The time bomb

The former minister of Finance Bogdan Drăgoi yesterday came on TV to tell us that the Budget has enough money to bring back the wages of the public sector workers to what they were before they were cut by 25%, in an attempt to deny the statements made by the new appointed Prime Minister Victor Ponta, who had said that Florin Georgescu, who replaced Drăgoi as Minister of Finance, found that neither the Boc Government, nor the Ungureanu government had set aside one penny for that.

I am surprised by the statement of Bogdan Drăgoi.

Bogdan Drăgoi said: "The net amount required to restore the wages starting with June 2012 is 1.5 billion lei. The number of people who left the system have allowed us to save 600 million lei. The balance will be paid out of collected revenues. We are not going to borrow. The money will effectively come from revenues.

The report which accompanied the draft budget for 2012 very clearly stipulated that if the possibility existed, then the wages and pensions would be enhanced. We were going to issue a Decision immediately after the negotiations with the IMF, by which we would raise the wages starting in June. It was possible, we wanted to do it and it was announced".

As far as I know, the total of the General Consolidated Budget was two times smaller than the State Budget (about 3.5 billion lei, compared to over 7 billion lei), even though the latter is part of the former (together with twelve other categories of budget, of which many are in the red).

Yes, if he means the big number, then the calculations of Drăgoi are likely, but the smaller numbers represent the reality that there is no money in the state budget.

And the shortage is so great, that not only do we have no way of restoring pensions and wages of public sector workers to their previous levels, but in reality, the state is in a metastasis, and the Government of Victor Ponta can not work.

Drăgoi speaks of the collected revenues which would be added to the savings made by restructuring the state apparatus, but, as far as I know, the average receipts over the first three months of this year is definitely lower than the average of the last year.

In fact, (as demonstrated to us), we need now, right away, a harsh budget rectification, because the situation is beginning to look like the peak of the crisis of 2009, Ponta will most likely have to renegotiate with the IMF to allow us to have a budget deficit one third bigger than we were allowed (hiking it to 3%) and quickly start borrowing from the domestic market (the NBR will have to accept a never-ending stream of REPOs) and from the foreign markets, to cover the monthly governing costs of 1.25 billion Euros.

It's also possible that, when he says that "the money exists", Bogdan Drăgoi is actually talking about the five billion Euros promised in tranches by the IMF, through the agreement signed in September last year, (even though he said that wasn't actually a loan).

If we were to run the numbers, we could see that the money of the IMF would actually only be enough for just four months.

Starting with June, when the first tranche would be released, the money would cover the months of June, July, August and September, so they would be just enough to carry the government to the local elections, but not to those for the parliament.

That's what a time bomb planted by the former government looks like.

It makes sense now why Traian Băsescu was laughing when Victor Ponta was nominated as prime minister.

It was funny.

But the president was the only one to know it.

And the only one who could see the humor in it.

We couldn't.