"Banks should drop the hypocrisy"

Reporter: How do we resume lending in Romania?

Sebastian Vlădescu: I don't think that this year or in 2016 we will see a turnaround in lending.

Banks, including bankers, are still reluctant.

A good portion of the potential customers are either reluctant in borrowing, or unable to do so, because they still have outstanding debts.

In my opinion, the government should pass a measure to prevent people from being thrown out in the street, because that threat exists. And it is not only borrowers in Swiss francs that are in this situation, but those who borrowed in CHF as well, as the dollar has already risen over 10%.

Banks should drop the hypocrisy, and actually, their malice, and negotiate effectively with their customers.

Rather than selling their assets in bulk, especially their homes, to debt collector for 30%, they would be better off negotiating with their borrower because they would certainly get more.

If they granted their borrowers a 30% discount, they would certainly pay off their home, because most of them took on loans to buy their homes to live in, not to make speculations or to let.

Considering that banks have sold off assets at discounts amounting to billions, an act of humanity to the borrowers who can no longer handle the strengthening of the currencies is necessary.

This could be taken at any time and borne by banks. It is more convenient than pushing all of them into personal bankruptcy, taking their homes and then bundling them and selling that bundle to debt collectors for nothing. Because those debt collectors will turn against the borrowers as well.

Reporter: What is your opinion on lending to SMEs?

Sebastian Vlădescu: Lending to companies is a far more delicate subject.

There are companies, generally multinationals, which have no credit problems at all.

But there are, however, many local companies that have major borrowing problems, caused by two major factors, the lack of their own equity and the lack of collateral.

SMEs have started off from the lowest rung of the ladder and have moved up step by step. Their growth was quicker than the increase of their own equity, over the last few years, especially during the boom period.

The second element that makes lending very hard for local companies is the size of collaterals. Loans have been granted based on collaterals which had certain valuations in 2006-2009, but nowadays, those collaterals no longer cover the amount of the loan. It is hard to create new collaterals now and this means there is a deadlock in which both parties are right.

The owner of the company that goes to the bank to borrow money either needs money to make investments, or for their day to day operations, or because they want to avoid a temporary liquidity crisis, does not have the necessary economic and financial parameters to be accepted by the banking system.

On the other hand, the banking sector currently has some very strict rules set by the National Bank, which is trying to prevent the appearance of a new boom.

Thus, on one side we have the need for money, and on the other there is enough money, because Romanian banks have a huge liquidity.

Both from a regulatory, legal, point of view, as well as in terms of the collateral and own equity, the two parties can not intersect, even if they wanted to.

Here is a problem which, aside from the bankers' lack of appetite in taking risks at the current time, caused by their past fears, gets deadlocked in the purely regulatory area.

A solution should be found, and the question is who is going to take risks right now.

Because in my opinion, a solution for helping with the lack of capital would be a guarantee fund.

But even if we bring together God, Saint Peter and all the saints, who have the highest morality and the highest level of intelligence, they themselves couldn't set up a guarantee fund that can avoid every loss.

Out of all the customers, there are at least two or three that fail due to various reasons - market, stupidity, lack of technological skills, calamity.

There is an area wherein the necessary flexibility must be found so that a new Bancorex isn't created, while at the same time helping the system work, lubricate it, make it start up again.

This should be done by the government, especially the guarantee part.

The existing guarantee funds are small, they have limits of 2.5 million Euros, with total guarantees of a few hundred million Euros.

Whereas the lending need amounts to 2-3 billion Euros, for all the companies.

We should also look into how much the NBR can relax the rules, to make the system work.

Or else, we are going to end up with a situation where we have banks with their money lying idle on one side, and entrepreneurs on the other. And they can't connect through lending.

Banks have very high liquidity now and they have a great deal of difficulty in placing their money. According to the rules, a bank is going to place some of its money in government securities; it will keep some of its money with the NBR - for the minimum mandatory reserves, but it still has a significant chunk available for lending.

Reporter: Do you think that the National Bank of Romania has fulfilled its role that it had in the national economy?

Sebastian Vlădescu: I think it did. I have to think before I answer because I do not want to give an answer that is open to interpretation.

People expect the National Bank of Romania to have acted perfectly over time, which would have allowed it to exceed its role.

For instance, when it comes to loans denominated in Swiss francs, citizens are saying that the National Bank of Romania should have prohibited loans denominated in Swiss francs. But in 2006, nobody would have agreed to that.

It is not only those loans denominated in Swiss francs that would have been eliminated, but those in denominated in any other currency, and the return to currency controls would have sounded very inappropriate in 2004 or 2005, just as we were rejoicing that money was flowing into the country.

Blaming the National Bank of Romania for individual mistakes or for individual expectations that reality did not meet doesn't seem right to me.

Perhaps the National Bank of Romania hasn't done perfect work, but in my opinion, over the last twenty years, it has been doing quite a lot of good and quite little harm.

• "Those who are pleased don't talk, those who are displeased are very vocal and the impression is that the whole fiscal code is a mess"

Reporter: What is your opinion on the Fiscal Code?

