The economic situation in Moldova, the poorest country in Europe, is far from being in a good shape and furthermore, forecasts are not optimistic at all. The financial system is on the brink and risks to collapse as a result of past and recent internal events, being also influenced by the geostrategic position of the state which fuels domestic issues in all domains. Moldova’s economy might be accelerated with the help of the European Union, but without a strategic plan of action supported internationally and which would exploit current opportunities, the chance of economic development might dissapear into thin air.
In November last year, a billion dollars, about 12% of Moldova’s GDP[1], disappeared from three major banks of the Republic of Moldova (the Savings Bank/Banca de Economii, the Social Bank/Banca Socială and Unibank) and these became insolvent[2]. As a result, the National Bank of Moldova has incorporated them into its system and created 660 billion dollars[3], process which led to increased inflation and interest rates.
More than that, international organizations have suspended the grants scheduled for Moldova until corruption will be totally eradicated, the judicial system will be reformed and the financial system will be properly managed and transparent[4]. The European Union announced, on July 5th, 2015, that it will freeze the aid program in the amount of 44 million dollars, while the World Bank stated that the assistance program will be resumed only if the three banks affected by corruption were closed[5]. According to the World Bank these are easy targets even under the tutelage of the National Bank of Moldova, but the requests were ignored by the public officials of the state East of the Prut river and the nationalization process continued anyhow. On the other hand, the European Bank for Reconstruction and Development (EBRD) tried to buy the majority of shares of Victoribank, one of the largest private banks in Moldova, in order to support the continuity of credits needed by the local businesses, but the government has blocked this process without providing further explanation[6]. To these we add the fact that Russia, one of the basic trading partners of Moldova and provider of jobs for its citizens (about 800 million dollars were redistributed to Moldova in 2014 in the form of wages)[7] is in economic crisis.
Regarding the energy security, Chisinau could be threatened by the separatist authorities in Tiraspol with the interruption of electricity supply produced by the Moldovan Thermal Power Plant Cuciurgan. This producer, controlled by the Russian group Inter RAO UES, could suspend or reduce the supply of electricity closer to winter, whereas Moldova does not have the money to buy enough energy to avoid massive disconnections, says Andrei Pascarenco, head of the General Directorate of counterintelligence in economics of ISS – Intelligence and Security Service (SIS – Serviciul de Informaţii şi Securitate)[8].
Apart from a seriously limping economy, Moldova suffered recently a political crisis following the resignation of the government led by Cyril Gaburici, on 12 June, which had as negative effect the freezing of negotiations with the IMF (International Monetary Fund) and the interruption of the European Union aid.
Time is not patient with Moldova. Most sectors of the economy are in involution, the economy contracted and is on the verge of not being able to sustain budgetary salaries, pensions or social benefits[9]. Investments are moderate, inflation continues to increase, the volume of imports and exports fell as well as the agricultural and industrial production, there are fluctuations on the currency market, and prices are rising continuously. Furthermore, new tariffs on energy resources are able to generate a rise of prices of up to 15%[10]. This means an even further decline in living standards.
Visible results are necessary in the road towards Europeanization, meaning that with the help of the European Union, the following steps should be taken:
1) releasing the state which is captive in the hands of the oligarchs, corruption being the greatest weakness of stability;
2) depoliticizing the National Anti-Corruption Centre (CNA- Centrul Național Anti-corupție) and the Prosecutor General (PG – Procuratura Generală) while completing the judicial reform;
3) involving the civil society in the anticorruption efforts and encouraging the independent media to support the exposure of corruption;
4) involving Moldova in a program called Cooperation and Verification Mechanism (CVM), an European Commission instrument which would assist the protection of the judicial system and would support the effectiveness of courts (Romania and Bulgaria are successful examples; public officials in Romania and economic tycoons were judged and condemned for corrupt acts);
5) promoting the European Union, its intentions and values – Moldova having a significant percentage of Russian-speaking population and a media landscape dominated by the Russian Federation is, therefore, a country vulnerable to its propaganda. Furthermore, information about the European Union and the ideas promoted by this institution do not reach the public.
However, the national reforms and European integration process may be in vain if Moldova does not regain international credibility and does not develop the political will to initiate and complete the programs, despite the costs. The European Union, as well as the International Monetary Fund and the World Bank should support Moldova’s progress through assistance and funds and should also develop programs reaching a wider segment of population while still maintaining the imposed conditions.
Autor: Irina Iacovoiu, pentru InfoPrut
Bibliography
- PANAITE, Sergiu; INAYEH, Alina; for the The German Marshall Fund of the United States, The EU and Moldova, How to Liberate a Captured State, article published on June 16th, 2015, link: http://www.gmfus.org/blog/2015/027 6/16/eu-and-moldova-how-liberate-captured-state#sthash.518TRUnV.dpuf, accessed on August 27th, 2015
- The Economist, Moldova’s economy gutted, article published on Augut 1st, 2015, link: http://www.economist.com/news/finance-and-economics/21660165-banking-scandal-set-bankrupt-europes-poorest-country-gutted, accessed on August 27th, 2015
- Securitatea energetică poate fi pretext de şantaj al Tiraspolulu, article publiushed on July 1st, 2015, link: http://www.timpul.md/articol/securitatea-energetica-poate-fi-pretext-de-santaj-al-tiraspolului-76396.html, accessed on August 27th, 2015
- CEAPAI, Alla, IDIS Viitorul: prognoze mai puțin optimiste pentru economia Moldovei, article published on August 25th, 2015, link: www.europalibera.org/content/article/27208467.html, accessed on August 27th, 2015
[1] Sergiu Panaite, Alina Inayeh for the The German Marshall Fund of the United States, The EU and Moldova, How to Liberate a Captured State, article published on June 16th, 2015, link: http://www.gmfus.org/blog/2015/027 6/16/eu-and-moldova-how-liberate-captured-state#sthash.518TRUnV.dpuf, accessed on August 27th, 2015
[2] Ibidem
[3] The Economist, Moldova’s economy gutted, article published on Augut 1st, 2015, link: http://www.economist.com/news/finance-and-economics/21660165-banking-scandal-set-bankrupt-europes-poorest-country-gutted, accessed on August 27th, 2015
[4] Sergiu Panaite, Alina Inayeh for the The German Marshall Fund of the United States, The EU and Moldova, How to Liberate a Captured State, article published on June 16th, 2015, link: http://www.gmfus.org/blog/2015/027 6/16/eu-and-moldova-how-liberate-captured-state#sthash.518TRUnV.dpuf, accessed on August 27th, 2015
[5] The Economist, Moldova’s economy gutted, article published on Augut 1st, 2015, link: http://www.economist.com/news/finance-and-economics/21660165-banking-scandal-set-bankrupt-europes-poorest-country-gutted, accessed on August 27th, 2015
[6] Ibidem
[7] Ibidem
[8] Securitatea energetică poate fi pretext de şantaj al Tiraspolulu, article publiushed on July 1st, 2015, link: http://www.timpul.md/articol/securitatea-energetica-poate-fi-pretext-de-santaj-al-tiraspolului-76396.html, accessed on August 27th, 2015
[9] The Economist, Moldova’s economy gutted, article published on Augut 1st, 2015, link: http://www.economist.com/news/finance-and-economics/21660165-banking-scandal-set-bankrupt-europes-poorest-country-gutted, accessed on August 27th, 2015
[10] Alla Ceapai, IDIS Viitorul: prognoze mai puțin optimiste pentru economia Moldovei, article published on August 25th, 2015, link: www.europalibera.org/content/article/27208467.html, accessed on August 27th, 2015
