The Dawn of a New Era, 1997–2005

Daniela Gabor

Chapter 4 in Central Banking and Financialization, 2011, pp 110-152 from Palgrave Macmillan

Abstract: Abstract In public discourse, 1997 is identified as the crucial moment when politics finally got in tune with the economic reforms repeatedly demanded by the IMF (Pop 2006). Before 1997, the reconstruction of economic relations along market principles suffered from a mismatch between “good policies” agreed and negotiated with the IMF (in the first instance) and “vicious politics” that surrendered policy implementation to vested industrial interests. The political willingness to reform changed, however, with the election of a centre-right coalition with recognized neoliberal sympathies at the end of 1996. While subsequent policy measures triggered a three-year recession and a near default on foreign debt service, it is argued that such developments were the unavoidable consequences of seven years of delayed reforms and a singularly unfavourable Communist legacy (Daianu 1999; IMF 2001). The improved macroeconomic performance since 2000 was interpreted as a clear indication that commitment to reform, unwavering in the face of inevitable social and economic costs, would eventually clear the field for a dynamic and efficient privately owned economy. The year things turned around for Romania also cemented the reputation of the central bank governor — Mugur Isărescu — as an apolitical technocrat whose economic expertise could command broad political support for painful reforms. This reputation was not acquired while at the helm of the central bank but through his eleven-month period as Prime Minister of Romania (December 1999–November 2000) when he was credited for single-handedly steering the country out of three years of crisis and putting the country firmly on its path to EU membership (negotiations for EU accession formally started in February 2000).

Keywords: Exchange Rate; Interest Rate; Foreign Direct Investment; Central Bank; International Monetary Fund (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:stuchp:978-0-230-29504-9_4

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DOI: 10.1057/9780230295049_4

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