The 2014 Moldovan “Theft of the Century”

Captured states and Modern Money Theory

Abstract
This paper sets out to investigate the ten-year power cycle of former oligarch Vladimir
Plahotniuc in the Republic of Moldova. First, we analyze his gradual rise to power from his
shadow role under the Voronin regime to his influence during the two phases of Alliance for
European Integration I and II. The climax of his ultra-dominance was reached after the arrest
of Prime Minister Vlad Filat in 2015. Eventually, the ten-year cycle ended with his departure
from power after a constitutional crisis in June 2019. Secondly, the banking fraud also known
as the “theft of the century” that saw the disappearance of one billion dollars from the coffers
of three of the major banks of the country, is given due consideration. We put forward a novel
monetary theorem: the endogenous creation of money for fraudulent purposes. Finally,
through the analysis of central bank reserves between 2014 and 2017, we rehabilitate modern
monetary theory.

Keywords: Republic of Moldova; captured State; banking fraud; endogenous money

Word count: 9910 words

Marc Pilkington, PhD

Associate Professor of Economics
University of Burgundy Franche Comté, France

ORCID iD: https://orcid.org/0000-0002-5076-6288

Email : marc.pilkington@u-bourgogne.fr

https://www.linkedin.com/in/marcpilkington1/
“The process by which money is created is so simply that the mind is repelled. Where something so
important is involved, a deeper mystery seems only decent.”

John K. Galbraith, Money: Whence It Came, Where It Went, (1975, p.29)

“Each and every time a bank makes a loan (or purchases securities), new bank credit is created —
new deposits — brand new money”.

Graham F. Towers (1939), Governor of the Central Bank of Canada (from 1934 to 1955), before the
Canadian Government's Committee on Banking and Commerce

INTRODUCTION

This article is centered on the capture by an oligarch of a small and under-researched post-
soviet country with a tormented History, namely the Republic of Moldova, which took place
gradually between 2009 and 2019, before a constitutional and political crisis provoked his
departure from power and the country. Our study aims to single out the consequences for
economic history of the captivity of the Republic of Moldova (hereafter RM) during the ten-
year power cycle of Vladimir Plahotniuc (hereafter VP).
In a first part, we evidence the captured state, and identify three sub-periods. We aim to
characterize VP’s ten-year power cycle (2009-2019) that came to an end in June 2019 on the
occasion of a constitutional crisis.

Secondly, after reflecting on the idiosyncratic concept of a market-based oligarchic economy

characteristic to post-soviet economies, we revisit the theoretical underpinnings of the
Moldovan banking fraud, namely the money creation process in a country subordinated to a
single person (i.e. an all-powerful oligarch). In other words, we present the first convincing
historical of the endogenous mass-scale creation of money for fraudulent purposes in a post-
soviet country.

In the third part, we shed light on the macroeconomic implications of the fraud by resorting to
modern monetary theory (MMT). The study of the evolution of central bank asset reserves
and other key macroeconomic indicators between 2014 and 2017 vindicates the theory.
Glossary of terms

theft of the century (called the “billion theft”, “furtul secolului” or“furtul miliardului” in
Romanian): how the biggest banking fraud in Moldovan (and arguably in world) history is
named by locals (Tanas, 2017). Poorly researched and mediatized outside East Europe
specialists, the scandal saw the disappearance of $1 billion from three Moldovan banks:
Banca de Economii, Unibank and Banca Socială in 2014.

captured state: coined by the World Bank (Anderson et al., 2000), the term is rather esoteric
for anyone who was born, and grew up in a country governed by the rule of law wherein
democratic standards, though sometimes imperfect, prevail: “State capture can be seen as
repressing the advantages that these countries have in terms of the capacity of the state and
the strength of public administration” (66). A captured state implies systemic political
corruption wherein powerful private interests influence a state's decision-making processes to
their own advantage (Hellman and Kaufmann, 2001).

oligarch(s): member(s) of the small corrupt groups of people who politically and
economically sustain the captured state at the highest level of (often informal) power

kleptocratic regimes: wherein the state is controlled and run for the benefit of an individual
(the so-called oligarch), or a small group, who use their power to transfer a large fraction of
society’s resources to themselves. State capture, oligarchy, and kleptocracy are intertwined
notions used interchangeably, in spite of minor differences of emphasis.
EVIDENCING THE CAPTURED STATE

RM is a land of contrasts and contradictions, from being the first post-soviet country to
appoint a communist government in December 1999 after the dislocation of the Soviet Union
(Jamestown Foundation, 1999) to being the “poster child” of the Eastern European
Partnership (Rinnert, 2013), and finally home of one of the biggest bank scandals ever (Kroll
I 2015; Pilkington 2015).

A post-soviet economy with a complex identity

Part of Great Romania from 1918 to 1940, RM has a tormented History being at different
times under the yoke of Romania, the Ottoman and Russian empires, which explains its
present ethnic diversity1 (NATO Strategic Communications Centre of Excellence 2017, 23;
CIA, 2017). The electorate of the Communist Party (hereafter CP) initially non-native became
more ethically balanced throughout the years, opposing the outright secession of
Transdniester (without condemning the presence of Russian troops), and by distinguishing
between “Moldovanism” (the stance shared by the masses) and “Romanianism” (a view
shared by the right-wing intellectual elite of the country, versed into History, poetry and
literature). Since 1991, communists and socialists have shared the conviction of “statalitáte”, a
Romanian word equivalent to independence, meaning complete autonomy of the Moldovan
State from Romania. Tishkov (2000, 625) argues that the state (as ‘polity’) is one of the two
forms of social groupings (the other one being a fictitious ethnic entity called the people) to
have the exclusive property of the concept of nation. Its derivatives such as ‘nationalism,
nationality, nation-state, and so on’, are merely ‘multiple synonyms with floating referents’.
(639). RM has always had a distinctive (and problematic) relation to the concept of nation.
While the Soviet Union was not conceived and organized as a nation state, nationality (or
nationalism) was nevertheless strategically instrumental on the sub-state level, in the absence
of any institutionalization of the concept on the level of the state as a whole (Brubaker 1996,
29). Given the ethnic diversity and antagonistic complexity of the Moldovan people, we argue
that “statalitáte” is the closest proxy for “Moldovan nationalism”.
Voronin was appointed President by the Parliament in April 2001. The CP obtained very good
results in the Parliamentary elections between 1998 and 2010, by adopting ambiguous

