None of the EU countries cut public sector salaries by 25 pc, but then again, they didn’t give 120 pc raises either, Mugur Iasarescu says.
Romania shouldn’t enter into yet another agreement with the International Monetary Fund (IMF), once the current one comes to its conclusion in 2013, since it would not send the right signal to markets, and the pacts with the European Union could provide the new anchor instead, National Bank of Romania (BNR) Governor Mugur Isarescu said yesterday, in his opening speech for the conference “Romania, where to? European Assessments and the Implications on Romania”, an event held at the Central Bank. “I’m not on the side of those who won’t face up to the task when the push comes to shove. They head into a totally unknown direction, you don’t know how they will go about it, they attack the euro zone, the EU too. I simply won’t believe this country has such a monumental bad luck each time it makes it into a club,” Isarescu said.
Also, the central bank governor opposes an abrupt cut in public debt, even if Romania should concern itself with market, economic discipline and its going out of the ‘90s situation. “There is a need for a model for several generations, which supposes sustainability as well. To give economic growth enough room to produce the necessary resources and to use the resource surplus to try and pay back your debt,” Isarescu also said.
For his part, Mihai Tanasescu, Romania’s representative to the IMF, said that public debt doesn’t put pressure on economy and payable as well.
Isarescu also said that, while Romania was the only EU country to have cut public sector salaries by 25 pc, none of the EU members made 120 pc pay increases in atector either. The BNR governor outlined that Romania will have to steadfastly access capital markets to draw funds in credible fashion and to avoid the moments when “merciless” markets execute those “at the end of their tether”. He also said world economy is stagnating and risks have increased a great deal.
Pauna, WB: EU funds, a guise trying to fake prosperity
The states most affected by crisis have absorbed EU funds in the tens of billions of euro, which created the illusion of prosperity and allowed for severely indebted budgets, masking structural imbalances and suboptimal allocation of 35-50 pc GDP, Catalin Pauna, senior economist, Bucharest Office, World Bank, told that same seminar. “We wonder whether the EU funds had not been but a guise trying to fake prosperity and to hide some imbalances,” Pauna said, who drew attention to those imbalances restricting market operability and private investments, since there could not be such thing as functional markets without private investments, nor private investments without structural reforms.
The World Bank economist is of the view that public spending too should take into account the economic laws, which are natural laws. He said that in building a motorway, for example, a public investment, the generated yield should be examined, since such projects generate some major recurring spending.
As for the European fiscal pact, Pauna pleads in favour of moving away from these ad-hoc adjustments, from spending cuts that would be hard to justify from an economic point of view.
The BNR governor however considers that the lost opportunity can also be regarded as a future opportunity, and the process of resuming economic growth and disinflation now mostly depends on how Romania will be able to start absorbing European funds.
Van Groningen, worried about the impact of banking regulations
In his turn, Steven van Groningen, the president of Raiffeisen Bank Romania declared himself “worried” by the impact which the acting regulations can have upon the Romanian banking system, according to HotNews.ro. “It is very important to find a balance between regulations and the impact they will have, if we want cheaper loans. I hope that the banking system will be able to sustain the economic growth Romania needs at this moment. The important thing is economic growth. This will get us out of the situation we experience today,” Groningen mentioned. According to the bank official, enforcing new regulations is a welcome process, but these, too, imply risks of their own.
Also, given the still-slack financing demand on the domestic market, Steven van Groningen believes that the Austrian Central bank regulation will bear a small impact on states in the region, as the potential effect will be a great deal stronger resulting from the parent bank obligation to meet an adequate capital ranking rate of 9 pc by mid-year.
Tanasescu (IMF): The Romanian banking system is sound and well capitalized
The Romanian banking system is sound, well capitalised, and banks have very good relations with the Central Bank, Romania’s representative to the International Monetary Fund, Mihai Tansescu said yesterday, in the same seminar, quoted by capital.ro. Even the current constraints imposed to the European banking system may gradually lead to economic growth, he added.