Sebastian Vlădescu: "If you have any savings, spend them!"

Reporter: What is your opinion on the steps recently taken by Cyprus and what effects will they have on the Romanian banking market?

Sebastian Vlădescu: I think that the situation in Cyprus will have almost no effect on the Romanian banking market. What is happening with Bank of Cyprus (BoC) Romania is minor within the system, and will not present a problem for the Romanian banking system.

As far as I know, the Romanian branch of Bank of Cyprus is not a troubled bank, in fact it is quire solid, at least according to the publicly available data, and I am convinced that it will be acquired. When, by who, how - that is a whole other discussion. (ed. note: the interview was made before the announcement of the National Bank of Cyprus concerning the transfer of the deposits and of part pf the loans of BoC România to Marfin Bank Romania).

If we are speaking about the consequences for the Romanian banking system, I think that they concern the psychology of depositors. Fortunately, over 90% of the Romanian deposits have deposits of less than 100,000 Euros and as a result, most of the Romanian depositors have little reason to be concerned. It's only those people that have deposits of over 100,000 Euros that should worry.

However that a new issue of moral hazard has appeared concerning the status of money in the banks, the deposits.

They say that this moral hazard has been created now, but I say that it existed in the past as well, this is not the first time that depositors in a bank lose money. There have been banks in Romania that have gone bankrupt, and the people have lost their deposited money, just like that.

Also in Romania, in the last 20 years, in a far subtler manner, the citizens have lost significant amounts of their deposits in real terms - we are speaking here about the Romanian banks in the periods when the real interest rate was negative and you would get 18% - 25% on deposits, but you would have an inflation rate of over 80%. Besides, that was an annual, periodic procedure.

This process of depositors losing money has not only happened in Romania, but also in Argentina and the US, there have been banks were the shareholders ran off with the depositors' money.

Reporter: But losing deposits shouldn't become a rule ...

Sebastian Vlădescu: I am only saying that what is happening now in Cyprus wasn't a first. The current action had a lot more weight because it was decided by the European Commission, the IMF and the World Bank.

This moral hazard model of the risk which the money deposited in a bank is exposed to, has existed all throughout the history of banks.

There are many examples where the value of a deposit was erased either directly or indirectly.

The rich people now have the problem of how they are going to keep the value of their money and by what means. That is why investment "advisors" exist - banks and investment funds exist, banks and investment funds etc.

The problem which I can see is the one concerning the Euro. What happened in Cyprus was a pilot case, a way of saying: "You see, this can happen to you too!"

Furthermore, the consensus between Germany and Russia was interesting when it comes to the decision on Cyprus. Clearly, if the two countries did not agree, any of the two could have sent in 10 billion Euros to deal with the situation.

Instead, they have decided to act the way they did. Why? How? We may find out 30 or 50 years from now.

Reporter: It's been said that the decision was made against the Russian oligarchs.

Sebastian Vlădescu: I don't think that the oligarchs had money in Cyprus and I don't think that there are any oligarchs going against Vladimir Putin at the present time.

I feel that in fact, this action pertains to long-term Russian-German agreements and new political configurations in the coming 20-50 years.

What happened in Cyprus was an example of pseudo-devaluation because all of a sudden, a Euro in a Cypriot bank was only worth 60 cents, whereas a Euro in a German bank was still worth one Euro. What was even more stupid was that a Euro in Bank of Cyprus was worth 60 or 30 cents, whereas a Euro in Cypriot banks others than the ones affected - BoC or Laiki - was still worth one Euro.

It was an experiment by the people in Brussels, who could no longer untangle the crisis, and have decided to act like that. And it seems to have worked. And if it worked over there, it will definitely be applicable in other parts of Europe.

That which is obvious to me is that Euro zone is in deep trouble and has no idea how to deal with them.

Reporter: But why did the Troika act like this in Cyprus instead of in Greece, which had and still has major problems?

Sebastian Vlădescu: Greece was a country that far too big for an experiment like that, but unless a solution gets found to deal with the problems over there, it may also be implemented over there.

Reporter: Could we be seeing an elimination of tax havens?

Sebastian Vlădescu: We are definitely seeing a rather concerted action against tax evasion through tax havens.

I think that another process that will take place, at least on a European level, but which is already at the discussion stage, is that concerning the taxation of multinationals. Already in Germany, and England there are already major talks about this fact, about transfer prices, the profits made in the countries they are located in etc.

These will be obligatory processes because the politicians have to choose between continuing to struggle with the problems of the crisis, or keep bringing more money in to support the welfare state or whether they will accept that it doesn't work and as a result they are looking for a new paradigm. The problem is that nobody actually has a vision of the way things ought to look like in the future.

My opinion is that for now at least, they will go in the already existing direction, because accidentally Germany, France, the US and even Russia are on the same side of the barricade, due to various reasons, and different philosophies.

Reporter: Isn't it interesting that the investigation concerning the tax havens, which was recently revealed, was begun in January 2012, by an organization of independent journalists, financed, among others, by George Soros?