1
75,8% Moldovan, with 8,4% Ukrainians, 5,9% Russians, 4,4% Gagauz, 2,2% Romanians, and 1,9%
Bulgarians comprising the remaining population.
positions regarding the legacy of the Soviet Union, mostly playing on the nostalgia cord felt
by a significant share of the population (Jamestown Foundation, 1999), ill-prepared with the
demands of a transition economy. Druţă (2019), member of the first parliament of RM regrets
the forced resignation in 1998 of Pro-European Prime Minister Ion Sturza under the Alliance
for Democracy and Reforms by an opportunistic parliamentary coalition between the
Moldovan Christian Democrats and the CP (who shared Euroscepticism and anti-Romanian
views). Sturza enjoyed a good reputation in the Western world, and had the pedigree to
change the historical course of RM toward European integration and the strengthening of the
rule of Law. But the turn of events coincided with the 1998 financial crisis in Russia, resulting
in the government defaulting on its debt and the Central Bank devaluing the ruble. Given the
rublization of the neighboring countries, the crisis hit severely RM, and marks the beginning
of a massive exodus. At odds with ADR, Voronin’s accession to Presidency occurred in a
context of oligarchic capital accumulation, clan systems in political life, and grand level
corruption (Carasciuc, 2001: 6), following the impoverishment of the population during the
1990s, and paradoxically a higher tolerance for inequalities (Hoftstede, 2001), and
concentration of private property, explained by the dramatic failure of communism and
egalitarian ideology in the Soviet era (Novokmet et al, 2018). While post-soviet countries
experienced a process of expansion in the 1990s, they also suffered massive social dislocation
and falling moral standards (Vladimir Mau cited by Korop, 2004) hampering the adoption of
market reforms. Individuals had to sell their labor in a market economy a socio-economic
imperative most citizens had little readiness for (Payne and Marsh, 2009, 35-6). It did not take
ten years after the dislocation of the Soviet Union for numerous post-soviet countries, to set
the stage for a crude version of capitalism equipped with the accoutrement of materialist
wealth and inequalities (36). It has been argued that RM is a conservative society with strong
family values (Calus, 2016: 4, footnote), wherein a majority of the population is Orthodox
Christian. The weight of the Orthodox Church (82% of the population) is undisputed, but the
latter has criticized, by means of propaganda, the EU integration for being excessively
complacent with minority rights. The “unholy alliance” between CP and the Orthodox Church
should not be underestimated (Rinnert 2013, 7).
Voronin’s ideological stance is rather complex. In 2003, he refused to sign the infamous
"Kozak plan" of federalization of RM (Botan, 2003), which resurfaced in June 2019 in an
incredible scenario on the occasion of the fall in disgrace of VP throwing his ultimate political
and media forces in the battle, which would have legalized Russian troops on the national
territory, and aligned the governance of RM with that of Transnistria, its Russian-leaning
separatist territory. Shortly after, Voronin was invited on an official visit to the United States,
thereby creating massive tensions with Moscow. In spite of the adoption of a set of pro-
market reforms during that decade, Voronin’s presidency marked the beginning of an era of
strongmen who utilized RM’s resources for personal gain (Kostanyan 2016, 1) that VP will
come to incarnate a decade later. In Russia, tolerance for extreme inequality was conditional
on the perception that “billionaires and oligarchs appear to be loyal to the Russian state and
perceived national interests”. This might have been true in RM, although this perception will
falter throughout VP’s ten-year power cycle. This first phase (2001- 2009) is of crucial
importance, as it is due to the cooperation between VP and Voronin (and his son Oleg, the
first billionaire in RM) that VP weaved his canvas between 2009 and 2013 (Calus 2016, 1).
VP was the shadow adviser of Voronin, also called the ‘grey Cardinal’ of the communist
regime (Viorel Topa, cited in Drew, 2015). He learned the tricks of the trade of Moldovan
politics. After Voronin lost power, VP obtained the latitude and resources to promote full-
time his personal political agenda and project, the Democratic Party of Moldova. Not short of
contradictions, Voronin had accelerated the adoption of pro-market reforms (in parallel with
high levels of grand-corruption). It is under his aegis that VP learned that ideology was
merely a powerful strategic tool, instrumental to politics, and not the other way round.
Voronin’s regime came to an end in May 2009 after the dramatic events of 7 April, the so-
called Twitter revolution (Ciubotaru, 2010), and the violent streets protests after the allegedly
rigged Parliamentary elections. The CP’s victory in the parliamentary election spurred riots,
during which several people were killed and injured.

2009 -2013: weaving his canvas

Following the events of April 2009, the first Alliance for European Integration (hereafter
AEI1) took power, and won a relative majority in the Parliament of 53 deputies out of 101,
short of eight votes to be able to elect a President. It gradually initiated a process of
subordination of the whole state apparatus to the respective three groupings or political parties
(i.e. PDM, PLDM and PL) that formed an allegedly pro-Western coalition (Calus 2016, 1).

The years 2009 – 2013 marked the beginning of VP’s ten-year power cycle. As early as July
2009, VP had funded up to 360,000 lei ($30,000) the campaign fund of PDM (Calus 2016, 1;
Romanovski 2013) that became the second government coalition partner after Vlad Filat’s
Liberal Democrat Party of Moldova. VP was preparing his ascent in the shadows: “in 2010,
the press in RM did not even have a photo of [VP]” (Romanovski, 2013). During that time
ministers’ portfolios and their revenues were divided between the coalition members.
However, two principal forces emerged around that time: VP and Filat, then the two
wealthiest individuals in RM. Rapidly, the AEI1 successfully branded itself to EU officials as
an Eastern Partnership (EaP) success story (Boonstra, 2011). The coalition functioned
relatively well until 2013 in spite of regular crises spurred by the power struggle between Filat
and VP (Kostanyan, 2016: 2) and the Padurea Dumeneaca scandal (Sanduta and Mosneag,
2013). The two rivals neutralized their power drive, by maintaining a series of fragile
parliamentary alliances. Viorel Topa (cited in Drew, 2015) thinks that the State began to
collapse around that time. VP still not holding any formal executive mandate (Calus and
Konończuk, 2017) was not interested in any structural transformation, or implementing any
thorough reforms including the Association Agreement with the EU. As his significance
grew, the symbolic actions aimed at structural change became even more superficial. VP’s
informal rise to power resorting to “preferment’s for high positions and opportunities for
cushy jobs” (Romanovski, 2013) was challenged by feuds on numerous occasions, but he
earned a strong reputation of silencing critics by suing them in court (ibid.). Table 1 features
the World Bank (2012) Development Indicators.

Table 1 The World Bank, World Development Indicators (Moldova)

2013-2015: AEI2 and the intense rivalry with Filat

The second period of the Alliance for European Integration (AEI2) was marked by a
succession a Prime Ministers and fragile parliamentary alliances. Behind the scenes, the
oligarchic tandem continued to hold sway until 2014 when the unnatural and secret alliance
broke down under the impact of irreversible tensions with the first revelations on the massive
banking fraud involving three major Moldovan banks (Kroll 1 2015; Pilkington 2015).
Reportedly, a secret agreement was concluded between Filat and VP in 2013 whereby the
former handed in every key state institution over to the latter (Viorel Topa cited in Drew,
2015). In this race to power, VP possessed an advantage conferred by his colossal wealth, his
strategic political flair, and his pervasive control of the judiciary (Calus, 2015). In the summer
2015, AEI2 looming towards an end, the political landscape was looking bleak.

Despite years of disappointment, many Moldovans still hold great ambition for their country. They
maintain that, freed from corruption, it can be transformed. But first, this captured state must be
returned to its citizens (Jagland 2015, italics added).

No matter how desirable democratic standards are in the civilized world, a captured state can
theoretically be well managed, and is not necessarily synonymous with recession or a halt in
the development process, as shown by the substantial drop in the poverty rate between the end
of Voronin’s reign and the advent of AEI2 (World Bank 2017, 1, italics added).

The end of the dual oligarchic regime

A dramatic turning point occurred on 15 October, 2015 after a motion initiated by the
prosecutor general led to the deprivation of the immunity of Filat, who was taken to custody,
and questioned by the national anti-corruption center (CCNA). Officially, he was charged for
his implication in the “theft of the century”, and for accepting a 250 million-dollar bribe from
Moldovan-Israeli businessman Ilan Sor (after a stunning self-denunciation protecting him
from immediate imprisonment), the central figure of the Kroll report I (2015). His arrest
marks the end of the duopoly of power, and the beginning of the ultra-dominance and single
oligarchic rule. In the following three months up until January 2016, the whole political scene
became subordinated to VP’s personal interests. Feeling that tables had turned, VP who had
voluntarily acted as one of the two shadow leaders, known as the puppetist, merely pulling the
strings of influence and power of the country, made his first (and last) attempt to become
Prime Minister2. President Nicolae Timofti blocked VP’s appointment, by referring to a
Constitutional Court decision (Curtea Constituţională a Republicii Moldova 2019), stating
that individuals of dubious honesty were prohibited from holding senior positions in the state
administration. His was put forward, but withdrew from the mission of forming a new
government in circumstances yet to be defined (Calus 2016, 2-3). There was another attempt
by former Prime Minister, Ion Sturza, who failed to win a vote of confidence, resulting in a
political deadlock. The Constitutional Court3, then passed a decision restricting the
2
There are three reasons. Firstly, that VP is simply driven by egocentrism. Secondly, that he was
asked to do so by the Americans. This was partly confirmed in my discussions with one of the
European diplomats. There also exists a third, and less popular, theory - that the oligarch needed
immunity, although not in RM but abroad (Levcenco, 2016).
3
A number of decisions passed by the Constitutional Court between 2012 and 2015 proved that this
institution had been controlled by VP, as shown by the court decisions that prevented Vlad Filat from
returning to the position of prime minister in 2013 under AEI2.
president’s right to nominate candidates for Prime Minister at his discretion. This is how VP
and his political party managed to push through the nomination of his trusted aide, Pavel
Filip, deemed as a compromised candidate, for the post of Prime Minister in January 2016.
The latter won a vote of confidence in parliament, and formed a new cabinet, leading to a long
period of relative (oligarchic) stability until June 2019. What arguably blocked VP’s long
drawn-out dream of formally ruling the country is his deep unpopularity, being trusted by 2%
of the population in 2015, while 95% distrusted him. Two years later, in April 2017, his
approval ratings stood at merely 0.9% (Newsmaker.md, 2017). In a poll presented by the
Association of Sociologists and Demographers on June 24, 2019, when asked who was
responsible for the political crisis, which lasted more than three months, 73.7 per cent of the
respondents answered VP. When asked to name the politicians they trusted, only 0.9%
(unchanged) mentioned VP (Infotag 2019b). These popularity figures contrast sharply with
Russia’s scenario, where Vladimir Putin’s approval rating stood at 66% in April 2019 (bne
Intellinews, 2019).

