ bargaining power across industrial branches. Coupled with large-scale cuts in the public sector, the policy of wage restraint was deemed necessary to better reflect developments in productivity. ^[8] Between 2013 and 2017 however, the minimum wage rose from 170 euros to 317 euros, almost doubling at a net average annual growth rate of 18%. The proportion of workers living from the minimum wage rose from 10% of all those in employment in 2012 to more than 30% in 2017. Following a new unified minimum wage law pushed through Parliament by the social democrat government in January 2017, minimum pay increased spectacularly between 2017 and 2019 from 317 euros to roughly 445 euros. This wage growth at the bottom of the economy was partly compensated for by a change to the social security system, effective from 2018, by which employees rather than employers were required to pay social contributions from of their wages. ^[9]

Coupled with a parallel wage growth in the public sector, pensions included—the raising of the minimum wage was widely criticized by employers, domestic pundits and experts on the European Commission because they claimed it undermined the competitiveness of the Romanian economy, notably in sectors in which low labour costs secured a competitive advantage for Romania. Their criticism was based on the fact that ever since 2016 Romania had shown ‘one of the fastest wage increase in the EU, strong even for a catching up economy faced with high poverty rates’. ^[10] More importantly, concern at potential loss of competitiveness is based on a view of the overall Romanian context in which employers find it increasingly difficult to hire skilled labour. Over the past two years investigations by journalists, opinion pieces, and TV programmes have painted an alarming image, deploring the scarcity of workers and reporting on strategies adopted by companies to recruit from outside Europe, notably in the construction and textile industries. ^[11]

However, such doom-mongering ought to be taken with a pinch of salt. It should be borne in mind that much depends on regional factors as the reach of labour markets is eminently local. Moreover, the crisis might be temporary rather than chronic, and simply correlated with higher demand from Western European labour markets over the past two years, which have allowed many Romanian workers to consider working abroad. The question of skilled labour is certainly more serious and a potential long-term problem for the Romanian economy. ^[12] First, over the past decades public vocational training has collapsed, and though some private companies do invest in educational schemes, the mismatch between demand and the availability of skilled young people is widening. Characteristically, in 2017 alone 18% of people between the ages of 18 and 29 were neither in employment nor involved in education. That figure is comparable to those of Bulgaria, Greece, Italy and Croatia. ^[13] Secondly, recent empirical studies show that wage disparity between Western and Eastern European economies tends to be higher among skilled workers. In other words, the difference between what counts as a low wage in the German and Romanian service sectors is smaller than that between what counts as a high wage in engineering in the two countries. ^[14] Understandably, much of the recent wage growth in the public sector that was pushed for by the social democrat government has been justified by suggesting that it was rewarding the sort of highly educated employees, such as medical personnel, who might otherwise have been expected to feature in brain drain.

Encouraging for some therefore and of concern for others, economic developments over the past few years in Romania should not obscure the fact that the country remains overwhelmingly poor with inequality distributed among regions on an axis from the impoverished east to the more prosperous west of the country, wealth concentrated in Bucharest and a few other large cities. Monetary poverty is among the highest in the EU and so too is inequality of income, with the top 20% earning as much as 6.5 times more than the bottom 20%. In the language of the World Bank, this configuration amounts to ‘shallow poverty’, namely low income and social exclusion underpinned by the world’s highest rate of home ownership. ^[15] Approximately 96% of Romanians currently live in their own houses, a legacy of the early 1990s when the first postsocialist governments encouraged citizens to buy their flats, until then rented from the state, at affordable prices. With more than 14% of its population living in other EU member states, Romania also tops the rankings for internal migration within the EU, with the number of Romanians spread across Italy, Spain, Germany and other Western EU countries conservatively estimated at 3.5 million. How, then, do these social and economic dynamics play out on the Romanian domestic political stage?

Years of Change

The unsurprising answer is: ‘Hardly at all’. The May 2019 EU elections emphasized the pro-European stance of the Romanian electorate. None of the major parties offered an overtly anti-EU political programme, although the ruling Social Democratic Party had on a number of occasions voiced criticism of European institutions. ^[16] However, the party could not capitalize on its show of hostility to the EU, receiving a historically low 22.5% of the vote. The National Liberal Party (Partidul Național Liberal, PNL) won the election with 27% of the vote, followed by a coalition of two newcomers, the Save Romania Union (Uniunea Salvaţi România, USR) and the Freedom, Unity and Solidarity Party (Partidul Libertății, Unității și Solidarității, PLUS). A few minor parties stood in the election, among them a party splintered from the PSD and called PRO Romania, which polled 6.6%. ^[17] A major difference from the previous European elections in 2014 was a relatively high turnout of 49.02% when compared with the previous figure of only 32.44%. ^[18] The turnout would in fact have been slightly higher if the Romanians queuing in front of consulates all over Europe could have voted by post. ^[19]

