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March 21, 2023

First figures of financial gridlock: over EUR 19 bln

The effects of the crisis have been tallied by the Finance Ministry for the first time. The companies’ arrears climbed up to EUR 19 bln and the net losses reached EUR 11.6 bln in 2008, registering an upward trend towards the end of that year, ‘Capital’ magazine informs. The companies’ arrears (both the arrears between companies but also towards the national budget and the banks), the companies’ losses and the domains that are worst-hit by the economic gridlock are analyzed by the Ministry of Public Finances and the Prognosis Commission in an internal document that centralizes the balance sheets at the end of last year however without taking into account the state’s arrears toward the private environment.

The conclusion is that the financial flows most affected by the crisis were the inter-company flows because the companies were no longer paid and they no longer paid their debts towards employees or their dividends. Of the RON 70.4 bln (EUR 19 bln at the average exchange rate in 2008), the inter-company arrears represented 79.6 per cent and the ones towards the general consolidated budget 18.5 per cent. ‘The expenditures are high because we did not want to sack people and because of that we ended up accumulating debt towards the state,’ Ioan Olaru, owner of the Oligopol Group, stated.

The inter-company crediting, which is free and highly risky, the insolvability of the borrowers (a fact that led to the funnelling of resources towards companies with unprofitable activities) and finally the postponement of payments are among the causes behind the financial gridlock. The highest losses are registered in the economic sectors that register a high volume of arrears. The most profitable domains last year proved to be the judicial and accounting activities. Of the less than 10,000 companies engaged in those activities, 74 per cent posted profits at the end of the year. Likewise, 71 per cent of the 17,000 architectural and engineering companies registered profits.

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