Figure 2 Approval ratings for Putin in Russia and VP in RM

The feud between VP and Filat during AEI1 and AEI2 has shown that RM lacked true
statesmen, and instead was ruled by power hungry oligarchs, fighting each other, thereby
exacerbating chronic instability in the country. RM is a hybrid regime (Morlino 2008, 7), best
apprehended through the lenses of state capture wherein "so-called oligarchs manipulate
policy formation and even shape the emerging rules of the game to their own very substantial
advantage (Hellman & Kauffman 2001; Pyman et al. 2014: 15).

2016-2019: climax of power

By January 2016, VP had concentrated in his hands more power than any politician before
him since the independence in 1991. Mizsei (cited in Ursu 2016) argues that “[t]he Republic
of Moldova is in an unusual situation, because the whole power is concentrated in the hands
of one person”. VP coordinates a "Kleptocratic network" (Chayes, 2016), formed of
government, business, and criminal elements, and fine-tuned by lower level officials, active
facilitators and external enablers (U4 Anti-corruption Resource Centre 2017, 3).

Figure 3 Moldova’s kleptocratic network and revenue streams

Corruption thrives in RM due a favorable environment (Chayes 2016).

[r]anking for control of corruption on the Bank Group’s Worldwide Governance Indicators (WGI) [had]
declined from 33 in 2008 to 17 in 2015, a score not yet fully reflecting a massive banking fraud in 2013-
14 that led to losses of about 12 per cent of Gross Domestic Product (World Bank 2017, 1).

The 2019 Corruption Perception Index (Transparency International 2019) ranked RM 120th
out of 180 countries, down from 117th a year before, on par with Niger and Pakistan.

The consolidation of an oligarchic elite’s position at the reins of the state apparatus is seen to have fueled
corruption in politics, business and public administration. An example of the country’s problem with
grand corruption was provided by the 2014 banking scandal, which led to the imprisonment of the former
prime minister and precipitated an economic crisis. (U4 Anti-corruption Resource Centre, 2017)

There are clear examples that in some areas sensitive to modernization, such as the reform of
justice and the fight against corruption, minimal progress, or even regression was observed
under VP. Likewise, the US State Department’s 2015 Human Rights Report stated that “the
spread of corruption continues to be the most serious issue in the RM in terms of human
rights” (cited in NATO Strategic Communications Centre of Excellence 2017, 13). In a
survey of social perceptions conducted in 2016, Moldovan citizens considered the Parliament,
the courts and the government to be the most corrupt institutions (U4 Anti-corruption
Resource Centre, 2017). The survey indicated that lack of trust in central state institutions (i.e.
hence their weakness) stems from the widespread perception that the latter are corrupt. Viorel
Topa (cited in Drew, 2015, italics added) thinks that corruption is a misnomer:

Corruption is just a general word – it is not just corruption that we are talking about here. When you
hijack the state institutions, it is not just corruption. When you capture the state, it is not just corruption.
When we say corruption, we usually have in mind bribes for certain facilities, something like this. We are
talking about hijacking the state.
In the Filip administration (2016-2019), key positions monitoring financial flows and law
enforcement agencies were filled by pure technocrats. VP who by the end of AEI 2 already
controlled the judiciary (tightened by the re-election of Mihai Poalelungi on 7 February 2016
as Supreme Court President), anti-corruption institutions, the National Bank of Moldova, and
the Constitutional Court, was by early 2016 pulling the strings of the fiscal directory, customs
services, the Ministry of Internal Affairs, and the police (Calus 2016, 3). Meanwhile, all these
institutions began to remove Filat-related agents by replacing them by others subordinated to
VP in a classic ‘carrot and stick’ governance system. The latter was evidenced by VP’s
obsession with full control over the Attorney General (ipn, 2015) and the judiciary system.
The unfolding scenario was one of ultra-dominance of PDM over political life. Ahead of the
Presidential elections held in the autumn 2016, Mizsei (cited in Ursu, 2016) lamented that
previous elections had seen an increase in law manipulation, clone parties, and last-minute
exclusion of competitors, undermining the country's level of democracy. Mizsei (ibid.) was
hopeful that the first direct presidential elections since 1996 would see the appointment of a
new president independent of VP and external powers, such as Russia, and her neo-imperialist
interest in the region. Unfortunately, the eventual election of Igor Dodon, propelled by a
revived socialist party (PSRM), whose popularity had been boosted by the massive discontent
of the population, spurred by AEI1 and AEI2, acted as a smokescreen, for there were well-
grounded suspicions that PSRM was connected to VP (Calus 2015, 6). Furthermore, the
prerogatives of the president are merely constitutional (Calus, 2017).
The events of 2019, the demise of VP, and possible state re-capture
2019 was marked by the end of the ten-year power cycle after some parliamentary elections in
February and a dramatic constitutional crisis in June. The key idea is that in spite of winds of
change and de-oligarchicization blowing on RM shortly after VP was forced to flee in exile,
his departure from power is subject to a plurality of interpretations in the light of the ensuing
events. Ion Iliescu, Romania's former President (1989-1996 and 2000-2004) was introduced
to VP in the 1990s. Iliescu had been a minister in the government of Ceausescu, and went on
to lead the National Salvation Front, which took control of the country after the uprising that
began in the western city of Timisoara in December 1989. Iliescu has been charged since with
crimes against humanity for his role in the aftermath of the violent revolt that toppled the
communist regime in 1989. His ambiguous role in the early 1990s shows that in post-soviet
countries, a captured state is often subject to short-term recapture in the aftermath of the
demise of the reigning oligarch.
ENDOGENOUS MONEY CREATION FOR FRAUDULENT PURPOSES

Modern bank money is endogenous as the central bank supplies base money on demand at its
prevailing interest rate, and broad money is created by the banking system (King 1994, 264).
Jakab and Kumhof, (2019, 1) rehabilitate the “financing-through-money-creation model”
wherein banks are modelled as financial intermediaries, whose loans are funded by ex-nihilo
creation of ledger-entry deposits that facilitate payments among nonbanks. The IMF and Bank
of England economists (1) revive a heterodox reflection on the money-creation process of
banks dating back to Wicksell (1906), being critical of the mainstream intermediation of
loanable funds model that equates banks as mere resource-trading intermediaries of physical
resources that receive deposits from savers, before lending them to borrowers (Bank of
England 2015). The lack of diversion of pre-existing resources is a corollary of endogenous
money. In a world wherein money is endogenous and/or chartal (Wray 2012), the bailouts can
be financed according to three alternative modus operandi (1) central bank asset reserve sale
(2) helicopter money4 or (3) issuance of new public debt financed by tax increases. Le Bourva
(1959: 721, our translation) explains that the supply of credit is determined by demand: "the
initiative belongs to the customers of the banks". Basle (1999, 15, our translation) sums up his
reasoning: "[i]n the reverse causation of Jacques Le Bourva, companies request financing, and
commercial banks grant and guarantee, under certain regulatory and institutional conditions,
the credits that make the deposits”. For Moore (1997, 427), money is demand-determined and
credit-driven, but remains influenced by supply, dictated by interest rate central bank policy.
In this sense, only the demand emanating from creditworthy borrowers (Wolfson, 1996)
presides over the distribution of new loans, and the endogenous creation of money. Ryan-
Collins et al. (2012) and McLeay et al. (2014), highlight the recent revival of a credit creation
theory, Werner (2014) makes similar claims intended for a mainstream audience, in sync with
the Banking School (Tooke, 1844), arguing that modern money, far from being exogenously
determined by gold or central bank reserves, is fundamentally a universally trusted IOU.