Sebastian Vlădescu: I haven't read it carefully yet.

From my point of view, only one thing matters, the fact that the new Fiscal Code is being republished. This is an achievement for which the Ministry of Finance, its employees, the minister, deserve every praise (ed. note: the interview was granted prior to minister Darius Vâlcov being summoned to the offices of the DNA).

As finance minister, I tried to do that and failed.

As for its provisions, I see the debates are about the same as they are every time the Fiscal Code is changed.

Some are pleased and some aren't.

Those who are pleased aren't talking, those who aren't are very vocal and the impression is that the whole Fiscal Code is a mess.

I know from my own experience that 90% of those who are unhappy aren't right and they are guided by their own personal interests.

I didn't see those who really matter take consistent positions, making complaints against the Tax break. I am talking about the Council of Foreign Investors, major audit firms, tax consultants, the Chamber of Auditors.

Reporter: Former finance minister Bogdan Drăgoi said that the new Fiscal Code is a draft law made for when PSD will be in the opposition.

Sebastian Vlădescu: The Fiscal Code has current provisions that become applicable on the the next day after it comes into effect and which affect everybody's activity. Beyond that, there is - I don't know if there are any provisions in the Fiscal Code or just electoral-administrative commitments - that discussion about the evolution of taxation in Romania.

The choice of president Iohannis, despite the fact that he has no role in the Executive, has created among Romanians a set of expectations that in fact lie with the Government 90%.

The executive of president Iohannis has not yet come to power, they are still the opposition.

The current government has announced a package of "hopes" for 2016, 2018, 2019, 2020. We don't know who will be in power or in the opposition next.

Obviously, what Ponta did was a shrewd political move, but any man that has economic knowledge is going to ask themselves questions when it comes to the feasibility of cutting these taxes.

The new Fiscal Code looks good, but I don't how feasible something like that is, because the first thing that causes a certain degree of feasibility is Romania's economic growth, which is, in turn, tied to the Eurozone, the United Europe and what is happening globally.

For instance, for a growth of 7%, starting in 2016, the answer is that there can be such a Fiscal Code, but for a growth of 2% I don't really see how this is possible.

Reporter: Do we still need an agreement with the IMF?

Sebastian Vlădescu: I think we need the same type of agreement that we've had, i.e. a stand-by one.

We have already created a watchdog - the Fiscal Council - that works. The IMF does nothing more than come in and reinforce it.

We have needed an agreement with the IMF, because we have needed money and there have been times in the history of Romania when the agreement with the international financial institutions was effective.

The agreement model that we have with the IMF currently, is nothing more than a form of additional control, of verification that you can forgo. It is not something that is imposed.

Reporter: Do you expect to be called over to the National Anti-Corruption Department?

Sebastian Vlădescu: I don't. Expecting means assuming you did something that could be a cause for concern. I have no worries of the kind.

Reporter: What is your opinion on the anti-corruption campaign?

Sebastian Vlădescu: It's good that it's happening.

Reporter: You've been a colleague with many people who are now in trouble with the National Anti-Corruption Department.

Sebastian Vlădescu: I've worked with many people. The fact that this campaign has begun is remarkable. It's true that there are factors that create emotions and uncertainty concerning this campaign. We are a country where snitching is not allowed and is not well received. At the same time, in many systems, in the US or in Germany, denouncements are actually rewarded. But this is where we encounter problems with the whistleblowing - we don't know whether it is out of revenge or it is real. In the end what matters is for evidence to exist.

The second thing that I think is not alright in this anti-corruption campaign is the excessive publicity. I think that the contact with the press is far too intense and it is already past providing information and heading towards the media circus side.

It is very possible that the pace of the action did not allow the judiciary system - and I am referring here to judges, prosecutors, those who are active - to create the necessary walls. The prosecutors have started doing their job. But I don't know how legal it is to supply information about from cases or from phone wiretaps, before a ruling in the case exists.

There are areas we still have to work on, in my opinion. It shouldn't be allowed to create the impression that in fact, it is an anti-corruption campaign, instead of a political vendetta.

Public appearances have an effect and in the end, the excess of mass-media reporting can lead to reactions that can affect the anti-corruption campaign, which is to be avoided.

This campaign is necessary for Romania, but from exiting the offices of the DNA in handcuffs to the conviction there is a long way to go. This is where the balance needs to be struck.

Until they are actually convicted, those people have the benefit of the presumption of innocence.

• "The quantitative easing that the ECB is doing now is nothing new"

Reporter: What will be the effect of the quantitative easing program in Europe?

Sebastian Vlădescu: The bond purchasing program of the ECB will not have any significant effect on Romania in the short term.

If the action is going to yield results, we will be positively influenced by the fact that our main export market - the Eurozone - will become more creditworthy.

If the French or Germans buy more, then we will export more and in such a case, we are going to produce more.

I do not think, however, that the weakening of the Euro against the dollar or the Swiss franc will also cause a consistent depreciation of the Euro against the leu, at this year's exchange rate.

