Difficult but wise choice: Romania took 20 billion loan

Since this economic crisis has started, Romania was considered to be one of the most dangerous countries “to explode and declare bankruptcy”. I was always saying that this is just an exaggeration, as the country didn’t really have to face the problems of many others (in the area or around the world). But it is sure that all the crawlers and alarmists had done their best so as to attempt to convince us about how big is the problem, bigger than the reality itself. This is why in my mother country, Greece, people were reading every day stories about Romania and Bulgaria.
There was nothing clear, the story was “thousands of Greek companies are in danger because if something happens and Romania will collapse, then they will collapse too”. (yeah, like “and if you walk out of your home and a car will crush you, you will go to the hospital and pay thousands of euro to be healthy again, so you will not have money to pay your loan. And if this happens to another 1.000.000 people in the same month, the healthcare system will be demolished! And the banks will lose all their money and bankrupt”… funny stories by journalists who knew nothing about the country, but they just wanted to write an article, so as to be trendy, no matter what was the damage they would create).

Some of the reasons why the deal is very good for Romania
Now all these are hopefully over. I know that a loan by International Monetary Fund, European Union etc is considered as something bad, but in reality the news is really very good for Romania. IMF will borrow 12.95 billion, European Union will add another 4 billion, World Bank will add up to 1,5 and EBRD another 0,5, so as in total the country to obtain 19,95 billion. The interest rate is agreed on 3,5%.
By a first look, this deal is very good for Romania. Why? Because…

• •  The country is secured towards any possible risk in the really difficult upcoming period.
  • The interest rate is lower than anything else the country would have obtained by the markets. I remind you that if Romania would have borrowed the same amount from the market’s free float, an interest of 6-7% would be almost sure. And if you multiply 20 billion with 2,5 – 3,5% extra costs per year, you have some 500 – 700 million euro extra costs to pay. Now the whole situation is much more relaxing, which is good for everyone and especially the Romanians. Less interest means fewer taxes…
  • To receive money by E.U., you need to contribute your own participation on each and every European structural fund too. So far this didn’t happen, or happened at a very small extent. Now Romania will have the money to contribute so as to access all the European structural funds, which will allow to the country to recover from the recession sooner. (Of course this requires also the studies and the preparation of the files so as to access the funds, which means that all these will start till the end of this year or the first part of 2010. But the important is to start!)
  • The country’s risk (in the eyes of the analysts) will be drastically decreased this year, almost diminished. So, this will help the psychology of all the market and initiate investments to continue or to be even stronger.
  • Let us not forget the Presidential elections this year, a factor of instability which was causing headaches to many people abroad. Now that the loan is arranged, everyone will know that there is no major danger by any election ahead. (ok, in life you can never be sure of something, but at least this is the most probable direction the country will take). Also hopefully the problems of the leading coalition will be solved in a smoother way, now that the future can be brighter again.
  • The Foreign Direct Investments will be initiated, as no “bankruptcy factor” will exist in the business plans of the companies.
  • The exports will be helped, as the state will have higher available funds, so as to return the VAT to the exporters, a big problem today. (The exports will be stronger for more reasons too).
  • Ron currency will not face the danger of demolition, with some “black” scenarios talking for even 1 euro = 8 Ron. Now, even if this year it can reach new lower levels, on the long run it will be stable again (especially when the country will start absorbing major quantities of European money) and eventually lock to a fixed rate towards euros.
  • Romania will be forced to correct the mistakes of the economy, things that we all know but they were not solved in the last years, on the contrary. The deficit, the taxes, the inflation, everything will be under constant surveillance of all the international organizations, which will also have the right to observe and demand changes. This probably means problems for the majority of the people for the upcoming 12 – 24 months (as some new measures have to be decided), but after this first period, it will help Romania to boost for many years, ensuring better life for almost everyone.
  • Unemployment will be fought with this new cash injection, consumption will be sustained and hopefully we will be able to see the banks opening their doors again in the near future (meaning to borrow with normal rates, not with crazy ones, like today). Soon Romanian banks will be able to borrow without paying extra interests due to the risk of the country, which will lead to lower interests for everyone.
  • Romania is still the no.1 country of Southeastern Europe, with some of the best fundamentals. Even with this loan, the total loans of the country remain quite low, allowing to it to stabilize and reach the 5 economic criteria (low inflation etc) which will open the door to EUROZONE, the “next big thing” for the years to come.
  • It is finally proved that the big countries with major interests here (such as Austria, Germany etc) didn’t let Romania to fall. It is not a co incidence that the today’s “major banks in Romania” summit will be held at Vienna (with almost half of the banks to be Austrian and the other half to be Greek, with just couple of exceptions).
  • Last but not least. I hope that all these will finally wake up the vast majority of the Romanian population. All these ones who were refusing to realize that the country has entered a new phase. Now it is more than clear that Romania will be safe, but there will be necessary sacrifices to be made by everyone, as he will face the reality.

25th of March was the day that Greeks started their revolution against the Turks, back in 1821, which eventually led to the liberation of half the territory we call Greece today. (This was the first revolution in Europe that time and a great celebration for us the Greeks). I hope that in the years to come we will also be able to celebrate the day that Romania received the 20 billion euro loan and gave an end to all fears, worries and troubles, opening the door to a better future.
Definitely the tunnel of recession is very long and still awaits all of us to walk through it. But now we saw the first light, in the end of it…