English
Ana Săbiescu
Former Finance Minister Daniel Daianu has expressed his astonishment with the European Commission"s refusal to approve the proposed increase in the capital of the State-controlled CEC Bank and has written a letter to European Commissioner for Competition Neelie Kroes to explain his discontent.
"I am stunned to find out that the Commission is against Romania" intention to increase the capital of its state-owned bank CEC. I agree with your assessment that CEC does not face solvency and liquidity problems. But let us go beyond the narrow judgment of what banks are supposed to look like and do, especially under the current very dire circumstances. Unless sound banks lend to the real economy the downturn will get worse and their very balance-sheets will be impaired. Just think on the very steady flow of exhortations which accompany Mr. Trichet"s statements whenever the ECB injects huge amounts of liquidity in order to revive credit markets. The same can be said about statements of top government officials in Germany and France," Economist Daniel Daianu wrote to Commissioner Kroes.
The European Commission maintained the opinion that the Romanian authorities had not informed the Commission of their intent to recapitalize CEC Bank and that the Commission discovered this state of affairs on by themselves. However, the Romanian Competition Council announced that discussions with the European Commission on the increase in the share capital of CEC Bank had been informal in nature that far, in line with a mechanism agreed with the Commission.
"I accept that this is a catch 22 situation, that lending should not be done in a blind, open-ended way But, arguably, when capital is available for a highly commendable end, it does pay to think in broader terms and help the economy. In Romania many commercial banks would rather finance the budget deficit than lend to firms. The SMEs sector is very much impaired because of the economic downturn and the cost of credit, which has become prohibitive to many companies. Giving CEC more muscle to play in role in financing SMEs is, in my view, commonsensical. Why should commercial banks get funding from IFIs (from the EBRD, for instance), with the purpose of financing SMEs, and CEC be barred from getting more capital in order to expand its activity, in this field?" Daniel Daianu also wrote in his letter to Commissioner Kroes.
Prime Minister Emil Boc late last week said that, should the European Commission deem the recapitalization of CEC Bank as a form of State aid, the respective sum would be added to the budget deficit, but experts from the Ministry of Finance and the Competition Council were trying to persuade the Commission not to label it as such.
Daniel Daianu believes that this particular case cannot be interpreted as a violation of the principles of fair competition: "There is no infringement of market competition here. And saying that is not related to EU wide state aid, which has become, almost, a norm in order to stem a financial meltdown. More capital to CEC is not with a view to gain market share, and should not be seen as a market infringement. It is a means to help business in an extraordinary period of time. This deep economic crisis asks for firm action, not procrastination and getting bogged down into technicalities, however with merit they may be."
In his closing remarks, Daianu said: "I hope, dear Commissioner, that the EC would reconsider its stance and find a positive solution to Romania"s request."
The Romanian Government included a 900 million RON increase in CEC"s capital in the State Budget 2009. The injection would be performed in two equal tranches by the Finance Ministry as sole shareholder with the approval of the European competition authorities. The capitalization of CEC Bank is one of the crisis containment measures decided by the Government in the beginning of the year.
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