Moment Of Truth

The new year was seconds away in Bucharest's Universitatii Square, where young people died fighting communism in 1989. A short, bald man jumped on stage. "Happy New Year, Romania. Happy New Year, Bucharest!" he shouted to an ecstatic crowd. Taking a swig from a large champagne bottle, he then sprayed the public like the victorious driver of a Grand Prix race. Elected president just days before, Traian Basescu spared his countrymen the officious speech they'd come to expect from their leaders every December 31. Instead, the former sea captain had a drink with them.

Gestures like this mark Basescu, 54, as a breed apart, a new generation Romanian leader, ready to take on the challenges of a new era. And he'd better be, for his country is in serious trouble. Scheduled to join the European Union in 2007--with the signing of the official accession treaty just a few weeks away--Romania is by no means ready. If graded today, it would fail almost every objective test of admission. The economy is a mess. Standards of justice and human rights are abysmal. Corruption is rampant. Romania supposedly arose in 1989 to slough off communist dictatorship. In fact, the celebrated revolution was more a crypto-coup that paved the way for nearly 15 years of rule by the communist apparatchiks and secret police who engineered it, led by the retiring President Ion Iliescu. Romanians today call it their "stolen revolution," in testimony to the stuck-in-the-sand morass they find themselves in, so in contrast to their post-Soviet neighbors. No wonder Eurocrats in Brussels are openly questioning whether Romania can meet its deadline--or should have its EU admission pushed back a year.

It's up to Basescu to change all that--to give Romania its revolution back and set it firmly on a path toward Europe. If he exudes the aura of a no-nonsense man-in-a-hurry, it's because he is. In Washington last week, Basescu hit it off with George W. Bush. Like the U.S. president, Basescu is nothing if not bold. As the hugely popular mayor of Bucharest, he wasted little time in cleaning up the capital's potholed and littered streets--and trying to clean up city government. Thwarted in that, he at the last minute entered December's presidential race, eking out a stunning victory over the stiff and haughty Adrian Nastase, the incumbent prime minister. Largely because of their desire for change, Romanians chose his unpolished charisma and often shocking frankness over the well-oiled political machine of the opposing Social Democrats. With Basescu, Romania has its first fully non-communist government since World War II.

On its face, Romania's future looks good. The economy has grown by more than 5 percent every year since 2001. The country is a member of NATO and EU membership is nigh. Beneath the surface, the country is a disaster waiting to happen. Corruption and burdensome bureaucracy has driven roughly half the economy underground, according to experts, reflecting a widespread view that it's better to avoid a system that can be abused or bought than to do business legitimately. "It is time for a new way of doing politics in Romania," Basescu said after his election. His promise to voters: lower taxes, honest government and painful economic reforms--demanded by Europe but which no previous administration has been willing to undertake.

True to character, Basescu plunged in. He appointed politically untainted young people to high political posts: a 36-year-old Oxford-educated historian as foreign minister, a 44-year-old Justice minister, a 40-year-old Finance minister. Within hours of being sworn in, his new government introduced a 16 percent flat tax on personal and corporate income--among the lowest in Europe. Modeled after successful initiatives elsewhere in Eastern Europe, the goal is to draw in money from the black economy, reduce tax fraud and spur local and foreign investment. Now the Romanian government has to convince the International Monetary Fund that these reforms will not deepen inflation, running at 9 percent, and balloon the budget deficit, which the IMF wants to see at around 0.5 percent of GDP--despite having allowed the previous government to run up a deficit three times as large. "The IMF is more pessimistic about the economy's uncertainties than we are," concedes Mugur Isarescu, Romania's central bank chief.

Meanwhile, Romania must prepare for entry into the EU. For starters, that means weaning thousands of large formerly state-owned industries from the subsidies and tax waivers--essentially a political life-support system--that have artifically sustained them for years. "The accounts of about 42,000 companies have been blocked until they pay their debts," Basescu told reporters last week about his plans for making Romanian companies more competitive. "If they don't, bankruptcy procedures will be started."

The Romanian government must still privatize many state industries, as well as reduce bloated public-sector employment and wages--throwing thousands out of work. He also has to tackle delicate social and political issues. Romania's judges dispense justice almost at whim. Insiders from the old regime and the police long ago grabbed the choicest state assets and continue to subvert the laws to their advantage. Mafia economics and values pervade society. The recent elections were as crooked as those that preceded it, despite Basescu's improbable but much needed victory.

Among the thorniest questions is Romania's recent history. Once in office, Basescu announced that he would make public the secret files of the Securitate, the fearsome secret police of dictator Nicolae Ceausescu, deposed in the 1989 coup-cum-revolution. Many fear that opening the black box of communism will shake Romanian society by exposing uncomfortable truths about many of its recent leaders and most prominent members. "We need to know," Basescu told the Council for Foreign Relations in Washington.

One can only wonder what will happen if (some say when) Basescu fails to deliver on the huge expectations he has raised in only three months. "I've been the sea captain of large oil tankers, and I always reach my destination," Basescu quipped last week. Whether he succeeds or not will soon be tested, beginning with the EU's upcoming decision on an accession timetable. But at least this much can be said: Basescu will be doing his utmost.