The election result provides on the one hand a number of insights into how the political scene evolved after the parliamentary election of December 2016 when the PSD received 45.47% of the vote; and, on the other hand, it shows how the Romanian EU presidency influenced the evolution of political moods over the first half of the year. As just one example of public opposition to the reform of the judiciary system that the PSD-led government planned to enforce, street protests accompanied the inauguration ceremony in January 2019 at which Romania took over the EU presidency. This was just one among many instances when protesters opposed the reform of the judiciary system that the PSD-led government planned to enforce, which aimed to weaken anti-corruption legislation with the goal of overruling the conviction of its leader, Liviu Dragnea, for influence peddling. Against these attempts to weaken the rule of law, a parliamentary and civil society coalition coalesced on an anti-corruption platform. The Romanian president, a former Liberal Party candidate, postponed signing the controversial decrees while the streets of Bucharest and other Romanian cities were regularly occupied by waves of protesters demanding that the government resign. The biggest of the rallies took place in August 2018, when members of the diaspora participated in it. A brutal clampdown using riot police put an end to that particular event. ^[20] However, rallies and other forms of protest, such as sit-ins in front of local PSD headquarters, continued throughout 2019.

It was possible for such protests to last so long because it was not the first time in Romania’s recent history that various groups had organized extended protests that managed to prompt then-unprecedented mobilization inside and outside the country. For example, beginning in 2013, environmental actions aimed at shutting down gold mining at Roşia Montană were hailed by numerous observers as nothing short of the rebirth of Romanian civil society. ^[21] Very effective online and street mobilization surrounding the Roşia Montană case led to the emergence of other voluntary associations and grassroots movements which addressed various matters and eventually branched out into new forms of political organization. For example, the Save Romania Union (USR) was one of the new parties to perform well in the 2019 EU elections. It had emerged from a voluntary association called ‘Save Bucharest’ (Asociația Salvați Bucureștiul) which ran its first local election campaign in 2015 based on a programme of improving the quality of life in the capital. In 2015 the party worked to extend its appeal to the whole country and managed to enter parliament.

One view of the USR’s success is that its credibility was forged by civil engagement with its anti-PSD stance in parliament as its drumbeat. Another explanation sees its success as the outcome of a clever tactic to align itself with the Freedom, Unity and Solidarity Party (PLUS) which was another newly founded party. The former PSD government was forced to resign in November 2015 after a fire broke out at a concert venue in Bucharest, killing 64 people and injuring many more. Street protests charging the government with neglect and mismanagement contributed to its toppling, and Dacian Cioloş, a man of no political affiliation who had served as EU Commissioner for Agriculture, became prime minister of a so-called ‘government of technocrats’. Cioloş continued to refuse any political affiliation until 2018, when he founded his own party (PLUS) and still runs his campaigns behind the slogan that he is not a politician, in spite of the fact that he has just became a member of the European parliament and is currently chairman of the EU political group ‘Renew Europe’. In the context of endemic corruption and the sheer incompetence of the Romanian political classe dirigeante, the idea to replace it with ‘technocrats’ seemed like a panacea. In other words, the USR-PLUS coalition capitalized on the appeal of a grassroots movement paired with the expertise of specialists. Similarly, its political programme is a mixture of everything; both parties try to circumvent the classical left/right division of the political spectrum with a combination of social welfare programmes and capital-friendly policies. USR leader Dan Barna even compared his party to Emmanuel Macron’s En Marche! movement, although of course Macron did not emerge from a grassroots organization. ^[22] In other words, the USR-PLUS coalition aims at nothing less than replacing the former political elite and realigning the existing party system.

To date the coalition has succeeded only partially, having contributed to the free-fall of the PSD. There were several factors that led to the PSD’s poor election results, such as street protests, political activism, pressure from the EU, press criticism and the party’s own blunders. Shortly after the EU elections, the deeply embattled PSD leader Liviu Dragnea was imprisoned for corruption and for the time being the party is in disarray. ^[23] There remains a very real question of whether a party streamlined for over two years around the personal interest of its leader can survive his removal. The situation is aggravated because the party had already lost a proportion of its members when another controversial PSD chairman left in 2017 to found the PRO Romania party, which also propounds a social democratic agenda. However, the PSD has been a major political force throughout the entire postsocialist period and can still rely on many elected mayors and county officials, especially in the rural parts of eastern and southern Romania. Changing such deeply entrenched local political networks will be difficult.

What remained unaltered throughout the tumult was electoral support for the National Liberal Party (PNL) with the regular presence of the country’s president Klaus Iohannis in the mass media probably the most important reason for its high approval rates. Within the last six months Iohannis has become one of the most outspoken critics of the government. In addition, the EU presidency exposed Iohannis to a Europe-wide audience, as Romania’s presidential system required him to act as the country’s main representative at EU summits. Iohannis tried to tap into popular discontent with the PSD’s attempts to dismantle the rule of law by proposing two referenda on judicial reforms. The votes were held on the same day as the EU elections and asked voters whether they approved of a ban on amnesties and pardons for offences of corruption; and whether they approved of a ban on emergency judicial decrees. 80.9% of the voters answered ‘yes’ to both questions. ^[24] However, it remains to be seen whether Iohannis and the PNL will continue to perform so well when corruption within the PSD has ceased to be the main topic of conversation.

