A few days ago, the European national bank governors manifested their indignation concerning the alarmist reports of international rating institutions (e.g., Moody's, Fitch, Standard&Poor's). They accused these organizations of playing a dirty game by publishing pessimistic reports about the Eastern and Central European economies.
In this context, I tend to understand the silence some regional and international institutions keep about the way these rating companies work. But this is not an excuse, nor a motivation. The reality is quite simple: there is no transparency in the way Fitch, Standard&Poor's or any other company rates countries, cities, national economies or banking institutions. As some said, they work with indirect information, oversimplify and use ridiculous indicators. With this image in my head, I cannot take their reports as accurate or good-willing. On the contrary, I suspect they make the game of big financial institutions or countries that want or try to make a living out of the misery of countries like Romania, Poland or Czech Republic.
I do not believe in the economic crisis as many analysts from all over the world present it. I believe that the current economic tremours are the result of a general panik situation. The fear is bigger than the common sense, it overwrites the reason. So, almost all economic leaders, instead of boosting investments and become more creative in opening new markets for their products and services, apply the precautionary principles in every aspect of their economic activities. They prefer to cut down the costs with employees and use outsourcing in every way they can, while unaware of the exponential increase of the operational risk. They prefer to freeze training budgets and keep on stand-by all investments, while the people are ready to cope with the crisis and save their jobs. They prefer to gain as much money as possible in less time or not to decrease their financial expectations, while their previous investments did not focus on decreasing costs with energy, efficiency at operational level, with performance based incentives for CEOs and directors.
Returning to the subject at question, the biggest mistake Romanian government can do at this moment is to contract a loan from the International Monetary Fund. This institution is well known for its portfolio full of unsuccessful projects in any country they worked with. For example, Romania, until its refusal to work with IMF, introduced stupid public policies and destroyed the productive industry, becoming a huge consumer of foreign goods. This vision IMF imposed in Romania was translated from other previous projects, without relevant results.
Taking into account this and other information about the current economic (and political) crisis, and after the pessimistic reports of the World Bank and IMF, I cannot trust these two institutions. So, I would prefer to count only on what Romanian can produce as gross internal product and refuse the IMF, WB or EBRD help. I suspect them also of trying to translate the risk from western markets to the east of Europe. It is better for them to minimize the losses they have on the American market, for example, by trying to raise the exchange rate for Eastern European currencies, like it already happened in Hungary, Romania, Bulgaria, Poland, Czech Republic, Slovenia and Slovakia.
This is why I appreciated very much the outburst of Mr. Isarescu, the governor of the Romanian National Bank (BNR), when he realize there are some major banks that, with the complicity of mass-media, tried to manipulate the exchange rate for Euro/RON. The intervention of the BNR on the financial market made these banks to loose more money, but stopped the Euro/RON exchange rate at 4.2 and not at 4.5/4.75, or even 5.0, as the western mass-media and some bank treasurers said it would end up.
Now, we are facing another step in this scenario meant to transfer the economic risks in other parts of the world. And this step involves direct attacks coordinated by rating institutions. If the fall of American banks did not affect Europe so much, at least the ratings for Eastern and Central European countries will reach their target. And the effects are already starting to show up (e.g., the scary-crow with the Austrian banks).
Readings:
* my previous post - Fitch Ratings - a highly unethical rating agency
* "Cotidianul", March 4, 2009 - Guvernatorii Estului ataca agentiile de rating
* BBC - http://news.bbc.co.uk/2/hi/business/7923685.stm
In this context, I tend to understand the silence some regional and international institutions keep about the way these rating companies work. But this is not an excuse, nor a motivation. The reality is quite simple: there is no transparency in the way Fitch, Standard&Poor's or any other company rates countries, cities, national economies or banking institutions. As some said, they work with indirect information, oversimplify and use ridiculous indicators. With this image in my head, I cannot take their reports as accurate or good-willing. On the contrary, I suspect they make the game of big financial institutions or countries that want or try to make a living out of the misery of countries like Romania, Poland or Czech Republic.
I do not believe in the economic crisis as many analysts from all over the world present it. I believe that the current economic tremours are the result of a general panik situation. The fear is bigger than the common sense, it overwrites the reason. So, almost all economic leaders, instead of boosting investments and become more creative in opening new markets for their products and services, apply the precautionary principles in every aspect of their economic activities. They prefer to cut down the costs with employees and use outsourcing in every way they can, while unaware of the exponential increase of the operational risk. They prefer to freeze training budgets and keep on stand-by all investments, while the people are ready to cope with the crisis and save their jobs. They prefer to gain as much money as possible in less time or not to decrease their financial expectations, while their previous investments did not focus on decreasing costs with energy, efficiency at operational level, with performance based incentives for CEOs and directors.
Returning to the subject at question, the biggest mistake Romanian government can do at this moment is to contract a loan from the International Monetary Fund. This institution is well known for its portfolio full of unsuccessful projects in any country they worked with. For example, Romania, until its refusal to work with IMF, introduced stupid public policies and destroyed the productive industry, becoming a huge consumer of foreign goods. This vision IMF imposed in Romania was translated from other previous projects, without relevant results.
Taking into account this and other information about the current economic (and political) crisis, and after the pessimistic reports of the World Bank and IMF, I cannot trust these two institutions. So, I would prefer to count only on what Romanian can produce as gross internal product and refuse the IMF, WB or EBRD help. I suspect them also of trying to translate the risk from western markets to the east of Europe. It is better for them to minimize the losses they have on the American market, for example, by trying to raise the exchange rate for Eastern European currencies, like it already happened in Hungary, Romania, Bulgaria, Poland, Czech Republic, Slovenia and Slovakia.
This is why I appreciated very much the outburst of Mr. Isarescu, the governor of the Romanian National Bank (BNR), when he realize there are some major banks that, with the complicity of mass-media, tried to manipulate the exchange rate for Euro/RON. The intervention of the BNR on the financial market made these banks to loose more money, but stopped the Euro/RON exchange rate at 4.2 and not at 4.5/4.75, or even 5.0, as the western mass-media and some bank treasurers said it would end up.
Now, we are facing another step in this scenario meant to transfer the economic risks in other parts of the world. And this step involves direct attacks coordinated by rating institutions. If the fall of American banks did not affect Europe so much, at least the ratings for Eastern and Central European countries will reach their target. And the effects are already starting to show up (e.g., the scary-crow with the Austrian banks).
Readings:
* my previous post - Fitch Ratings - a highly unethical rating agency
* "Cotidianul", March 4, 2009 - Guvernatorii Estului ataca agentiile de rating
* BBC - http://news.bbc.co.uk/2/hi/business/7923685.stm
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