THE NATIONAL INTEREST IS BEING UNDERMINED BY THE SHAMELESS POLITICIZATION OF THE NATIONAL BANK OF ROMANIA Poodle or chihuahua reloaded

The result of the latest "elections" for appointing the management of the National Bank of Romania should cure even the most optimistic of the optimists of the delusion of the independence of this fundamental institution of the state.

To financial analyst Florin Cîţu, the parliamentary decision "legalizes the subjugation of the monetary policy to political interests". On his blog, Cîţu also writes that "the NBR has never been politically independent, but that was harder to prove".

It's true that there wasn't much evidence that would have held up in a court that was impartial and independent, but the actions of the NBR, ever since the period which preceded the crisis, have demonstrated an extremely "harmful" appetite for stimulating the nation's economy.

We know the results of that appetite. The real estate bubble has turned many Romanians into debt slaves, under the approving gaze of the NBR, and its bursting and the return of home prices to more realistic levels are still far away, due to the support lent by all the authorities of the state to the "First Home" program, which was a gift made to banks.

In fact, all of the actions of the BNR were intended as a stocking stuffer, in order to keep both the banks and the government happy, the latter by supporting its policies.

In an article of 2006 (author's note: "Poodle or Chihuahua?", BURSA, 27.12.2006) I wrote that the explosion of the money supply and of lending has accented the imbalances in our economy, as governor Isărescu was saying that "the NBR was ready to take on the role of watchdog of the Romanian economy".

Now, that statement sounds more like bad joke. Following the election of the new management of the NBR, the press has reminded us some statements made by governor Isărescu which indicate either his ignorance, or his inability to act in the beginning of the global crisis, which threw us into a deep recession, while the official forecasts indicated the continuation of growth.

Amid the recovery signs on a continental level, the NBR has initiated a new period of quantitative easing, which only benefited the banks and the government. The central bank has thus hopped on the bandwagon of the global trend of financial repression against the private sector, which is already being strangled by the burden of debt.

In spite of the official statements of the NBR, its actions have demonstrated that it can not be the watchdog of the national economy. "Maybe just a poodle or a chihuahua, whose leash gets removed while he's taken out for a walk in the park, to prove that it is independent", I wrote in the article published at the end of 2006.

And back then, the management of the NBR was at least made up of personalities that could at least act like they were competent. Now, the new management includes characters with strong left leaning views, who are probably ready at any moment to vote on starting the printing press directly, not just the easing of the key policy. What is the absurd notion of "left wing monetary policy" supposed to mean, after many years during which the major central banks have tried to convince us of the imminence of welfare through the printing press?

The ING Bank economists are worried over "the modification of the independence of the NBR", especially "given the tacit agreement of the governor to the removal of Cristian Popa", according to an article in Hotnews.

But where does that concern come from? From the possible transfer of the control of the "independent" NBR from the European Central Bank to the Government? In 2008, the ECB warned Romania about the provisions of the draft bylaws of the NBR, because "the draft law is fundamentally incompatible with the dispositions of the Treaty, concerning the Economic and Monetary Union, and its passing could lead to the beginning before the Court of Justice of the European Communities of the procedure of infringement of community law" (author's note: see the article "Who is afraid of the independence of the National Bank?", BURSA, August 15th, 2008).

It seems that back then things worked out amicably, but the situation has changed fundamentally in the years of crisis. Currently, "the independence" of the NBR must please both the European authorities as well as the local ones.

Aside from the appointment of Liviu Voinea on position of deputy governor (author's note: why did he leave the Ministry of Finance, when there is still so much damage for him to do through taxes?), the appointment of state secretary Gheorghe Gherghina on the Board of Directors of the NBR is very controversial. As written by Hotnews, he worked on the budget even when he was in the hospital, and he can write it while at the NBR as well. Then why not cut budget spending, by merging the Ministry of Finance and the NBR into a major institution of national welfare? Thus, the National Bank would "print" money, and the Ministry of Finance would transfer "the money" to all the major national development projects and the local barons. Isn't this an infallible recipe for prosperity or at least for honestly buying off the voters?

The scandal started in Poland by the publication of secret talks between the governor of the central bank and the minister of internal affairs should represent a warning, especially for Romania, because, at least in the international perception, it is viewed as being far behind Poland, hailed as the champions of transition in Eastern Europe.

After Marek Belka suggested the removal of the minister of finance, the prime-minister came to his defense. "I share the opinion of the governor, regardless of how horrible his comments may have been, that those conversations were intended to support Poland", said Donald Tusk according to a piece of news by Bloomberg. Isn't national interest great?

As the Romanian media has published the speculations concerning the loss of the majority by the current government coalition, isn't a an action of monetary policy that would undermine a government of the opposition, for example, by "losing" control of the exchange rate or hiking the interest rates? How will the "independence" of the NBR manifest itself?

After missing the initial target for accession to the Eurozone, governor Isărescu hopes to be on stage when victory is declared in 2019. But who will that victory be declared against? Against Romania probably, because, if we expect the evolution of the last few years to continue, a strong currency is bad for uncompetitive economies, as "proven" by Greece, Spain, Portugal, France and other countries dependent on cheap money, and competitiveness does not come from taxes that strangle the economy.

The results of the latest "elections" of the NBR only confirm one thing. The plundering of Romania's economy will continue, even if the population will express its discontent concerning the drop of the purchasing power.

No one will be found guilty, just like in the last twenty-five years "freedom", because nobody can doubt the competence and the good intentions of "our" National Bank.