At this moment Moldova is at a political crossroads. But will it move into the direction of the EU?

Wolfgang Behrendt is head of political and economic department of the Delegation of the European Commission in Chisinau. He believes Moldova is on the right track. Igor Munteanu, director of the influential social-economic think-thank IDIS Viitorul believes that the EU should put more effort into the monitoring of the reforms.

Political reforms

Behrendt: “There are improvements in this country, but it goes step by step. The big problem for Moldova is not to create the laws, but to implement them. I believe there is a lack of well qualified people. And those who are skilled leave the country, or work for a company which pays more than the government.”

Munteanu: “The EU should put much more pressure on the reforms of governmental institutions. In the past years they were supporting political figures who promise change, like what they did with president Voronin. That is obviously not working. One of the big problems right now, with reforming the institution, is the fact that the power of the presidential clan is everywhere.”

Behrendt doesn’t want to comment on the presidential influence within society. “But there has to be a change in mentality on all political levels. In this country things have gone on a certain way for many years, and now they have to do it on our terms. The elite in the top knows what the EU wants from them. But to get it all the way down, into all levels of the bureaucracy, that is another story.”

Totalitarian state

During the demonstrations in April, people got killed, journalists reporting on the scene were beaten. In the aftermath people became terrified of the police, students got tortured and NGOs got checked by financial police. That doesn’t seem like a move towards EU, but more a move towards authoritarianism.

Behrendt: “I don’t believe this country is going in the direction of an authoritarian state like Belarus. Remember that Moldova is a country in transformation, with all the problems that come with that. Like a weak and fragile state. It is slowly moving in the right direction, and sometimes it moves back.”

Munteanu isn’t that positive. He is afraid that his country might end up on the wrong track. “This moment, right after the April elections, is a crossroad for Moldova. Now the EU should stick to its principals. If it promotes prosperity and democracy, it should keep the principles very high. The European Union often has a lot of arguments not to do something for us. We are too far, we are too busy, we are still digesting. We know these arguments very well. But now it’s time for them to say that their principles really matter, also for the European citizens outside their borders.”

Expectations of the people

Behrendt: “I believe that the people of Moldova are realistic. They understand that accession to the EU is right now not on the agenda. In this country there is this hope that the EU will bring a better life. A hope not only for more money and better living conditions, but also for more stability and rule of law. They hope that the EU can help them achieve that.”

Munteanu: “Our country does not need the EU as a gift overnight. This country needs transformation, and that can only be accomplished if there is a golden ticket at the end of the race. But in general people expect too much from the EU. That is something you see in all the countries which are willing to integrate. What it is that Moldavians really want from the EU? The commitment of the EU, people need this to accept the fact that they have to suffer. In the end all we need is some democratic solidarity.”

Estimates maintain at least a quarter of the work force is not inside the country’s borders. Many of them work in Russia and Western Europe, sending money to relatives back home. In 2007 remittances were good for a stunning 36 per cent of Moldova’s GDP. This makes the country together with Tajikistan the leader in the world when talking about dependency on money from people working abroad.

Remittances become bigger part of Moldovas GDP, see here the exact percentage per year.

But since the economic crisis the money flow has been drying up. In the last three months remittances decreased by 30 per cent, according to statistics of the International Organization of Migration.

Dependency on abroad

“The Moldovan economy developed a growth model based on consumption and imports,” say Ghenadie Cretu, economist at International Organization of Migration (IOM). The past years this model worked okay. Since 2001 the GDP has increased by at least 5 per cent a year.

But both Cretu and Veaceslav believe it is dangerous to let your economy grow using remittances. “In our language we have this saying which fits perfectly,” says Veaceslav. “Our economy is like ‘a rain puddle’. When there is rain, it’s there. But when it stops raining, the puddle dissapears. That’s our economy. If people stop sending money, there is no economy.”

One out of four households in Moldova is dependent on remittances send from abroad. Almost everybody knows at least a handful of people who are working abroad. Their importance is big. The remittances are mainly used for daily needs, like buying food and clothes, paying the rent and improving the house.

Consequences of the crisis

But with the remittances decreasing, expenditure is going down. For half of the households which are dependent on money from abroad, it makes up half of their budget. “And now people just stop spending,” Veaceslav says.

This has big consequences for the Moldovan state budget, which is sixty per cent dependent on taxation, in the form of VAT on consumptions and imports. Both are going down rapidly, as Moldovans were used to fund them by remittances. For the government this was a reason to request all the authorities to cut back the expenses by 20 per cent.

“This will mean that the government soon can not pay the salaries to public workers,” believes Cretu. “Probably people working as doctors and teachers won’t get their money within the coming weeks, and also pensions won’t be paid.”

Veaceslav also believes that this is only the beginning of the crisis in Moldova. “The big problems will start in September, when more people won’t receive their salary as the whole state will collapse because of the lack of incomes.”

Again a crisis

Big economic crises are not new for Moldova. After it’s independence from the Soviet Union in 1991 the economy went into free fall, making it the poorest country in Europe. The bottom was hit in 1998, when the country’s main export market failed during the Russian financial crisis.

But when working abroad was the solution to fight the crisis ten years ago, they are now causing troubles. “Many Moldovans are now returning home because they can’t find work,” says Cretu. At the same time he sees seasonal workers are not leaving for Russia, which they normally did.

” After 1998 the remittances were a capital infusion for the country,” says Veaceslav. But many of the countries where many Moldavians work – Russia, Italy, Spain and Portugal – have been hit severely by the crisis.

The only way out of this is with international financial help, thinks Veaceslav. “But I doubt if the EU and others are willing to lend us money. I don’t think anyone trusts this Communist government.”