4
We understand this term in a chartalist sense, and not a printing press à la Friedman one. The latter
metaphor corresponds to an erroneous exogenous money conception at odds with the double-entry
bookkeeping nature of bank money. Even orthodox economists today seem to endorse the first
concept. See Gali (2020) for a possible application in the context of the COVID-19 pandemic.
 Figure 4 Money as a universally trusted IOU

Table 2 describes the interest-rate schedule in 2012-2014, crucial to the understanding of

the scandal.

Table 2 Interest rate schedule (2012-14)

Source: NBM

There was a gradual decline of overnight interest from the beginning of 2012 to mid-2013
before a surge until the end of 2014.

Figure 5 Supply of credit (Nov. 2013 – Nov. 2014)

Table 3 Volume and average rate on credits in national currency

 As compared to November 2013, the volume of new granted credits in national
currency increased by MDL 2004.7 million (by 2.2 times), while the average weighted
interest rate on granted credits increased by 0.41 percentage points.

Figure 6 Total loan exposure of the Sor group (2010-2014)

There is no statistical correlation between the growth of the loan exposure of the Sor group,
and the NBM’s interest rate decisions (the only noteworthy observation is that it suddenly
skyrockets in November 2014, and shortly afterwards, interest rates increase sharply). Kroll I
(2015, 11) points out the abnormally high level of connectivity between the three apparently
independent banks, which signals shortcomings in terms of control and coordination. Kroll 1
(2015) shows that all but four loans granted to the Shor group on 31 October 2014 had been
paid down by 24 November, 2014. On that day, the remaining credit assets were replaced by
higher value loans issued by BEM, repaid between 24 and 26 November, thereby generating a
massive flux of liquidities deposited immediately at Banca Sociala, to grant more loans to five
companies belonging to the Shor group up to 13.7 billion lei. On 26 November, secret
corporate banking arrangements allowed the sale by BS of all the loans outstanding to Fortuna
United LP, an Edinburgh-based offshore shell company also involved in a criminal scheme in
the energy sector. Figure 8 presents the circular bank deposit scheme.

Figure 7 Timeline of the banking scam

Figure 8 Description of the circular bank deposit scheme

 Figure 9 Integration of offshore entities in the money-creation process

The banking sector started to run out of resources between 2010 and 2013 through
transactions involving offshore companies. However, the hardest hit came in 2014, when
three banks, two of which, Banca de Economii and Banca Sociala, were government-backed
and of systemic importance, became involved in illegal lending.
For Dymski (1988, 517), decisions regarding the volume and the loan rates in the current
period depend on the anticipations of bank liquidity in the next one. During the fraud, either
these anticipations were flawed and based on utter incompetence, or there existed a criminal
scheme at the highest level of power to sabotage the banks through a blend of fraudulent
governance practices, and extract colossal fraudulent revenue out of these non-performing
loans (Parliament of RM, 2019). The Moldovan case features an unprecedented global
scheme that allows an (oligarchic) controlling entity to take over three of the country’s largest
banks, issue credit to a network of affiliated firms, belonging to itself, with collateral cross-
issued amongst the three banks, and, finally, to wire the money through shell companies and
offshore banks. Managed by a single and opaque controlling entity (Pilkington 2015), the
banks were the perpetrators of the fraud, and, as such, were unwilling to engage in monitoring
activity. Only NBM could have attempted to prevent, detect, and reverse any illicit operations.
Interestingly enough, Dorin Dragutanu, former Governor of NBM in 2014, was detained in
March 2020 for his alleged involvement in the theft of the century (Necsutu, 2020). Levi
(2014), Wiszniowski (2011), Lee (2008) or Lipman et al. (1977) discuss internal fraud in the
banking sector, and its implications for regulation, but none of these papers investigate the
mechanisms whereby fraudulent operations are perpetrated, nor do they study the impact on
individual banks, or financial sector stability. A gap exists in the literature wherein
endogenous money creation for mass fraudulent purposes, except for Pilkington (2015) is
absent. Such mass scale endogenous money creation was enabled by the concomitant control
of (1) bank governance, (2) the judiciary including law enforcement and anticorruption
institutions (3) the central bank in charge of the supervision of the banking sector. In modern
banking history, either these conditions had never been met, or such a captured state-driven
banking fraud had never been attempted.
Key macroeconomic notions, such as "the effective demand for loans" (Wolfson, 1996) are
insufficient to capture the integrality of the money-creation process in the hypothesis that it is
contingent on internal corporate banking governance mechanisms. In the run-up to the fraud,
no credit crunch was observed (Figure 5), which means that the banking system was not
paralyzed by fear. A credit crunch is provoked by the sudden increase in the degree of
uncertainty and the rise of pessimism of commercial banks about the future ability of banks to
reap profits, hence the decrease in their solvency. Bank solvency in the literature is
apprehended through a battery of regression tests on key financial accounting variables, such
as capital ratios, non-performing loans ratios, and earnings (Martin 1977; Espahbodi 1991;
Helwege 1996; Cole and White 2012): “almost no research to date has empirically analyzed
the influence of corporate governance characteristics, such as ownership structure or
management structure, on a bank's probability of failure” (Berger et al. 2016, 729).
The conditions below being verified in a captured state, the Moldovan banking fraud scandal
represents the first historical of the mass-scale endogenous creation of money for fraudulent
purposes.

Theorem: the mass-scale endogenous creation of money for fraudulent purposes in a captured
State requires that the following conditions be met:
1) Total/opaque control over the bank governance of the lending entities
2) Existence of several controlled lending entities enabling the cross-issuance of collateral
amongst them, and the implementation of a circular bank deposit scheme (Figure 8) in
order to circumvent the capital adequacy and liquidity ratios in vigor.
3) Total/opaque control over the holding company (through a constellation of fictitious
entities, the final beneficiaries of the bank loans).
4) Total/opaque control of the judiciary and the anticorruption institutions that might
otherwise have detected abnormal patterns and conflict of interests in 1) and 2)
5) Total/opaque control over the central bank (or the institution in charge of the regulation of
the banking sector)
6) Total/opaque control over a network of foreign shell companies and accounts opened at
offshore banks with weak regulatory oversight, to which the loans are redirected
immediately after the beneficiaries’ accounts in Moldova have been credited.
Kroll I: Sor took control of the three banks, and inconsiderate huge loans were granted to
entities seemingly under his control. Shor was at both ends of the customer bank/client
relation. Endogenous money theory points to borrower/creditworthiness considerations and
liquidity-to-profitability trade-off; money is created on the by bank credits, but money must
be demanded beforehand in phase with the "needs of trade".
The endogenous creation of bank money for fraudulent purposes is not given sufficient
attention (Pilkington, 2015), because it assumes the simultaneous control of bank governance,
money laundering to swiftly remove the fraudulent funds from the national banking, area and
finally the judicial system as a whole, enabling impunity on the issue of breaches in banking
regulation (liquidity ratios, solvency, conflicts of interest and documentation).

