1 The views expressed in this article are those of the author and do not neces- sarily reflect the views of the United Nations or its Member States. The author is grate- ful to Peter Humphreys, Yoram Gorlizki and Michael Moran for their comments and discussions on earlier versions of this article, and to an anonymous referee for very helpful comments and suggestions. 2 J. Elster, C. Offe and U. K. Preuss, Institutional Design in Post-Communist Societies: Rebuilding the Ship at Sea, Cambridge, Cambridge University Press, 1998. Lucian Cernat 1 The Politics of Banking in Romania: Soft Loans, Looting and Cardboard Billionaires IN THE LAST TWELVE YEARS, ROMANIA HAS BEEN ENGAGED IN A MAJOR systemic transformation, from a communist system towards a market economy. After the demise of communism and the overthrow of a brutal dictatorship, most analysts expected a rapid improvement in the economic and political situation in the country. While a demo- cracy has been established fairly rapidly, the economic evolution has been far below expectations. Although the economic evolution was uneven across the entire Central and East European region, some countries were more successful than others in transforming their economy without a persistent decline in output. For Romania the initial years of transition have triggered a significant decline in eco- nomic growth, followed by a slow and only partial recovery. After more than a decade of transition, Romania has yet to reach the 1991 GDP level. There have been numerous attempts to explain the variance in the economic performance of Central and East European coun- tries (CEECs) during the last decade. Some theories emphasize the major institutional changes involved during the transformation from socialism to capitalism and the disorganization that followed the sudden end of central planning. ‘Rebuilding the ship at sea’ 2 therefore had severe economic implications for the CEECs. Other theories have underlined more specifically the lack of openness © Government and Opposition Ltd 2004 Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.