Banca de Economii (BEM) can be nationalized only with the consent of the current majority shareholders and this nationalization would cost 7-8% of the GDP. After the nationalization, the state will have to pay all the debts assumed earlier by the BEM, which is another 10% of the GDP. Thus, the budget deficit during the first year alone will rise to over 17%. This would make it unsustainable and would lead to a default in Moldova, says a report by the Black Sea University Foundation (BSUF), quoted by IPN.
The report says that the foreign exchange reserves of the National Bank of Moldova since 2014 until now decreased from US$2.7 billion to US$1.7 billion. The nationalization of the BEM would swiftly use up the central bank’s reserves and Moldova would experience a much more serious crisis than that of 1998. “Nationalization means transfer of the right of ownership from a private owner to the state following just compensation. In the case of the BEM, Moldova will take over the BEM from its owners – private individuals and legal entities – after paying compensation to these. However, given that the BEM is a public company, i.e. it is quoted on the stock exchange, the takeover is possible through squeeze-out, when the state makes a public offer to purchase shares at a price that will represent the average price of a share for the last 12 months,” says the report.
According to the report, this offer can be made only after the state becomes a majority shareholder in the BEM, for example, by converting the BEM’s debts to the state budget into shares. But this conversion mechanism must be ascertained by a court. It is not automatic as a result of insolvency. For Moldova to ‘nationalize’ the BEM, a court should first ascertain the bank’s insolvency or Parliament should decide this by a law, with the consent of the current shareholders.
Moldova hopes to sign a lending agreement with the IMF, but this organization cancelled the visit of its delegation to Chisinau. Also, the World Bank announced that it halts the financing, as the EU and Sweden will do. Such a serious situation is due to the announcement that the BEM will be nationalized, made by the leaders of the ruling coalition, at a time when the foreign partners recommend liquidating it.
The only solution is now to quickly install a new Government in Chisinau, which would enjoy the support of a solid parliamentary coalition. A Premier with authority who will be supported unconditionally by the coalition should take all the reform measures required by the development partners and should undertake to liquidate the BEM.