Kroll 2: the first version of the Kroll 2 report, completed in 2017 but kept secret until 2019,
reveals that the Shor Group includes 77 fictitious economic entities documented in Kroll I
(2015) that had laundered money into foreign jurisdictions. Kroll 2 (2017) shows a more
complete list of foreign jurisdictions to which funds have flowed, but the first published
version lacked any reference to VP. However, a new version of Kroll 2 disclosed in July 2019
(Diez 2019), established clearer connections. Within days after the demise of VP, a
Parliamentary committee announced the presentation of a report, based on the findings
contained in Kroll 2 (2017), including the names of the beneficiaries. Chairman Slusari (cited
in infotag, 2019a) already stated that RM had become a regional laundry platform since the
advent of AEI1. The report of the Commission of Inquiry for the elucidation of the
circumstances of the devaluation of the banking system and the investigation of the bank
fraud published in 2019 acknowledged (Parliament of RM 2019) that VP was the main
benefactor.
The fraud was premeditated as early as the beginning of AEI1; the parliament had initiated
legislative change to pave the way for the theft. The report (ipn 2019) revealed that VP was
the main beneficiary through his shell companies. Other beneficiaries include Vlad Filat, Ilan
Șor, Marina Tauber, Reghina Apostolova, Iurie Fotescu, Petru Lucinschi, Gabriel Stati, Olga
Bondarciuc.

Drawing on Berger and Bouwman (2013), one notices the small size of the three Moldovan
banks, and their resulting financial fragility. The fact that they were under-capitalized
weakened their performance, and slashed their probability of survival during what appeared as
a bank crisis caused by an exogenous event triggering systemic risk (176). Marangos (2006,
669) criticizes the neoclassical prescriptions calling for rapid privatization in post-communist
countries. The creditworthiness of bank credit recipients is harder to assess whenever the
latter take the form of a constellation of firms. The common objective for colluding bankers
and managers was to reap the benefits of the most profitable parts of the business while
transferring the losses to the state. It is necessary to move beyond the confines of the banking
system, and include other forms of financing, from endogenous money toward endogenous
finance (Palley 1992, 18) whereby other sources of financing must include issues of new
equity shares financed by hard-to-trace off-shore companies. Pilkington (2015) notes a
parallel between “creative” (non-banking) finance (Bianco and Piacenti, 2013) and the Shor
group’s financial engineering practices.

THE MISSING BILLION

Kroll 2 (2017) provides an account of the criminal investigations that have helped trace back a
substantial share of the missing billion to multiple foreign jurisdictions, including some that
would qualify for regulatory opaque tax havens. Macro-financial accounting holes and legal
uncertainty blur the actual fund flows to ensure stock-flow consistency (Godley 1999; Lavoie
and Godley 2001-02; Lavoie 2017). Put in place in the aftermath of the Asian crisis by
emergent economies so as to avoid speculative attacks on the exchange rate after their
international reserves had fallen below a critical threshold (Erturk, 2001), central bank
reserves have experienced a tremendous process of accumulation over the last two decades
across emerging markets. The optimal reserve level of a country is a complex issue that
depends on a set of interrelated objectives, such as investor confidence, exchange rate regime
protection, the Government’s objectives for the Official Reserves Transaction Balance, the
banking system’s foreign currency demand, or current account financing (Antal and Gereben
2011). Rodrik (2006) estimates the cost of reserves as the spread between the private sector’s
cost of short-term borrowing abroad and the yield the Central Bank earns on its liquid foreign
assets. In 2011, the International Monetary Fund (2015) developed a broad measure of
reserve adequacy by combining four traditional benchmarks into a single composite risk-
weighted metric to account for potential foreign exchange pressure involving short-term debt,
other portfolio liabilities, broad money, and exports. Accordingly, reserves in the range of
100-150 per cent of the metric are adequate for precautionary purposes (18), and most
countries continue to have ample reserves within that range (26). Esser and Vincent (2017,
89) explain that an “over-insured” country holds reserves well in excess of 150 % of the IMF
composite reserve adequacy metric (89). Four years after the revelation of the theft of the
century, the IMF (2019, 5, italics added) noted that “robust private financial inflows 5 […] led
to a moderate buildup of reserves that remain adequate at about 170 per cent of the IMF
composite reserve adequacy metric”. This assessment is somewhat puzzling in the light of the
magnitude of the exogenous shock experienced a few years earlier. The accumulation of
reserves by NBM after April 2015 was more than moderate, and must be investigated. This is
the object of our empirical study presented in Appendix. We grounded our methodology in
the narrative of the banking fraud. After collecting the asset reserves statistics on the NBM
website, with an emphasis on foreign currency reserves and securities, for a period of 172
weeks (between 2014 and 2017), we have identified three sub-periods:

- In yellow: “the calm before the storm”; from 12/09/2014 to 07/11/2014 (10 weeks)
- In red : “in the eye of the cyclone”; from 14/11/2014 to 17/04/2015 (24 weeks)
- In green: “ long and steady recovery”; from 24/04/2015 to 01/09/2017 (138 weeks)

The appendix contains additional charts on key macro-indicators (interest rate, inflation,
exchange rate etc.). Our objective is to identify distinguishable patterns that shed light on the
macroeconomic impact of the 2014 banking fraud.

During the ten weeks preceding the outbreak of the scandal in November 2014, NBM’s total
securities holdings and foreign currency reserves were reduced by respectively 3.2%
(averaging $5.5 million per week) and 1.4% (averaging $4.1 million per week). Starting from
the first week of the crisis (Figure 7) until the following spring (twenty four-week period),
there was a steep and gradual depletion of reserves (NBM’s total securities holdings and
foreign currency reserves were reduced by respectively 32.1% (averaging $342.9 million per
week) and 28.6% (averaging $198.5 million per week).The outstanding amount of reserves,
which stood at £2.57 billion at the beginning of the red period, reached a bottom low on 17
April 2015 at £1.74 billion. This marks the end of the red period; it will be followed by a 138-
week period of growth and (over)accumulation of reserves until September 2017. NBM
avoided a total collapse of the banking sector by bailing out the creditors of the three banks,
and injecting substantial emergency liquidities obtained from the proceeds of the sale of
nearly a third of the country’s reserves in six months. It must be noted that this emergency
rescue operation was nothing less than a QE policy. Although the printing press is a
5
Personal remittances received from abroad accounted for 16.1% of GDP in 2018
See https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=MD
misleading metaphor, the central bank in charge of the regulatory overhaul of the banking
sector factually bailed itself out, amounting to a bookkeeping entry in the bank balance sheet
of NBM (the T account mirroring the ‘rest of world’), without any consequence for the budget
of the State.

CENTRAL BANK (NBM) REST OF THE WORLD

Assets Liabilities Assets Liabilities

14.11.2014 $2.57 billion Capital as on 14.11.2014 as on 14.11.2014

= ∑NBM Reserves Money aggregates

Reserve asset sales

17.04.2015 $1.74 (2.57–0.82) billion Capital +$822 207.04 (assets)

= ∑NBM Reserves Money aggregates -$822 207.04 (liquidities)

Proceeds of the reserve

asset sales (emergency Equivalent new stock of central
liquidities available for bank money= additional liability
bailing out the creditors towards the economy (i.e. QE)
impacted by the fraud)

The NBM reserve asset sale

Inflation peaked during the recovery "green" period. It remained subdued throughout 2014,
but increased rapidly throughout 2015, thereby raising fears of a hyperinflationary scenario.
In early 2016, inflation was contained, and experienced a sharp decline until the end of the
year when it eventually approached the 2% level.

Interest rates skyrocketed throughout 2015. They were substantially lowered starting from
2016, mirroring the sharp reduction of inflation. Monetary policy tightened and recalibrated
supervisory policies starting from 2015. The Moldovan leu depreciated rapidly as the scandal
broke out. The currency downfall was nevertheless contained by NBM in January 2016, and
the exchange rate eventually stabilized around its long-term moving average (18.4 lei/$).
There was a massive increase in external debt in 2015 in the aftermath of the fraud. Starting in
2016, external debt initiated a downward trend. This is consistent with an "ebb and flow"
hypothesis of the stolen billion that transited through offshore jurisdictions, before returning
to RM. This scenario is consistent with the socio-politics of the scandal. By January 2016,
international financial markets had been convinced by the structural reforms and the
orientation of austere monetary policy, which would help avoid a Zimbabwe or Venezuela-
like hyperinflationary scenario. The fast accumulation of central asset reserves from April
2015 onwards, bears testimony to the unexploited fiscal space that could have been
theoretically freed up unconstrained by NBM. Within a captured state, even more pernicious
Machiavellian policy options than the standard shock therapy model are available to the
oligarch(s).

