October
2008
EDITORIAL
 
Vol. 4 No.8  
 

Restitution mess shows hollow morality at heart of leadership

 
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The issue of the restitution of property to former owners whose homes, land, businesses and forests were seized by the Communist dictatorship of Romania is a fascinating allegory of the vicissitudes of Government in the post-revolutionary history of this country.
The lack of legal consistency, a failure to make bipartisan decisions, the presence of a wasteful bureaucracy, leadership without moral guidance and a result which may see the state experience a loss of trust from the people and a financial haemorrhaging. Successive Governments may have created the ultimate lose-lose situation.
At first former owners were ignored and, in some cases, their properties and businesses were privatised. After 2001 state and local authorities had the obligation to give back property sequestered by the Communists – but have since failed to carry out a consistent nationwide policy of return.
In total, around 40 per cent of all restitution claims remain unsolved. One major reason, pointed out in an illuminating new report by the Romanian Academic Society, is a lack of incentives for the officials examining each individual case. If these civil servants are earning only 200 Euro a month to help return a 500,000 Euro house to a rich old man who lives in Canada, why should they care?
Now no one is sure of the full weight of the financial burden which the state will have to pay. As house prices rise – although a correction is now taking place – the value of these properties will also increase. If central and local Governments improve their resolution of restitution claims, it may find it has generated a financial leviathan that never seems to stop absorbing state assets.
Ex-property owners are now being compensated for any property that was irretrievably lost in shares in an investment fund, the four billion Euro Fondul Proprietatea , which was meant to be listed on the local stock exchange in 2006.
However the delays are due to Government meddling in how to regulate and administer the fund, which still lacks a fund manager to oversee the listing. Former owners now have pieces of paper with a nominal value. A grey market in these shares has recently emerged. This takes the form of a matchmaking forum between buyers and sellers on the Fondul Proprietatea website where so-called ‘brokers’ buy up the shares from ex-owners at a 55 per cent discount. This appeals to owners who have waited for 60 years for their property to return and have lost patience with the Romanian state and its failures to live up to its promises, so are willing to cut their losses and take half the cash.
In today’s financial climate only the wealthy can afford to assume the risk of buying shares which will not be active until at least June 2009. In many cases, what is happening is a redistribution of wealth from the state to the rich, who then sell on to the super-rich.
This is an unprecedented scenario where properties that no longer exist are being exchanged for shares that cannot be listed, which are then sold on a market which has no regulation.
Those who have the patience to wait another year for the listing may see their shares boom in value. The irony is that the state may end up giving to ex-owners the value of their lost property at its optimum point during the entire post-Communist period in the form of shares that are set to appreciate. Those who wait the longest may win the most – even more than they deserve. But there will be no justice for the generation who did not live to see their homes again, due to a legacy of bureaucratic insolence, mendacity and moral vacuity at the highest level.

Michael Bird


 
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