To a large extent the anti-corruption campaign directed against the PSD and its leader Dragnea was what mobilized many voters and formed the basis for a wide consensus among the opposition and civil society activists. However, on closer inspection the ad-hoc anti-corruption coalition has very little else in common. For instance, it remains largely unknown where most political parties and civil society groups stand on social and economic policies. The USR, because of its grassroots beginnings, is careful to distance itself from ‘leftist’ associations, meaning that the party has largely ignored social matters. The PNL, while seemingly agreeing with the wage policy of the current government, seems equally concerned that higher wages might endanger economic growth. In fact, all the political parties except the PSD seem to have positively embraced ambiguity about such topics. Indeed, it could not be otherwise, for no opposition party could afford to commit itself to the recommendations of the European Commission and make rising labour costs the centrepiece of its policy, nor could the opposition risk alienating potential supporters by attacking the wage growth policy pursued by the current coalition government.

Romanian society is also very much divided on fundamental values. Probably the best recent example to illustrate the deep rifts in opinion is a recent referendum, which failed because turnout was below the required threshold of 30%. In October 2018 an association of non-governmental organizations called the Coalition for Family (Coaliția pentru Familie) raised a petition for a referendum on changing the definition of ‘family’ in the Romanian constitution. Specifically, the referendum was aimed at replacing the definition of marriage enshrined in the constitution, from ‘a union between spouses’ to ‘a union between a man and a woman’. The explicit goal of the referendum was therefore to wipe out every constitutional opening to the legalisation of same-sex marriage in Romania. Although the petition gathered three million signatures, the referendum failed not only because of calls for a boycott but from widespread lack of interest. Among political parties the USR and PRO Romania opposed the view of the referendum’s proponents, while the PSD supported them. The PNL abstained. However, even the leader of the USR declared that his party had no plans to promote same-sex marriage, that being a task for the next generation. ^[25]

Another contentious family-related matter is abortion. In this respect, Romania’s recent history is singular, as it had the most restrictive abortion law of all the state socialist countries. ^[26] Its devastating effects in the form of illegal abortion and child abandonment lingered for many years after 1989. However, Romania is now witnessing a conservative backslash. Since 2014 the Romanian Orthodox Church, evangelical groups and voluntary organizations have organized so-called ‘marches for life’ (marșul pentru viață) all across the country. ^[27] In addition, although abortion is legal up to the 14^th week of pregnancy, more and more hospitals are refusing to perform abortions. ^[28] In the same vein Clotilde Armand, one of the most prominent members of the USR (which had boycotted the referendum to alter the legal definition of the family) became one of the most vocal advocates of the ‘traditional’ family and herself a ‘prolife’ activist. ^[29] Even more to the point, a recent poll showed that discrimination and xenophobia is widespread throughout Romanian society. It emerged that 59% of those questioned would not accept a homosexual in their family, 39% would not welcome an immigrant or a Muslim, 29% were hostile to Roma, and 21% would reject a Jewish person. Two thirds of respondents opposed marriages between people of the same sex. ^[30] To be sure, the EU-friendly vote means a strong commitment to the rule of law which is one of the core principles of the EU but in terms of fundamental private values, such as personal freedom, equality and non-discrimination, Romania is almost catching up with the more conservative East European countries inside the EU such as Hungary and Poland.

Conclusion

Contemporary Romania is in a pickle. In spite of initial doubts, the EU presidency was a generally positive experience which should encourage Bucharest to take itself more seriously in the face of Brussels’s langue de bois. If anything, the criticism that welcomed Romania to assume the presidency was more a disciplinary technique, ‘corruption-talk’ traditionally deployed to rappel à l’ordre t he EU’s eastern fringes. Domestically, t he so-called fight against corruption was and remains the main topic of discussion. Indeed, new parties emerging on the political scene seem incapable of generating any other ideas than a resolutely anti-corruption agenda, their outline of a better future effectively reduced to nothing more than a Romania without the social democrats in office. Still, anti-corruption was the great political catalyst of recent years. Not only did it define the relationship between EU institutions and Bucharest, but it also fuelled the most widespread mass protests in recent Romanian history, catapulting a new political elite into the European parliament who rode a wave of generalized revolt against the PSD and its former boss, Dragnea.

Having served all its imaginable purposes, ‘corruption-talk’ would now be better buried as a political language. The European Union and future Romanian governments should devote more of their energy to rethinking the low wage economic model of the Eastern periphery. Large current account deficits might be troublesome in the short term but a future in which Romania were still defined—at home and abroad—as a pool of cheap labour would be a far more serious mater, both for EU ‘cohesiveness’ and ‘competitiveness’ in the global economy and for the country’s prospects of catching up. Equally important, anti-corruption veiled for too long the emergence of a reactionary, ‘illiberal’ civil society in Romania, one resourceful enough to mobilize a large constituency around anti-abortion and anti-gay marriage agendas. It was bottom-up, voluntary organizations rather than the political elite which first pushed for a return to ‘traditional values’. With a society increasingly turning conservative and an economy creating ever more precarious employment, tomorrow’s Romanians will surely look back on the past couple of years with some nostalgia, remembering a period of economic growth and pro-EU sentiment during which all they seemed to do was complain about how corrupt their country was.