Several pillars of central bank independence were repeatedly violated during VP’s reign:
firstly, personal independence and the impossibility for politicians to put pressure on central
banks by influencing the appointment or dismissal of the governor or Board members (Bini
Smaghi 2008, 450), a thesis supported by the recent arrest of the former NBM Governor at the
time of the bank fraud (Necsutu, 2020). Secondly, the bailout of the creditors of the state-
controlled banks Banca de Economii, Unibank and Banca Socială, through the massive asset
reserve sales, is a violation of the financial independence principle that prohibits the central
bank from funding the public sector and state-affiliated institutions (Smaghi, 2008: 452). De
facto central bank independence is not a credible policy objective in a captured state.
Flabbergasting was the decision to issue emergency sovereign loans in September 2016,
amounting to 13.5 billion lei (i.e. a sum matching the missing billion partly funded by the
asset reserves sales), imposing a new debt burden over the next 25 years. With the interest
accrued, the State will have to repay in fine around 21 billion lei to its creditors (Călugăreanu,
2016). It is worth noting the double standards applied in setting the interest rates by the
government and the NBM. The cost of the resources for the beneficiaries of the fraudulent
loans amounted to merely 0.1% in 2014, while the citizens will pay 5% per annum for 25
years, namely a fiftyfold difference in the cost of resources. Stunningly, in the light of the
formal (yet repeatedly violated) NBM independence, and the inability to understand MMT’s
founding principles, by the year 2041, the infamous Moldovan billion will have been “stolen”
twice (the second time with interest), with the active complicity, and the involvement of the
captured state.
 CENTRAL BANK (NBM) GOVERNMENT

ASSETS LIABILITIES ASSETS LIABILITIES

Additional government debt: +
$1.74 (2.57–0.82) bil Capital +$1 bn (borrowed liquidities) $1 bn (to be converted in lei at
the current exchange rate). 5%
annual rate (maturity = 25
years)
= ∑NBM Reserves Money aggregates (in the name of the stolen billion!)

Proceeds of the reserve Equivalent new stock of central

asset sales (emergency bank money= additional liability
liquidities available for towards the economy (i.e. QE)
bailing out the creditors
impacted by the fraud)

How Moldova’s government has earned $1 bn by invoking the bank fraud

Fiscal spending is not financed by ante taxes, which “cannot be a source of revenue in the
consolidated balance sheet. They do not add monetary assets, they reduce liabilities”
(Tymoigne and Wray, 2013, 15). Rather, income flows back ex post in the form of taxes to
the government. The freeing-up of massive fiscal space in Europe’s poorest country raises
some doubts. By pretexting that planned spending will help pay back an odious debt that no
longer exists, the macroeconomic closure of the circuit in the interest of the population is not
warranted. Chicu (ipn 2020, our translation, italics added) made a stunning confession:
We are not a state that issues currency. We do not issue euros and dollars to launch on the market as much as we
want because some will change them based on the rate we set. If we launch massively lei, this means inflation,
and pensioners from 1500-2000 lei will not be able to buy bread. […] There's no point in printing money.

The inevitable depletion of state budget resources is a consequence of the self-imposed

independence of NMB rather than RM’s limited room for manoeuver to issue bonds in euros
or dollars on international bond markets.
CONCLUDING REMARKS

We have accounted for a ten-year power cycle in RM, which allowed a single oligarch to
derive tremendous illegal gains from his control of the State apparatus, the energy and the
banking sectors, thank to complex transnational financial engineering schemes.

We propounded a novel theorem, featuring six conditions, to account for money creation in an
oligarchic country, thereby shedding light on the endogenous creation of money for fraudulent
purposes. Werner (2014) shows that banks individually create money out of thin air. We
added some strong restrictions on any mass-scale capability: substantial opacity of state
institutions, bank governance control of the lending entities, informal control over a
constellation of fictitious borrowing entities, and de facto control over the central bank, the
judiciary and the anti-corruption bodies. The fraud was the outcome of the cross-issuance of
collateral amongst the borrowing entities, and the implementation of an ingenious circular
bank deposit scheme. The appropriation of funds was contingent on transnational financial
interlinkages between the borrowing entities and poorly transparent offshore foreign
jurisdictions.

Finally, the evolution of central bank reserves between 2014 and 2017 clearly shows that the
initial macroeconomic shock, namely the banking fraud, was absorbed by the economy at the
expense of the population. Emergency asset reserve sales funded the losses of the banking
sector. In a country with a formally independent central bank, the Parliament cannot legally
bail out bloodless banks, and ask the central bank to “make the payment by adding to the
deficit” (Kelton cited in Albaladejo 2020).

A harmless solution in 2014 would have consisted of a government’s overdraft at NMB (Bank
of England 2020), extended to a temporary line of credit, without imposing a shock therapy to
the population. But the captured state added insult to injury in 2016, by issuing an equivalent
amount of public debt aimed at paying back, with a 5% rate over 25 years, an odious debt,
which had already been partly extinguished by massive central bank asset reserve sales
between November 2014 and April 2015.
REFERENCES

Albaladejo, A. (2020) “We Must Spend Our Way to Recovery, Says Economist.” LA Progressive, 3 April,
https://www.laprogressive.com/spend-our-way-to-recovery/

Anderson, J. Hellman, G. Jones, B. Moore, H. Muller, S. Pradhan, R. Ryterman and M. Sutch (2000)
Anticorruption in transition: a contribution to the policy debate (English). Washington, D.C.: The World Bank.
http://documents.worldbank.org/curated/en/825161468029662026/Anticorruption-in-transition-a-contribution-
to-the-policy-debate

Antal, J., and Á. Gereben. (2011) “Foreign reserve strategies for emerging economies-before and after the
crisis.” MNB Bulletin, 6(1), 7-19.

Bank of England (2020) HM Treasury and Bank of England announce temporary extension to Ways and Means
facility, 9 April, https://www.bankofengland.co.uk/news/2020/april/hmt-and-boe-announce-temporary-
extension-to-ways-and-means-facility

Baslé, M. (1999) Mélanges Jacques LE BOURVA. Ouvrage collectif, June, online edition, http://perso.univ-
rennes1.fr/maurice.basle/Publications/1999/06melanges_lebourva1999.pdf

Berger, A., B. Imbierowicz, and C Rauch. (2016) “The roles of corporate governance in bank failures during the
recent financial crisis.” Journal of Money, Credit and Banking, 48(4), 729-770.

Bianco, A. and P. Piacentini. (2013) The sustainability of a creative-finance-led economy creative finance,
FESSUD, Working Papers Series N°7

Bini Smaghi, L. (2008) “Central bank independence in the EU: from theory to practice.” European Law Journal,
14(4), 446-460.

Boonstra, J. (2011) “Moldova: an EU success story?” FRIDE Policy Brief no. 92

Botan, I. (2003), ‘“Kozak plan” Implications, e-democracy’, November 30, http://www.e-

democracy.md/en/monitoring/politics/comments/200312031/

Brubaker, R. (1996) Nationalism Reframed: Nationhood and the National Question in the New Europe.
Cambridge: Cambridge University Press.

Całus, K. (2015) “A captured state? Republica Moldova’s uncertain prospects for modernisation, OSW
Commentary.” 22 April, http://www.osw.waw.pl/en/publikacje/osw-commentary/2015-04-22/appropriated-state-
RMs-uncertain-prospects-modernisation

Całus, K. (2016) “The unfinished state. 25 years of independent Moldova.” OSW Studies, No 59, December

Całus, K. and W. Konończuk, (2017) “Explaining Oligarchic Moldova”, Carnegie Europe, May,
https://carnegieeurope.eu/strategiceurope/69856?lang=en4

Carasciuc, L. (2001) Corruption and Quality of Governance. Center for Strategic Studies and Reforms,
Transparency International.

