Romania Takes Steps Toward Free Market

ROMANIA is taking urgent measures to introduce a market economy, following months of economic decline. ``We have reached a level where we have no alternative and where no compromise is possible,'' Prime Minister Petre Roman told a joint session of the parliament on Thursday, 100 days after forming his Cabinet.

The country's industrial production has steadily declined this year, dropping by 28 percent since January. Labor productivity has fallen by 23 percent in the same period. This figure is partly explained by the high rate of absenteeism among workers, despite salary increases decreed after last December's revolution.

``We don't have the stick any longer, but we don't have any carrot yet,'' says Daniel Daianu, president of the Romanian Institute for Free Enterprise and currently a visiting scholar at Harvard University.

Mr. Roman and the young ministers he appointed last July have been formulating the first steps toward liberalization of the Romanian economy. A package of laws presented to parliament includes granting administrative and financial autonomy to the country's state-run industries and foresees distribution of 30 percent of the capital of the country's enterprises to workers. Roman proposes that at least half of the country's state-owned assets be privatized within three years.

But the parliamentarians' hesitations have pushed Roman to call for a ``legislative shock.''

In a few days, Romanians will begin feel the first effects of their government's determination to speed up reforms. Prices of nonessential goods will be released from state control Nov. 1.

Excluded from the price reforms are energy, food, and other sensitive areas, such as rents. Subsidies will be provided to keep food and energy prices from rising at a rate that could prove too unpalatable to the public.

Price liberalization is intended to end the artificial price system bequeathed by the old regime and to stimulate competition.

``There is a falsity in our economy. Only if we reestablish the relation between supply and demand will we be able to differentiate between viable and nonviable enterprises,'' Roman explained.

Roman also called attention to the ``masked unemployment'' in the Romanian economy (because of overemployment) and predicted 1 million unemployed by 1991. This includes 300,000 university graduates.

Trade unions and the Labor Ministry have been negotiating a law giving the right to strike, granting unemployment benefits, and establishing of a minimum wage. But the amount of safety net the government will grant to workers remains undetermined.

``We will protect children and elderly persons, but the workers will have a duty to protect themselves. And harder work will be one way to achieve this,'' Roman stated.

Roman's reforms amount to a radical departure form the relatively conservative program that President Ion Iliescu offered to Romanians when he was elected last May. With worsening shortages of raw materials, higher energy costs, and intermittent strikes across the country, Roman and his team know that time itself is an essential consideration in transforming Romania's economy from one that is state run to one that is dictated by the market.