The joke about… “Romania being ready to collapse”

Friday, November 14th, 2008

Are we ready for the New World? (part 2)

“Ilia, did you hear this? Standard and Poor’s has given a bad mark to Romania”… “Ilia, did you hear that? Romanian GDP growth is expected to slow down in 2009”… “Re malaka (this is a friend), in the newspapers I read that Romania is ready to bankrupt, like Iceland”… “I am really sorry, mister Ilias, but didn’t you read that Romania is in very big danger?”… “Uncle Ilia, uncle Ilia, uncle Ilia (a young nephew calling), I heard in the morning news that Romania will be down and the teacher in school told us that this means that it will lose all its money”… “Ilia, you are not well informed, the “X” newspaper claims that the Greek banks have big problems because of their exposure in Balkans and especially in Romania”…

The last one month I am tired of trying to explain to people things which are at least obvious. But this is my job, when you are (also) a consultant, you have to be responsible and always ready to give answers for your field of expertise. Most of the times, I hear and read people afraid, tying to terrify the others, without giving arguments. Without telling us how exactly this country will collapse, why we will lose our money. The only thing that I read and hear is this “Many countries in the region are in trouble. Romania is one of them and it will also have trouble as many analysts say. And Greece has invested many billions in the area, the Greek investments are in danger” (the same version stands in many different countries, depends also a lot about how irrelevant with Romania is the journalist – judge).
Some few speak about the account deficit of the country, which is really big and they claim that because of this the whole structure will be demolished. But, is this the truth and do we really want to know the truth?

Yes, there is a problem, but not the problem you are reading
Yes, no one can say that Romania is out of trouble. But the problems it has are totally different than the ones people tell you officially. Why is this happening? Probably because they don’t care to find out the truth, they just want easy words, what they can see from the surface. So, the real problems of Romania (for me) are:
- Many investors in Real Estate have made stupid expensive investments. These people invested without mind and now they will try to blame the country for their loss.
- Following the first point, many businessmen have lost money in Romania, or didn’t succeed to earn the profits they have been expecting. Some of my friends who (let us be honest) didn’t really try to understand Romania or work hard here, already claim that “no foreigner became rich in Romania”. Maybe they mean no foreigner became rich very fast, forgetting that in their own countries all people need to work for 20 years so as to become wealthy, a target which still can be achieved here in 3 – 7. Definitely, if (for example) you opened a shop and you were expecting the people to stand in queues so as to be your clients, then you lost, but Romania is not responsible for this. If you overestimated the country, the mistake is all yours.
- The country is heading to elections. This means, all around the World, that the situation is not very steady, it could be described as “in transition”. Politicians promise, fight, collide, play games and behave in the same way that we know everywhere (ok, there may be few countries that don’t apply to this situation, but an exception is always here just to confirm the rule). So, in a “election” atmosphere, people are searching for stability. Wait few weeks and you will have this too.
- Definitely, the local currency, Leu, is under attack and it will continue to be. No one denies this, only the countries of Euro zone or other countries with very strong economies don’t face problems. Myself I have written here that I expect it to be devaluated by 20%, around 4.5 Leu for 1 Euro. But this is not necessary a disaster. It will be a difficult period for the Romanians who keep their money in Leu, but for the ones who valuate their goods with Euro and most the foreigners, things will be better in mid term. The exports will be stronger, the imports weaker, the economy of the country will receive a necessary boost.
- The new measures of BNR (National Bank of Romania) regarding the ability of Romanians to receive a loan and especially the housing loans, the ones that all developers wait so as to sell their units to the end users. The new system and tests allow to only a small part (15 – 20% comparing to the recent past) of the Romanians to receive a housing loan. This is difficult and all sides attack. But let us be honest. If we want a healthy progress, we don’t want unpaid loans, USA and the whole world will suffer a lot because of the last bubble there. This measure will lead to very big safety for the banks and also to more “white money” appeared in the salaries of the employees. Whoever will want to receive a loan, will be forced to present his real income, which is painful (for him) but necessary for the country. (Ok, some modifications could be added too, but the main idea is definitely moving to the right direction).
- For me the biggest problem will be the scenario of the Governor of BNR resigning. Mr Isarescu has been a very important player in the market, for many years, his guidance was vital for the growth of the economy and if he will go, we will lose few months so as to find a new balance and stability.

The joke about… “Romania being ready to collapse”

Are we ready for the New World? (part 2)

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