In the short term, the Euro will be weaker, but in the medium term, its evolution will depend strictly on the result of the main European economies - German, French, Italian, Spanish, Dutch.

We do not yet know, if the economies of the Eurozone will react to the ECB program and whether they will have effects similar to those in the US, which I think are quite perverse.

But, at least at first glance, the US have had positive results from the quantitative easing program - a drop in unemployment, economic growth, increased consumption, low inflation etc.

But in this whole picture of the current Europe, we should not forget the situation in Ukraine and the evolution of the conflict, which have repercussions on the European economies.

Reporter: What will the Central Banks be buying?

Sebastian Vlădescu: We are probably talking about bonds, but they may buy stocks or corporate bonds.

I don't know if the ECB program has limitations, including when it comes to the risk level of the instruments it is buying.

In fact, the quantitative easing that the ECB is doing now is nothing new.

It has been done in the previous years as well, but under different names.

What has mattered this time, however, is the significant scale of it that has been announced, as well as the major advertising they have done in the mass-media.

Reporter: Analysts have said that the Swiss National Bank has raised the EUR/CHF cap because of the ECB's quantitative easing.

Sebastian Vlădescu: There is still heavy pressure on the Swiss franc, despite the elimination of the cap.

Even though the franc is very strong now, there is buying rather than selling pressure on it.

The bets are still that the Euro will weaken and the franc will strengthen.

Reporter: There is probably somebody making the rules on this market.

Sebastian Vlădescu: There are funds, groups that have huge liquidity resources available, of tens and hundreds of billions of dollars.

If we calculate the value of the world's GDP and the value of the liquidity available for special transactions or the total volume of transactions, including derivatives and other financial transactions, then we will see that there is a huge difference between the two indicators.

We are dealing with totally different worlds.

If we were to transfer that money from financial transactions into the real world, we would find that we would be left with a mountain of money that has nowhere to go.

Huge quantities of money have been created from nothing, simply through multiplication through financial transactions.

I understand the added value of a loan, which is part of the added value of a form of labor, but the added value of a derivatives operation escapes me.

Reporter: We are talking about virtual money that has no backing.

Sebastian Vlădescu: The young are learning to live in the virtual world more than in the real one, and the volume of virtual money is beginning to be larger and larger. The problem is that upon their creation, they are virtual, but when used they are real. The one who gets a bonus on a derivative transaction - an operation that is strictly tied to the virtual money - goes and makes purchases in the real world, paying for food, drinks, homes, cars, clothes etc.

Reporter: Who will stand to gain from the quantitative easing?

Sebastian Vlădescu: On principle, the big countries.

Reporter: Mario Draghi, the president of the ECB, said that we are going to have a quick economic growth, following the ECB program.

Sebastian Vlădescu: It depends on what that means.

The Eurozone has grown less than 1%, if it sees a growth of 1.5% - in other words, nearly twice that -, we don't know if it is quick and high.

Inflation is already no longer a problem and in that regard there is something that to me is unknown - I can't understand how you can print huge amounts of money and not have inflation.

Part of the explanation is the inflation on the stock market. Over there, shares reach values that have no connection to the company's valuation.

Artworks are also increasingly expensive, and luxury goods in general, are now far more expensive.

For instance, luxury watches have increased in price constantly by 15-20% over 5-7 years. We are talking about products of 50,000-150,000 Euros, for truly rich people who can afford to pay money for something that could become an investment object.

Reporter: Will Greece exit the Eurozone?

Sebastian Vlădescu: As long as the Eurozone exists, no one will leave it, and I think the Eurozone will be one of the basic components of the future integrated structure, including politically, of a United Europe.

Reporter: Greece does what it wants.

Sebastian Vlădescu: Greece says what it wants.

Reporter: That matters too, because it is part of the negotiations.

Sebastian Vlădescu: What Greece does, compared to what it says it wants to do, is relative.

The problem of a political party like Syriza is how they are going to keep the promises they made before the elections.

We have the same problem in Romania, because over here we also have that type of expectation created by both sides of the political spectrum, the executive and the presidential one.

The moment the Ponta government launched the tax cuts program, his hopeful attitude overlapped with that of the president. One has numbers, the other has more consistency among the population.

We do not yet know how these two entities will function.

The same problem exists in Greece.

It is certain that the authorities in Athens will not offer the electoral handouts they promised in their campaign, such as the 14th wage or additional pensions.

Greece does not have the domestic means to create 200,000 jobs now. Being a politician and making promises is very easy, but being a manager and getting what you promised when you were a politician to work is a lot harder.

Reporter: Europe will keep giving Greece money.

Sebastian Vlădescu: Europe is constantly giving Greece money, it never stopped.

But it won't be giving it money to raise salaries, and it won't allow them to keep doing tax evasion.

There will be things that will continue to annoy Greeks greatly.

Syriza will have to implement the measures imposed by the European officials, to receive money.

Reporter: Thank you!