Sebastian Vlădescu: The governments are always talking about tax evasion and tax havens.

What is important is when the political decision is important enough to act in the good direction.

We are currently "at the end of our rope" and we need action.

Furthermore, there is increased competition from countries which have no welfare system, such as India, Brazil, China, Taiwan, - all of these countries, they have no mandatory healthcare system, no mandatory retirement system etc. And this cannot be offset by the Western countries except through research, development, scientific and technological revolution etc.

It is a changing world and I suspect that in terms of national strategies, the conclusion is: Where do we get money? You can't keep raising taxes indefinitely.

Reporter: Is it likely the EU will disband?

Sebastian Vlădescu: You, who are an anti-Euro newspaper, would certainly hope so ... (ED. NOTE: Mr. Vlădescu is kidding).

Reporter: It would seem the process didn't work.

Sebastian Vlădescu: My opinion is that the EU is in a deadlock, I don't think that it isn't working.

The Euros is effectively only 12-13 years old, time must still go by before it becomes a mature currency that is taking its first steps.

On a historical scale, even the European Union isn't that "old", only 60 years have passed since 1956-1958 - the Coal and Steel Union - and the present day. It hasn't been that long historically and I think that steps which were unimaginable 40-50 years ago have been taken.

There are voices that are saying that the European Union can not set itself up as a unitary block because its member states are independent, they have different histories, languages, cultures, policies, different competitive advantages etc.

I think that if we were to remove from Romania all of the foreign cash inflows, it would not have the internal resources to grow by itself.

China, Singapore, Taiwan, Malaysia are countries which have an excessive competitiveness generated by the fact that they have no rules.

The Europeans, the Americans, they need to find the solution for functioning by using the rules in relation with these countries that have no rules.

That is very hard to do.

The situation is very similar to what happened about 2000 years ago when the invasions of the barbarians began: an empire which relied on rules was supposed to deal with barbarians that had no rules. And history has shown who has won that confrontation.

The welfare state isn't fair, it takes from those who produce more, to those who produce less. It is a system which increasingly less functional.

There are millions of people who don't pay one leu to the healthcare contribution and yet they benefit from it.

This system is applied in Europe. In Romania, less than in Germany or Sweden. When you're spending 40% of the GDP or 30% of the GDP on salaries and welfare, it is very hard to find solutions for functioning.

This is the great challenge at the moment - finding solutions to maintaining the social systems so that no riots occur, and people stay peaceful, but at the same time making sure they remain functional in the long term, knowing that in terms of competitiveness and effectiveness, you can't do all of those things.

That is why the choices are being made for common solutions which tend toward greater spaces, labor flexibility, global rather than national competitiveness.

Reporter: Will Austria give in to the European pressures to drop banking secrecy?

Sebastian Vlădescu: Not now. Perhaps the EU will pressure it and one year from now Austria will change its point of view.

Luxemburg said it will drop it in 2015, but that is still two years away. A lot can happen.

Reporter: Will we see a paradigm change?

Sebastian Vlădescu: The problem here is what does money mean anymore? The moment money can simply be printed through the administrative decision of the Central Bank, what is the intrinsic value of the currency anymore?

This is the philosophical problem which will translate into practice.

For example, in 2008 there was a certain amount of goods and services and a certain quantity of money on the market. Starting in 2007, first the Americans, and then the Europeans, then the Japanese, each of them put currency into the market, but which was not backed by goods and services, absolutely nothing.

There is currently a major imbalance between the quantity of money in the market and the existing services. Theoretically, a person's money loses value every time a central bank creates money, because, to simplify it greatly, the volume of goods and services remains unchanged, but the money is multiplied.

I don't think that the decision concerning the deposits of Bank of Cyprus is important, rather the decision to print money indefinitely is.

The entire economic paradigm that we are going around in is different than the one we know.

Reporter: What will the future be like?

Sebastian Vlădescu: I don't know. If I knew, I'd be running for the Nobel prize in economics.

Reporter: Banks, the way we know them, are no longer functional.

Sebastian Vlădescu: They will reposition themselves. The Romanian banking system, for example, will see a major destructuring in the next two years. I am not referring to numbers, but rather in terms of assets, exposure, market share.

Reporter: If I have savings, where should I keep them?

Sebastian Vlădescu: If you have some money, spend it, if you have lots of money invest it, and if you have huge amounts of money, get into charity work.

Spend it, enjoy life, travel, buy what you like.

Spending means restoring faith in your ability to earn money in the future.

People are currently scared of what is happening to money, because they no longer have faith in the banking system, and on the other hand, the European economies lack internal consumption.

I repeat, if you have money spend it, in doing that you are encouraging domestic consumption, production, economic growth, and this can mean better earnings for everyone.

That is how you get rid of the problem of the money I currently have, you fulfill a wish, a need, a pleasure, and at the same time you also broaden your perspective and you escape the psychological deadlock of the current fears about the future and what will happen to your money.