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March 23, 2023

President: Romania enters recession

Traian Basescu criticised, for the first time, both the Central Bank for its ‘unjustified optimism’ and several ministers, specifying that in time of crisis he continues to be their strong partner.

Romania shall enter economic recession at the end of the second quarter. The announcement was made yesterday by President Traian Basescu, during an extraordinary government meeting where he showed up without previous notice. The president said that the current state of facts in economy does not justify the optimism of the National Bank of Romania (BNR). He explained that the Gross Domestic Product is decreasing for the second quarter consecutively, which means that the country enters recession.

“Starting from the prerequisite that we are partners at the time of crisis, you should know that I strongly back the government until the crisis is over, hoping it is overcome in due time. My opinion is, although I do not have clear facts, that the optimism shown by BNR in April is not reflected in the future economic developments and we shall witness decrease in the second quarter also, which means entry into recession, by all norms”, Basescu told the ministers. He indicated that economy appreciation could take place only in Q3 or Q4 of the year. The head of state said that it was difficult to tell when Romania shall have a production in agriculture equal to the one in 2008.

The reaction of BNR came from the advisor of Governor Mugur Isarescu, Adrian Vasilescu, who said that the Central bank had a scenario which included the decrease of the economy in the first quarter, but hopes are related to the second part of the year, and the concern of President Basescu was natural because the Government had to announce the recession.

“We had a first quarter with a negative growth rate, and on June 30, a second quarter ends, with a negative rate also, and practically, the Government shall have to officially announce recession. BNR never had a different scenario for this first half of the year. The hopes were related to what would happen in the second semester, and, at this moment, there are still chances to end the year at 0.1 – 0.2 per cent growth”, Vasilescu explained.

Banks’ compulsory minimal reserves at BNR to decrease

BNR has a reserve close to EUR 12 bln. and it has RON equivalent to EUR 6 bln., which is the money of the commercial banks, being obliged to preserve a reserve at only 2 per cent for Romania to join the EUR zone in 2014, Basescu said.

He warned that BNR had to be predictable, namely it has to engage the banks into talks related to the reduction of BNR reserve, namely the money which are now in BNR reserves. The Central bank committed to gradually reduce the compulsory minimal reserves and it released, in May, EUR 1 bln., which shall be followed by other relaxations, but it would be a mistake to produce a “wave to flood the commercial banks”, as Vasilescu said in his turn.

Basescu asks for austerity, less for militaries

President Basescu warned the Ministers that they were running the risks of not having funds for salaries if they rely on the fact that during the presidential campaign, they can use the money from the IMF loan, which requires a negative reappraisal in August – September. Basescu recommended Ministry of Finances to restructure the public debt and to switch to a medium and long term debt, by “absorbing the EUR surplus” in the banking market, considering that this will stimulate a rapid drop in interests. The head of state also asked FinMin, Gheorghe Pogea, to secure a faster pace for the VAT compensation procedures. In spite of the fact that Basescu asked the Ministers to be careful as to how the funds of the Ministries are spent, he expressed the wish for Ministry of Finances to analyze the option as, starting in July, militaries shall receive the due bonuses. He pleaded for the decision saying that “militaries are the only structure who cannot go on strike, cannot say anything. It is the silent structure which must be silent and bear with the situation, but we do not have the right to think humanly”.

During a visit to Romanian troops in Iraq and Afghanistan, just before the EP election, the president promised that soldiers would receive all due bonuses. His visit gave rise to speculation that he was in fact campaigning for the Democrat – Liberal Party or his daughter Elena Basescu, in the race for the European Parliament. As daily ‘Jurnalul National” notes in its Saturday edition, Elena Basescu got the highest number of votes in Iraq, while in Afghanistan, she came second after PDL.

Education Minister, criticized

The toughest critics were against Education Minister, Ecaterina Andronescu, to whom the President drew the attention on the disastrous situation in education and he asked for the adaptation of the curricula to the market requirements. He also asked Ecaterina Andronescu to leave sport within the curricula.

Basescu told Minister of Regional Development and Housing, Vasile Blaga, in relation to the thermic isolation program of houses, that his was an example of an investment for which there are no funds. Public investments in economy in Q1 are lower compared to the amounts earmarked last year, since the funds for various projects were budgeted but the financial resources are not available in the budget, according to President Traian Basescu. According to Realitatea TV, Traian Basescu had comments related to Minister of Internal Affairs, Dan Nica, as well, whom he asked to prevent the multiple votes, as well related to Cristian Diaconescu, Minister of Foreign Affairs.


PSD Bucharest leader, Marian Vanghelie, had a tough reaction. Basescu “came to put Romania’s Government into a corner, which is not normal. He said something different one month ago. Today, he tells us that we enter recession. He should not tell this now, during the government meeting, with the whole mass media present’, Vanghelie said, cited by Realitatea TV.

The leader of SedLex, Vasile Marica, contradicts the head of state. “We have been in recession for two months, an economic crisis is always followed by a strong recession”. Dan Radu Rusanu, PNL vice president, believes that “banks are commercial companies and one cannot ask a business, by administrative tools, to reduce interests”.

Olguta Vasilescu, PSD Senator, considers that the presence of the head of state in the government meeting was not justified. “The president presents information to the Government which he has from the officials in the government. I am confident that the information he came with he had from Mr. Boc. I do not understand why he comes and why he speaks about raises in case of civil servants, considering that he has a Minister, former advisor, who runs the Army and who had to cope with a negative reappraisal, one of the highest”.

In his turn, Health Minister, Ion Bazac, said, in a press conference, that Romania could officially be in recession after the evaluation to be conducted by IMF at the end of June – early July, considering that the evaluation made by President Basescu was an accurate one.

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