The issues that the money-laundering bank fraud that has taken place in the Republic of Moldova creates, has been widely discussed in the media, in the Parliament and with the international partners. According to the Expert Group Country Report, Moldova is facing the biggest economic crisis in its short history and that couldn't be far from the truth as the IMF has frozen its negotiations until the forming of a new Government and the EU has followed its example. This country is heavily relying on external financial aid and is lacking the basis for direct foreign investment that could secure its development without the bargains on socially difficult questions (retirement age, the optimisation of the education system etc.). Nowadays, the so-called Pro - European parties cannot continue governing without extended help from the EU, as the loans given to stabilise the failing Banca de Economii, Banca Sociala and Unibank have created a black hole in the budget that won't be easily covered by internal resources, if at all. The Pro-Russian rising stars hint at some kind of Kremlin help, which is also highly unlikely as Russia is notorious to promise help and not deliver it. Moreover, there is an estimated $ 0.5 to 1 billion needed to stabilise the banking system that could go down due to a domino effect. There are numerous facts indicating that the insurance system may be going through a similar process of "fund extraction" and further the crisis already in place. There are a number of factors that have contributed to this situation:
1. The lack of an independent justice system;
2. The alleged implication of political forces in the illegal activities;
3. The lack of transparency and effective mechanisms of control in the banking system;
4. The relative inactivity of the investigation and prosecution agencies.
All of them have a common root, the lack of political will to realize a real reform in the justice system, as well as in other critical domains that could enhance the predictability of the environment and has ended, allegedly with the participation of some key party leaders, in this difficult situation.
There are three scenarios we can address now:
1. The liquidation of the banks as a condition to get the funds from the partners. This is the most economically sound plan, but it would result in a serious political backlash for the leaders that will decide that. Tens of thousands of clients of the three banks would protest losing (part of) their money and this could easily be used by the Pro-Russian Parties in an attempt to overthrow in a more or less legal way the Government. This would mean that the next Prime-Minister would be a sacrificial pawn and not the "New Hope" of the Democrat Party, Adrian Candu. It might even be the now rumoured leader of his own coming party, ex-Prime-Minister, Iurie Leanca. The personal support given to him by Angela Merkel is a known fact and other party leaders may use him to their advantage.
2. The saving of the banks with IMF and EU money An unlikely scenario that implies a Card Blanche from the international partners of the Republic of Moldova to the Pro-European parties. The EU may gamble a geostrategic plan to maintain the country on the right course and give them a second chance. In the context of the Grexit crisis, this comes as a dream scenario, but you never know.
3. A Russian solution to the problem There are signs of coquetry with the Kremlin, especially in the declarations of Victor Osipov, the vice-Prime-Minister for reintegration of the Republic of Moldova. The authorities in a desperate attempt to stay in power could turn to a Russian loan as an alternative to the austerity measures proposed by the IMF and EU. This would mean forfeiting the European integration objectives and risking giving them up and making big concessions to the Transnistrian regime.
and the intermezzo scenario:
4. Failing to sign a deal with the IMF This would mean a technical default with the incapacity to pay salaries and continuing negotiations to reach an even harder deal with either the Europeans or the Russians.
Either way, there are a certain number of issues that we would like to see in the (maybe secret) negotiations with the IMF and EU:
1. An independent international investigation committee (potentially funded by EU) to investigation the billion dollar case;
2. A short term EU - LEX mission that would take upon General Prosecutors key functions and the Supreme and Appeal Courts to stabilise the justice system;
3. A boycott of compromised politicians and government officials that should not occupy public functions;
4. A real implementation of the reform processes with closer EU monitoring and clear milestones to be achieved.
We just have to wait and see what happens in a matter of months.
