The world economy, heavily globalized, suffered in the last nine years one of the most important “financial earthquakes” of history, a moment that seems not to be exceeded completely today.
The financial crisis, naturally followed by the economic crisis, started in 2007, found unprepared, at least the world political leaders, who could not have consistent reactions but only after two or three years.
The current crisis could not be compared with periodic crises recorded on certain segments of the financial system after the 80s (the banking crisis in 1982, the crisis of savings and loans of 1986, the insurance crisis of 1987, the fall of Long Term Capital Management in 1998) and therefore, the head of states could not generate proactive, but reactive answers.
In the European Union fierce debates arose on the theme of austerity versus economic recovery, but these research topics, in our view, should pursue more the qualitative segment (i.e. good management of budget funds, increasing the multiplication effects of public investment, increased transparency in the use of public funds) rather than the quantitative segment (i.e. reducing public expenditure or reducing the number of indicators to payment at a given time, in the public sector).
In addition to the prolonged economic crisis, 2015 also brought the refugee crisis, due to the endless conflict in the Middle East and Arab countries, generating in turn social, political and economic unbalances.
2. The current economic situation of the European Union
However, after the latest Eurostat statistics, published in December 2015, the current account balance in the EU28 is positive and indicates the highest level in recent years, namely 19.8 billion euros. However, as it can be noted (table no. 2), Romania has a negative balance, this element indicating among other things that in our country it has not been pursued the implementation of measures to generate added value overall, but the application of quantitative elements, generating austerity, aiming mainly spending cuts.
Table no. 1 – Balance of payments in euro for EU28 (billion euros)
Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15
EU28 – current account balance 10,8 11,9 8,8 17,6 15,0 8,4 13,8 13,6 13,3 18,6 18,2 19,7 19,8
Trade in goods 2,5 3,7 2,2 10,9 8,8 3,5 9,4 10,1 9,9 9,3 8,8 11,1 11,3
Services 12,9 12,8 12,5 13,0 13,8 12,7 13,0 13,5 13,8 12,1 13,1 13,0 12,7
Direct investments 1,4 1,6 0,4 -0,1 -1,8 -1,7 -2,3 -3,7 -4,0 3,6 2,4 2,2 2,1
Indirect investments -6,0 -6,2 -6,3 -6,1 -5,9 -6,1 -6,3 -6,3 -6,4 -6,4 -6,2 -6,5 -6,3
Source: Eurostat
Table no. 2 – Current account balances of EU28 countries plus Serbia and Macedonia
In the current economic and military context, institutions of defense, public order and national security are under increasing pressures from both internal factors and external stakeholders; the obligation to align these institutions to the quality standards of the European Union becoming more pronounced.
3. Current state of institutions of defense, public order and national security in terms of number of employees and budget allocations
However, as it can be seen in table no. 3 below, the number of employees of the Ministry of Defense and Ministry of Internal Affairs is continuously decreasing.
Table no. 3 – Number of employees in MoD (Ministry of Defense) and MIA (Ministry of Internal Affairs) in the last 5 years
Ministry 2010 2011 2012 2013 2014 2015 (November)
MoD 79.210 77.290 77.246 77.553 75.406 74.638
MIA 147.822 134.168 136.848 136.261 133.602 132.682
Source: author, from the public data of the Ministry of Labour, Family and Social Protection for the Elderly
Therefore, a steady decrease has been outlined at the Ministry of Defence since 2010, from 79.210 funding indicators to 74.638 indicators in the month of November 2015.
In real terms there was a decrease of 4.572 indicators, i.e. a reduced number of personnel employed by 5.77% compared to 2010, a real problem in the current context of acute lack of specialists in these fields of activity.
The decline is even more pronounced at the Ministry of Internal Affairs, where, in the past five years there has been a decrease of more than 10% of the employees, namely registering a decrease of 15.140 indicators.
This concern with long-term effects on the activity of institutions is due, in our opinion, on the one hand, to the suspension of employment of public institutions and, on the other hand, the decreased attractiveness of these fields, further characterized by specific restrictions, and also due to low levels of remuneration (can be shown that in a military institution, under study, at the level of tertiary authorizing officer in 2015, 25% of executive staff was paid at Gross minimum wage per economy).
