How Moldova Escaped the Crisis

Europe’s poorest country is a paragon of financial stability

Image: Mads Nissen/Getty Images

On a sun-drenched spring day in Moldova’s capital of Chişinău, a laid-back, leafy city of about 785,000 built atop seven hills, I strolled down the central boulevard, Stefan Cel Mare, talking with my friend and guide, whom I’ll here call Roman, a trim fellow in his mid-40s. The global economic crisis was on everyone’s lips in Moscow (where I live, and where it is known succinctly as the kreezis), so I asked Roman about it, Russian-style, without adjectives.

He shot me a puzzled look. “What crisis?”

“The global financial crisis!”

“Oh, that. I scratch my head and try to remember it. It’s something we see on TV. We perceive it as distant from us.”

Roiled by recent political tensions, beset by a long-standing separatist conflict over its eastern territory of Transnistria, dependent on Russia to supply energy and import its wines and agricultural produce, Europe’s poorest (and only Communist) country would appear to have nothing at all to boast of.

Except that it has flat-out beat the United States, the United Kingdom, and most other capitalist titans at their own market game. Well, at least in a way. Earlier this year, The Banker, a respected British financial journal, ranked Moldova fifth out of 184 countries for economic stability in recession times, according to the 25 indicators used to compile its World Financial Health Index for 2009. Moldovans complained to me about corruption, the ruling Communists, and the president, but the kreezis did not come up in conversation unless I mentioned it.

Moldova lacks not only the energy reserves that characterize three of the four countries ahead of it on the index (Norway, Russia, and Kuwait), but also most of the attributes now associated with developed (read: leveraged) economies: among others, the prevalence of credit, state debt and debt interest payments, and domestic bank loans. The Moldovan government largely lives within its (admittedly limited) means; Moldovan banks, on the whole, exhibit what a year ago would have been diagnosed as risible, out-of-touch conservatism, lending modestly (35 percent of GDP, as compared with 230 percent in the United States) and maintaining a high capital-to-assets ratio. In fact, the country hardly has a banking or financial sector at all.

“We never think of going to the bank for a loan or using a credit card,” Roman told me. “We operate on a cash-only system here.”

Cash-only is a matter of not just choice but tradition for Roman and other Moldovans. Taking on debt is still fraught with taboo. Still reigning are old-fashioned ideas of solvency and personal pride, and a pragmatic way of dealing with money born of decades of penurious scarcity. Moreover, since the fall of the U.S.S.R., scandals involving banks, stock fraud, and Ponzi schemes have periodically made the news. All of which confirms the trust people place in cash savings (mostly in dollars and euros), which they usually keep hidden in their homes, under the proverbial mattress.

Roman affirmed this. “I keep all the money I have in a drawer. What I have is mine. We spend only what we have. And so I sleep well at night.”

Not that there is little to buy in Chişinău. Moldova’s current leadership may be Communist, but all the temptations of a capitalist consumer society abound. We passed shop windows chock-full of clothes, food, and electronics. Commercial malls such as Sun City and Jumbo boasted the same sort of well-stocked stores one might see in the West, with additional, post-Soviet touches like BMWs for sale in the lobbies and casinos on the upper floors. There was no shortage of shoppers, though occasionally attendants complained to me that business was down. Notably few store windows displayed credit-card logos; buyers had to pay in cash.

The one speculative operation most people engage in involves buying dollars and euros as hedges against the anemic local tender, the Moldovan leu. On almost every street corner in the city center stands a booth marked Schimb Valutar (currency exchange).

Roman was dressed in stylish Western jeans and a denim jacket. He drives a Ford and, with his wife, owns a three-bedroom apartment (for which they paid cash) in the fashionable district around Chişinău’s version of the Arc de Triomphe, the Holy Gates. He represents, in sum, the debt-free middle class that arose across the former Soviet Union roughly during the time the credit boom was sweeping much of the West.

I told Roman about Moldova’s ranking in The Banker, and his eyes lit up with surprise. But when I described the widespread suffering the crisis was causing in the United States, he grew somber.

“I feel sorry for people in the West,” he said. “Their financial system worked well for decades, and now it’s collapsed. You know, I feel blessed to have been born here.”

Blessed to have been born in Moldova? Few would have uttered such words a year ago. Now, sadly, they make sense.