Dear Commissioner Kroes,

I am stunned to find out that the Commission is against Romania’ intention to increase the capital of its state-owned bank CEC. I agree with your assessment that CEC does not face solvency and liquidity problems. But let us go beyond the narrow judgment of what banks are supposed to look like and do, especially under the current very dire circumstances. Unless sound banks lend to the real economy the downturn will get worse and their very balance-sheets will be impaired. Just think on the very steady flow of exhortations which accompany Mr. Trichet’s statements whenever the ECB injects huge amounts of liquidity in order to revive credit markets. The same can be said about statements of top government officials in Germany and France.

I accept that this is a catch 22 situation, that lending should not be done in a blind, open-ended way But, arguably, when capital is available for a highly commendable end, it does pay to think in broader terms and help the economy. In Romania many commercial banks would rather finance the budget deficit than lend to firms. The SMEs sector is very much impaired because of the economic downturn and the cost of credit, which has become prohibitive to many companies. Giving CEC more muscle to play in role in financing SMEs is, in my view, commonsensical. Why should commercial banks get funding from IFIs (from the EBRD, for instance), with the purpose of financing SMEs, and CEC be barred from getting more capital in order to expand its activity, in this field?

There is no infringement of market competition here. And saying that is not related to EU wide state aid, which has become, almost, a norm in order to stem a financial meltdown. More capital to CEC is not with a view to gain market share, and should not be seen as a market infringement. It is a means to help business in an extraordinary period of time. This deep economic crisis asks for firm action, not procrastination and getting bogged down into technicalities, however with merit they may be.

A final observation: you may ask why should the Romanian government undertake this infusion of capital at a time when it benefits on financial assistance from IFIs and the EC. But let us put it in the right perspective: CEC is in the business of helping the real economy, not of funding current expenditures of the state. I hope, dear Commissioner, that the EC would reconsider its stance and find a positive solution to Romania’s request.

Sincerely yours,

Daniel Daianu, MEP
Former finance minister of Romania