In terms of budgetary allocations, the situation of two ministries under analysis is the following:
Table no. 4 – Situation of budgetary allocations during 2010 – 2015
Thousands of lei
Sector Expenses type 2010 2011 2012 2013 2014 2015
Defense Personnel costs 2.705.725 2.646.082 2.918.985 3.493.232 3.113.853 3.355.114
Material expenses 554.302 463.175 508.036 482.590 526.423 715.314
Public order and national security Personnel costs 8.993.208 8.250.858 8.788.507 10.262.311 9.419.618 10.449.488
Material expenses 967.211 804.745 791.802 833.222 1.108.234 1.073.017
National budget Personnel costs 16.899.800 15.309.517 16.384.018 19.556.298 17.081.976 20.048.007
Material expenses 3.727.945 3.881.386 4.178.731 4.347.558 4.417.675 5.042.804
Source: author, from the public data in the annual state budget laws for 2010, 2011, 2012, 2013, 2014, 2015.
As it can be noticed, we have examined only two categories of expenditure, namely personnel costs and expenses for the procurement of goods and services, since capital expenditures for investments are disparate, with no consistent investment program, available money occuring, in general, towards the end of the fiscal year.
Budgetary allocations for the provision of salaries have had a discontinuous evolution in both structures analyzed, following the trend imposed by the general consolidated budget. Certainly, this type of public expenditure is directly influenced by the number of indicators in payment, but also by the rights to be granted. Although the evolution of the number of employees of the ministries analyzed was constantly falling, we can say that all the positive correction of budgetary allocations were determined by updating the values of certain compensatory amounts (like meal allowances, cash compensation for equipment) or the granting of new rights, especially to compensate for the extra work done in regular working days or free days.
For the amounts of money for purchases of goods and services it can be noticed that the tendency imprinted in the general consolidated budget was not observed in the allocations of the two ministries analyzed. Therefore, the Ministry of Defence has had reduced allocations in 2011 (suffering a negative correction of 16.44% compared to 2010), and in 2012 it had a slight increase, followed again by a decrease (a decrease in allocations by 5% in 2013 compared to 2012), finally entering in the last two years into the budgetary increase logics.
Graph no. 1 – Evolution of budgetary allocations for the purchase of goods and services in Ministry of Defence
For the Ministry of Internal Affairs, the amounts for material expenses were successively reduced, until 2013, when they entered on an uptrend, following, as we said, by the increase imposed by the state budget. Although they had an ascending character, these amounts, however, have not had the level of 2010 in the five years analyzed. Therefore, in 2010, the budget allocated to the Ministry of Internal Affairs for the purchase of goods and services represented 25.94% of the state budget for the acquisition of materials, the closest level being recorded in 2014, when the amounts provided amounted 25.09%.
Graph no. 2 – Evolution of budgetary allocations for the purchase of goods and services in Ministry of Internal Affairs
In our opinion, this discontinuous and unpredictable nature of the budgetary allocations for the purchase of goods and services only proves that there is no long-term strategy with regard to the development in the defense sector institutions, public order and national security. And here, we must also mention another aspect which we consider essential, namely that about 80% of the budgets of these institutions, in this category of costs, are represented by the cost of operation (utilities).
4. Conclusions
Romania’s economy is still an economy dependent on the financial resources that might generate development and one of the sources of funding, namely the European funds, is insufficiently exploited. The absorption of European funds, if they would bring a relevant supplementation of resources (at least 4% of GDP), could generate the development of infrastructure, the modernization of public administration which in turn would lead to reduced wastage of public funds and efficient use thereof.
On medium and long term, the economic growth is closely linked to a better allocation of resources and investments and an efficient use of technological progress.
Although lately (2014 – 2015), in the current European political-military context, there has been an increase in funding of the national institutions of defense, public order and national security, they were, however, funded at the edge of survival. In our view, two issues must be had in view, namely salaries of the personnel within these structures, and we believe that this problem could be solved by a single law on payment that would balance and create the motivational prerequisites in this matter, and the current financing activities of these institutions, which, brought to an acceptable allocation level, would succeed in covering normal neds of equipment, training, and action at similar institutions of the European Union.