Chayes, S. (2016) The Structure of Corruption in Moldova.

http://carnegieendowment.org/files/10_Moldova_Full_Web1.pdf

Călugăreanu, V. (2016) “Guvernul Filip își înrobește cetățenii - a pus miliardul furat pe spatele amărâților”,
Deutsche Welle, 27 September, https://www.dw.com/ro/guvernul-filip-%C3%AE%C8%99i-%C3%AEnrobe
%C8%99te-cet%C4%83%C8%9Benii-a-pus-miliardul-furat-pe-spatele-am%C4%83r%C3%A2%C8%9Bilor/a-
35902157

CIA (2017) The World Factbook - Central Intelligence Agency. https://www.cia.gov/library/publications/the-

worldfactbook/geos/md.html
Ciubotaru, A. (ed.) (2010) Twitter Revolution: Episode One, Moldova, Chişinău, Editura Arc

Cole, R. and L.White. (2012) “Déjà Vu all over again: the causes of US commercial bank failures this time
around,” Journal of Financial Services Research, 42(1): 5–29.

Curtea Constituţională a Republicii Moldova . 2019. Menţinerea în funcţie a Prim-ministrului unui Guvern
demis pentru motive de corupţie este neconstituţională (Sesizarea nr. 10a/2013),
http://constcourt.md/libview.php?l=ro&id=428&idc=7&t=/Prezentare-generala/Serviciul-de-
presa/Noutati/Mentinerea-in-functie-a-Prim-ministrului-unui-Guvern-demis-pentru-motive-de-coruptie-este-
neconstitutionala/

Diez. (2019) “a publicat niște pagini nepublicate din raportul Kroll 2. Apare numele lui Plahotniuc,” 11 July,
https://diez.md/2019/07/11/foto-video-renato-usatii-publicat-niste-pagini-nepublicate-din-raportul-kroll-2-apare-
numele-lui-plahotniuc/

Dymski, G. (1988). “A Keynesian theory of bank behavior.” Journal of Post Keynesian Economics, 10 (4) : 499-
526.

Drew, J. (2015) “If we had not left Moldova five years ago, we would be in jail and probably not alive today’
eureporter, 23 November, https://www.eureporter.co/world/2015/11/23/if-we-had-not-left-moldova-five-years-
ago-we-would-be-in-jail-and-probably-not-alive-today/

Erturk, K. (2001) “Overcapacity and the East Asian crisis.” Journal of Post Keynesian Economics, 24(2), 253-
275.

Essers, D. and E. Vincent (2017) “The global financial safety net: In need of repair?” Economic Review, (ii), 87-
112.

Espahbodi, P. (1991) “Identification of problem banks and binary choice models.” Journal of Banking &
Finance, 15 (1): 53–71

Eurasia Daily Monitor (2019) ‘Moldova’s “Hybrid” Governing Coalition: Physiognomy, Goals, Prospects’ (Part
Two), 16 (8), Issue: 115, August

European Court of Auditors (2016) Special report No 13/2016: EU assistance for strengthening the public
administration in Moldova, 1 September, https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=37235

European Investment Bank (2014) Private Sector Financing and the role of Risk-bearing Instruments - Synthesis
Report, 26 March, https://www.eib.org/fr/publications/econ-synthesis-report-psf-and-the-role-of-rbi

Galí, J. (2020) “Helicopter money: The time is now.” 17 March, Voxeu, https://voxeu.org/article/helicopter-
money-time-now

Gazette of the Republic of Moldova no.68-76/227 of 02.03.2018,

https://ancd.gov.md/sites/default/files/document/attachments/Traducere%20NARD.pdf

Gogu, N. (2016) “Who really rules the airwaves in Moldova?”, 26 March https://www.opendemocracy.net/od-
russia/nadine-gogu/who-really-rules-airwaves-in-moldova

Hellman, J. and D. Kaufmann. (2001) “Confronting the challenge of state capture in transition economies.”
Finance and Development-A Quarterly Magazine of the IMF, 38(3), September

Helwege, J. (1996) “Determinants of savings and loan failures: estimates of a time-varying proportional hazard
function.” Journal of Financial Services Research, 10 (4): 373–92

Hofstede, G. (2001) Culture's Consequences: Comparing Values, Behaviors, Institutions, and Organizations
Across Nations, 2nd ed. Sage, Thousand Oaks, CA.

Infotag.md. (2019a) ‘ad hoc commission to publish report on bank fraud investigation in September.’ 11 June,
http://www.infotag.md/finances-en/276461/

Infotag.md. (2019b) ‘Most citizens regard Vladimir Plahotniuc as responsible for political crisis in Moldova.’ 25
June, http://www.infotag.md/reports-en/777566/
Institutul de Politici Publice, Barometrul Opiniei Publice, Noiembrie (2015) [Barometer of Public Opinion,
Republic of Moldova, April], http://www.ipp.md/libview.php?l=ro&idc=156&id=773&parent=0.

Institute for Public Policy (2016) “Barometrul Opiniei Publice, Aprilie 2016” [Barometer of Public Opinion,
Republic of Moldova, April], http://www.ipp.md/libview.php?l=ro&idc=156&id=773&parent=0

International Monetary Fund. (2015) Assessing Reserve Adequacy – Specific Proposals, April, International
Monetary Fund Washington, D.C. http://www. imf. org/external/np/pp/eng/2014/121914. pdf.

International Monetary Fund (2019) Republic of Moldova : Fourth and Fifth Reviews Under the Extended Credit
Facility and Extended Fund Facility Arrangements, Completion of the Inflation Consultation, and Request for
Extension of the Arrangements and Rephasing of Access-Press Release; Staff Report; and Statement by the
Executive Director for the Republic of Moldova, Country Report No. 19/305, 25 September,
https://www.imf.org/en/Publications/CR/Issues/2019/09/25/Republic-of-Moldova-Fourth-and-Fifth-Reviews-
Under-the-Extended-Credit-Facility-and-Extended-48706

ipn. (2015) Prosecutor general is controlled by Vlad Plahotniuc, 4 December, https://www.ipn.md/en/ion-diacov-

prosecutor-general-is-controlled-by-vlad-plahotniuc-7965_1024088.html

ipn. (2019) “Alexandru Slusari: In Kroll report, Plahotniuc appears as beneficiary of bank fraud.” 20 September,
https://www.ipn.md/en/alexandru-slusari-in-kroll-report-plahotniuc-appears-as-beneficiary-of-
7965_1068270.html

ipn. (2020) “Ion Chicu: Veniturile la bugetul de stat au scăzut în jumătate, 16 April,” https://www.ipn.md/ro/ion-
chicu-veniturile-la-bugetul-de-stat-au-scazut-7965_1072923.html

Jagland, T. (2015) “Bring Moldova Back From the Brink.” New York Times, 10 August,
https://www.nytimes.com/2015/08/11/opinion/bring-moldova-back-from-the-brink.html?_r=1

Jakab, Z. and M. Kumhof (2015) “Banks Are Not Intermediaries of Loanable Funds—and Why This Matters,”
Bank of England Working Paper, No. 529.

Jakab, Z., and M. Kumhof (2019) Banks are not intermediaries of loanable funds—facts, theory and evidence.
Staff Working Paper No. 761

Jurnal.md. (2015) “Epopeea oligarhului care se visează preşedinte.” 6 January,

http://jurnal.md/ro/politic/2015/1/6/epopeea-oligarhului-care-se-viseaza-presedinte/

King, M. (1994) The transmission mechanism of monetary policy. Bank of England, Quarterly Bulletin, August.

Konończuk, W. D. Cenusa K. Kakachia. (2018) “Oligarchs in. Ukraine, Moldova and Georgia as key obstacles
to reforms?, The struggle for good governance in Eastern Europe / edited by Michael Emerson, Denis Cenuşă,
Tamara Kovziridze, Veronika Movchan ; - Brussels : Centre for European Policy Studies (CEPS); London:
Rowman & Littlefield International

Korop, E. (2004) "Novoe pravitel'stvo poidet starim kursom." lzvestiia, May 13

Kostanyan, H. (2016) Why Moldova’s European integration is failing, CEPS Commentary, 3 March,
https://www.ceps.eu/system/files/EU-Moldova%20formatted.pdf

Kozak, D. (2019) la Chișinău: Alegerile anticipate sunt inevitabile, chiar dacă va fi formată o coaliție, 3 June,
https://radioChișinău.md/dmitri-kozak-la-Chișinău-alegerile-anticipate-sunt-inevitabile-chiar-daca-va-fi-formata-
o-coalitie---88717.html

Kroll Report. (2015) Final Report – Prepared for The National Bank of Moldova, 2 April, London.

