The paper also includes this very revealing chart, which just about says it all I think.
Perhaps it is worth recalling at this point Spain and Italy have been the principal destinations for Romanian migrants, and that the number of Romanians in Spain has increased in the following fashion:
(more explanation of this in this post) while the number of Romanians in Italy has increased as follows:
And while I'm up here posting, here's a reminder of the volume of remittances these Romanians are sending home (as measured by the World Bank, who openly recognise that this is minimum data, since accurate information here is virtually impossible to come by).
I think the conclusion we can draw here is that - even while accepting that the number of Romanians working in Spain and Italy increased significantly in 2005 and 2006, the very steep increase in the chart is more a by-product of the fact that the post 2004 data while still inadequate is nonetheless a big improvement on what was available earlier. Another way of looking at this is to take the current transfers item in the monthly balance of payments data published by the National Bank of Romania.
While this data has little validity in absolute terms - since it includes other kinds of transfer - in relative terms it can give us a much better appreciation of how the remittances situation has evolved over the years than the World Bank data can. It will also give us some sort of proxy indicator to track as we move forward. Be all this as it may, the world bank estimate the 2006 volume to have been some 4.1% of GDP, and that is very large, and with significant macroeconomic consequences as we are currently seeing. I think what no-one had thought about before was the way in which these remittances could be treated as an income stream and used to finance mortgage borrowing to fuel construction, with all the distortionary consequences we are now observing.
4 comments:
here is the Western Union data for 2006: it puts the number of individuals sending money to Rumania at a little more than 1,000,000 and the average sum sent at 4,500 USD for the whole year.
Wester Union graph in NYT
As to mortgages financing the construction boom ... for a one room apartment at 65,000 Euros the buyer will have to advance, from his own money, at least 30%, which gets close to 20,000 Euros ...
As to the paper of Ana Bleahu, I am quite skeptic:
"Romania is a “peasantry country” – more than 47% people live in countryside " etc. etc. .
That argument is used a lot by the neo-conservative "inteligentsia" to legitimize it's attempt to deny the "peasants" the right to political representation.
The are supposed to be stupid and uneducated, thus unable to exercise their political rights: the defeat of the historical parties in the early '90s is ascribed to this, forgetting that the "historical parties" were, before the Communists gained power, the instruments of a kleptocratic and murderous elite that would make Saddam Hussein seem a decent and restrained leader.
Hi Emil,
Thanks for the comment. The Western Union data is very close to the World bank one I think, if you multiply 1 million by the 4.5 thousand USD. And then again, if we imagine about 350,00 Romanians in Italy in 2006, and maybe 450,000 in Spain then the 1 million total number of economic migrants doesn't seem like a bad guess (for 2006 that is).
What would be very interesting to know would be the additional number who are out this year. Prodi in his FT interview accepted a number of 500,000 now in Italy, and we could imagine a similar proportionate increase in Spain. We will have to wait till next year to really know.
So, you mention a figure of 20,000 euros deposit for a small flat. But isn't this just the point. The only way ordinary Romanians can accumulate legitimately that kind of money is by working abroad, say two or three family members for two years, using the Western Union estimate of annual remittances. But after that the euro income from family members abroad can also be very important in meeting the monthly payment, and especially if the value of the Leu keeps dropping.
Of course, as you are suggesting this situation makes things virtually intolerable for those Romanians without special skills who continue to live and work in Romania, hence there is a great pressure to leave, and hence there is a great pressure on the government to permit substantial wage rises. We have seen the same sort of thing in eg Latvia.
As to the comment from Ana Bleahu you quote, I agree. I noticed that, and it seems very stupid to me if you look at some of the other data she presents about unemployment etc. She seems to be exaggerating enormously. But that being said, the paper is interesting for the qualitative research which lies behind it, and the quotes from migrants.
On dicatators and authoritarians, I tend not to make comparisons between them, since I dislike all of them, neither Romanian fascists nor Romanian communists especially appeal to me (although I do have to own up to having read a lot of Cioran in my time, and he was reputedly - like Heidegger - a fascist sympathiser in his youth). However, I am really left in awe by the impact of Ceausescu's "pro-natal" policy of the late 1960s. The volume of women and children who died then (at least 1 million in 2 years) must make this one of the great unsung atrocities of the 20th century, every bit as comparable with the Turkish genocide against Armenians which has attracted so much attention of late.
"The volume of women and children who died then (at least 1 million in 2 years)."
I have asked about that. The numbers must be wrong: 500,000 dead in a year is an entire generation of women. Than would have not been forgotten, and as of now I have found nobody that remembers such a tragedy.
"The only way ordinary Romanians can accumulate legitimately that kind of money is by working abroad."
Well, "ordinary Romanians" can also have small businesses, or cultivate small farms and plant high-labor-high-market-price plants, or raise rabbits/quails/emu, or have the extended family pool money etc. Special skills are not mandatory to make a good living: willingness to learn (which always existed) and cheap capital (became available only very recently) are.
What is at stake: building regulations. This is the cause for more that 200% increase in the price of homes since 2000: almost no apartments got built since 1989, and even now very few are being built. All that construction boom is sunk in highways, railways, office buildings, hypermarkets, improving the industrial platforms etc. Unless there will be a real liberalization in home building, people will leave the country no matter how large will be their income: the prices for homes will grow even faster than the income. I can only hope our government will stay away from the Green scam, since that will be the end for any hope of inexpensive new homes.
"there is a great pressure on the government to permit substantial wage rises"
Rumanian government can permit or deny raises only to government employees, and there are a lot less of them than it used to be, and their wages did not get raised much.
Hi Emil
"I have asked about that. The numbers must be wrong: 500,000 dead in a year is an entire generation of women. Than would have not been forgotten, and as of now I have found nobody that remembers such a tragedy."
Yes,Iam sure you are right.I went to the UN data base, and then double checked with the US census bureau records. The number is considerably less, but still significant. I have published a fresh post on Romanian demography which you will doubtless have seen where I present the more modified results.
I still think the long term consequences of all this are very important, and that few are talking about it. I also think a national monument to those who died would be no bad thing.
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