Romania’s embattled finance minister faces budget test

By:
Eric Ellis
Published on:

Euromoney meets Ioana Petrescu in Bucharest as she wrestles with the challenge of kick-starting an IMF-bound sputtering economy in the teeth of political opposition.

Spare a thought for 34-year-old Ioana Petrescu – Europe’s youngest finance minister.

Ioana_Petrescu-large.
Ioana Petrescu, Romania's
finance minister
In the job for just nine months after a budding career in US academia, she heads a creaking institution where there are people still working in the austere Communist-era finance ministry building in downtown Bucharest "longer than I have been alive", as she told Euromoney this week.

Barely a week after nutting out a draft 2015 budget  under the supervision of the European Union and the IMF, Petrescu is widely expected not to see out the year, and perhaps not even Christmas, in office as her country’s 23rd finance minister in the 25 years, this month, since the fall of Communism in Romania.

For her part, Petrescu seems resigned to her fate and powerless to do much about it, and that she hopes to stay in office "until my work is completed". "I am a technocrat, not a politician," she says, defiantly.

Unfortunately for Petrescu and her longevity in office, Romania’s prime minister Victor Ponta, her boss and the man who appointed her last March, doesn’t exactly provide a ringing endorsement of his widely criticized charge.

In an interview with Euromoney last week, he confirmed he will soon announce a cabinet reshuffle, adding he "hoped" Petrescu will keep her job. As one local analyst put it, Ponta’s remark "had the air of a struggling football club owner declaring the manager had the full support of the board".

Economic analysts in Bucharest say Petrescu has been "an unremarkable performer" and "virtually invisible" in office, though long-resident bankers such as Steven van Groningen, chief executive of the local arm of Austria’s Raiffeisen Bank, says she won plaudits with him for being "the only finance minister among the dozen or so I’ve experienced who ever called me up to talk about our industry".

Romania FM 1-600
Above: Romania has had 23 FMs in 25 years, and their portraits  and those before them  are lined on panels around the foyer of the imposing Ceausescu-era FM building. Below: The rather small placard on Ioana Petrescu's office doesn't exactly scream permanence.
Romania FM 2-600

Petrescu has taken on a poisoned chalice. In the 25 years since Nicolae Ceausescu fell, Romania has had 23 finance ministers in office, compared with just six in the Ceausescu years. Against this backdrop, Romania and its sputtering economy, the second-poorest member of the European Union after neighbouring Bulgaria, is scheduled to join the eurozone by 2019.

Outwardly, Petrescu’s lightning rod is Romania’s budget, which she is arm-wrestling over with teams from IMF and Brussels, Romania’s economic nursemaids during its crisis-wracked transformation to capitalism.

At issue is a plan to peg Romania's fiscal shortfall to 1.8% from an estimated 2.2 to 2.3% this year. Romania’s government is also seeking IMF clearance to widen Bucharest’s defence budget, as tensions over Russia and neighbouring Ukraine rumble.

The budget is now woefully behind schedule, which in most other European democracies might be cause for instant dismissal. However, though only nine years old when Communism fell, it is the political association that might fell Petrescu – a victim of Romanians’ constantly frustrated desire to be free of the lingering shadows of Ceausescu’s cronies a generation after his ouster.

Punished

Though presented by modern faces, the ranks of Romania’s ruling Social Democratic Party (PSD) are littered with relics of yesterday’s Romania, who voters punished last month when denying Ponta a presumed elevation from the prime ministership to the national presidency.

Instead of Ponta, the presidency was won by Klaus Iohannis, mayor of the northern city of Sibiu, where he won plaudits for its efficient and non-corrupt administration. When he is inaugurated on December 22, 25 years to the day of Ceausescu’s ouster, Iohannis will become the fourth ethnic German president of an Eastern Europe state since the fall of Communism.

Under Romania’s French-style cohabitation system, Ponta’s PSD remains constitutionally in power until 2016 parliamentary polls. However, the election loss to Iohannis has led to turmoil within the party and many Bucharest political analysts expect shifting alliances could see Ponta’s government toppled by next March.

Ponta’s economic adviser before becoming finance minister, Petrescu told Euromoney she is "not concerned" about any rumoured reshuffle and would be "quite happy" to return to the US and her former position in academia.

Some 25 years after the fall of the Ceausescu regime,  Euromoney’s in-depth examination of how far Romania has come since then, will be published on euromoney.com in January, and in the February issue of Euromoney magazine.