Kroll Report 2. (2017) Project Tenor II Summary Report -– Prepared for The National Bank of Moldova, 20
December, London

Le Bourva, J. (1959) "La théorie de l'inflation le rapport des experts et l'operation de decembre 1958. "  Revue
économique, 10(5), 713-754.
Lee, G. (2008) “Rule-based and case-based reasoning approach for internal audit of bank.” Knowledge-Based
Systems, 21(2): 140-147.

Levcenco, M. (2016) “Vlad Plahotniuc: Moldova’s man in the shadows, openDemocracy.” 25 February,
https://www.opendemocracy.net/en/odr/vlad-plahotniuc-moldova-s-man-in-shadows/

Levi, M., (2014) Regulating fraud revisited. In Invisible Crimes and Social Harms. Palgrave Macmillan UK,
pp.221-243

Lipman, I. A., Warren, Gorham and Lamont, Inc, & United States of America. (1977). Combatting Internal Bank
Fraud. Bankers Magazine, 160, 71-74.

Marangos, J. (2006) “Was there an optimum model of transition?” Global Business and Economics Review, 8(1-
2): 133-160.

Martin, D. (1977) “Early warning of bank failure: a logit regression approach.” Journal of Banking & Finance,
Vol. 1, No. 3, pp.249–276

McLeay, M., A. Radia, and R. Thomas (2014) Money in the modern economy: an introduction. Bank of England
Quarterly Bulletin, Q1.

Moore, B. J. (1997). Reconciliation of the supply and demand for endogenous money. Journal of Post
Keynesian Economics 19(3), 423-428.

Morlino, L. (2008) Hybrid regimes or regimes in transition. Working Paper 70.

NATO Strategic Communications Centre of Excellence, Riga, July 2017, 2nd edition
https://www.stratcomcoe.org/download/file/fid/75574

Necsutu, M. (2020) Moldova Detains National Bank Chiefs Over ‘Grand Theft’, BalkanInsight, 5 March,
https://balkaninsight.com/2020/03/05/moldova-detains-national-bank-chiefs-over-grand-theft

Newsmaker.md. (2017). “Барометр общественного мнения: В парламент проходят только две партии —
ПСРМ и PAS.” 27 April, http://newsmaker.md/rus/novosti/barometr-obshchestvennogo-mneniya-v-parlament-
prohodyat-tolko-dve-partii-psrm-i-pa-31064

Novokmet, F., T. Piketty, and G. Zucman. (2018) From Soviets to oligarchs: inequality and property in Russia
1905-2016. The Journal of Economic Inequality, 16(2), 189-223.

Palley, T. (1992) “Beyond Endogenous Money Toward Endogenous Finance.” Working Paper [online]
http://www.thomaspalley.com/docs/articles/macro_theory/endogenous_finance.pdf

Payne, D. P., and C. Marsh . (2009) “Sergei Bulgakov’s ‘Sophic’Economy: An Eastern Orthodox Perspective on
Christian Economics.” Faith & Economics, 53, 35-51.

Pilkington, M. (2015) “Where did the money go? Endogenous money creation for international fraudulent
purposes: the case of the 2015 Moldovan banking scandal.” International Journal of Pluralism and Economics
Education, 6(3), 251-71.

Pyman, M., T. Bock, E de la Blache, S. Mustafa, and D. Zaum. (2014) Corruption as a threat to stability and
peace. Berlin: Transparency International

Rinnert, D. (2013) “The Republic of Moldova in the Eastern partnership.” Berlin: Friedrich-Ebert-Stiftung.

Rodrik, D. (2006) “The social cost of foreign exchange reserves.” International Economic Journal, 20(3), 253-
266.

Romanovski, D. (2013) “Moldova’s Gray Cardinal.” Transitions online, 11 July,

https://www.tol.org/client/article/23859-moldovas-gray-cardinal.html?print

Ryan-Collins, J., T. Greenham, R. Werne, and A. Jackson. (2012) Where Does Money Come From?: A Guide to
the UK Monetary & Banking System (2nd ed.).
Sanduta, I. and V. Mosneag. (2013) “Vânătoare de oameni în Pădurea Domnească,” ziarul de garda, 10 January,
https://www.zdg.md/editia-print/investigatii/vanatoare-de-oameni-in-padurea-domneasca

Tanas, A. (2017) “Moldova says ready to start recovering stolen billion.” Reuters, 13 April,
https://www.reuters.com/article/moldova-banking/moldova-says-ready-to-start-recovering-stolen-billion-
idUSL8N1HL3U1

The Jamestown Foundation. (1999) Moldova Lays Down The Red Carpet for the Communist Party, 5 (3) n° 224
3 December, https://jamestown.org/program/moldova-lays-down-the-red-carpet-for-the-communist-party/

Tishkov, V. (2000) “Forget the 'nation': post-nationalist understanding of nationalism.” Ethnic and Racial
Studies 23 (4): 625–50.

Tooke, T. (1844) An Inquiry into the Currency Principle, London: Longman, Brown, Green and Longmans.

Topa, V. (2018a) “Brief Note on Raider Attacks.” http://vioreltopa.blogspot.com/2018/03/brief-note-on-raider-

attacks.html

Topa, V. (2018b) “Diagram - Heist of the century in Moldova.” Blogpost, March 11,
http://vioreltopa.blogspot.com/2018/03/diagram-heist-of-century-in-moldova.html

Transparency International (2018) Corruption Perceptions Index 2018,

https://www.transparency.org/cpi2019#report

Tymoigne, E., and L. R Wray. (2013) “Modern money theory 101: A reply to critics.” Levy Economics Institute,
Working Papers Series, (778)

U4 Anti-corruption Resource Centre (2017) Moldova: Overview of corruption and anti-corruption with a focus
on the healthcare and procurement sectors, U4 Expert Answer, Transparency International and CMI, 27
September, https://knowledgehub.transparency.org/helpdesk/moldova-overview-of-corruption-and-anti-
corruption-with-a-focus-on-the-healthcare-and-procurement-sectors

Ursu, V. (2016) “Kalman Mizsei: Este o situaţie foarte complicată, aşa cum e totul în Moldova?”, Radio Free
Europe/Radio Liberty?, 15 november, https://moldova.europalibera.org/a/28119394.html

Werner, R. (2014) “Can banks individually create money out of nothing?—The theories and the empirical
evidence.” International Review of Financial Analysis, 36, 1-19.

Wicksell, K. (1906) Lectures on Political Economy. Vol. II: Money. Translated from the original Swedish by E.
Classen, (ed.) L. Robbins, London: Routledge, 1935

Wiszniowski, E. (2011) “Internal bank fraud as a category of operational risk.” Argumenta Oeconomica, 27 (2):
137-71, https://www.scopus.com/inward/record.uri?eid=2-
s2.080055045155&partnerID=40&md5=5b84494eac23d99c56ab649d5158aba2

Wolfson, M. (1996) “A Post Keynesian theory of credit rationing.” Journal of Post Keynesian Economics, 18(3),
443-70.

World Bank (2012) World development indicators 2012. World development indicators. Washington, DC:
World Bank, http://documents.worldbank.org/curated/en/553131468163740875/World-development-indicators-
2012

World Bank (2017) Moldova - Country Partnership Framework for the period FY18-21 (English). Washington,
D.C.: World Bank Group. http://documents.worldbank.org/curated/en/604221499282920085/Moldova-Country-
Partnership-Framework-for-the-period-FY18-21

Wray, R. (2012) Modern Money Theory; A Primer on Macroeconomics for Sovereign Monetary Systems. New
York: Palgrave MacMillan.