Economist Radu Georgescu warns that Romania, which has been operating on loans for the past seven years, will enter an economic withdrawal. He says that in all these years, 90% of the borrowed money went into salaries and pensions, meaning into consumption.
„For the past 2 years, I have been explaining to my children, family, clients, and those who follow me on social media that we are heading into a period of economic withdrawal. And that we need to prepare ourselves financially and mentally. I have explained that Romania’s economy has been functioning on loans for the past 7 years. In the last 7 years, we borrowed over 250 billion euros.
Loans are like steroids for the economy. When you take steroids, you can lift heavy weights. When you stop taking steroids, all the weights come crashing down on you. I have explained that Romania's economy has a Balkan model. When we get our salary, we go and spend it on the first night in a fancy club. By the end of the month, we eat yogurt and pretzels. We borrow to pay rent or the bank installment.
The 250 billion euros went 90% into salaries and pensions, meaning into consumption. We didn't even consume products made in Romania," says economic consultant Radu Georgescu in a post on his Facebook page.
We Missed a Huge Opportunity for Economic Development
According to the economist, Romania has a record trade deficit, the largest in the European Union.
"If these funds were invested in infrastructure: schools, hospitals, factories, highways, Romania would have become a study model in economics books. We missed a huge opportunity for economic development. Probably the last one, as we can no longer take steroids (loans).
I witnessed the last financial crisis firsthand, being a financial director in a bank. I saw how consumption increased based on loans. And how it collapsed in the absence of loans. The withdrawal from the last financial crisis started the day Traian Băsescu appeared on TV and said that Romania was in recession and that from the next day all salaries would decrease by 25%, and the VAT would increase to 24%. Until that day, the bank's offices were full of people taking out loans. The next day, there was no one. No one was taking out loans anymore. Not the following week. Not in the following months. Not in the following years," says Radu Georgescu, emphasizing: "From that moment on, consumption will sharply decline."
He recalls that it took ten years for Romania's GDP to return to the 2008 level, adding that Romania "will officially enter withdrawal" when the reduction in the number of public employees is announced or when salaries and pensions are frozen.
"From that moment on, consumption will sharply decline. Probably this message will come after the presidential elections," says the economist.
The Raw, Yet Beautiful, Side of Economic Withdrawal
Georgescu explains, however, that there is also a "beautiful side to a period of economic withdrawal."
"You understand what is truly important. And what is truly beautiful. In 2008, we paid 120,000 euros to go on a ski team building trip to Switzerland. In 2009, we didn't have money to pay our office rent and utilities. Because we had zero budget for team building, we went with colleagues camping in the Apuseni Mountains. I was surprised to see that the sunrise from a tent on top of the mountain looks much more beautiful than from a 5-star hotel in Switzerland," concludes Georgescu.