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April 20, 2021

FinMin Citu: No need for Romania to resort to international markets, it has managed to finance its general Gov’t deficit

Romania will end 2020 on a general government deficit lower than other countries in the European Union and will be the country to avoid technical recession, Finance Minister Florin Citu said on Wednesday evening, adding that currently he does not see the need for Romania to resort to international markets because it has managed to finance its general government deficit.

“The European Union has now an average deficit of 14%. Hungary, in the middle of the year, has a deficit of 6%, we have 4.44%. We started this period with a huge handicap because we had a deficit inherited from last year of 4.6%. Most EU countries would have a budget surplus in recent years. There are 11 countries that had a national budget surplus. All EU countries reduced their budget deficits in the last three years on economic growth. Only our socialists widened the deficit and postponed footing the bill. When adding up, Romania will end 2020 on a smaller deficit than all other EU countries, I hope it will be all the other; maybe one or two will have a smaller deficit. Romania had economic growth in the first quarter, the second largest in the EU. I am telling you that we will be the country that will avoid technical recession, which means two consecutive quarters of economic downturn,” Citu told Digi24 private broadcaster.

He said that in terms of consumption, things are looking very good given the economic context, which means that purchasing power has been preserved.

Citu added that he does not see the need for resorting to the international markets because the deficit has been successfully financed.

“At the moment, I don’t see resorting to international or other markets. We are OK. We look at every moment to see what happens. We have managed to finance this deficit (…) One can fund a deficit of 8.6% without the need for help from international institutions, funded only from the market, from trusted investors. Look at FIDELIS, a bond issue for individuals, for citizens, which is listed on the Stock Exchange; what a success we have had there. Every issue we did was oversubscribed with declining interest rates. We were the only government in Romania, and even before the British, to borrow at negative interest rates in euros,” said Citu, according to Agerpres.

He mentioned that the pandemic has incurred direct costs of 5 billion lei, but the indirect costs, represented by measures such as postponing repaying loans, and SME Invest, are much higher. He specified that these one-off costs are around 11 billion lei in 2020, or 1.1% of the GDP. However, these costs will not occur again next year.

On the other hand, the minister pointed out that problems will arise if the crisis in the EU economies continues.


I would prefer to come up with a budget for next year as soon as possible


The Minister of Finance on Wednesday evening told Digi 24 private television broadcaster that he would prefer to come up with a budget for next year as soon as possible, and not to wait until December.

“We have prepared the financing for this year. We know exactly every chapter of the budget. I don’t want to wait until the end of the year, I want to come up with a budget to present it as soon as possible for next year,” said the Minister of Finance.

He stressed that there are regular meetings with President Klaus Iohannis on European funds, on the package received from the European Commission.

“At all these meetings we are having very concrete talks, we come up with questions that we need to ask the Commission in order to make sure that, when the plan is drawn up and approved, there are no such projects that we cannot introduce because we didn’t ask for the exact conditions. (..) We want to draw all this money. That’s why we are looking at the budget burden for the next period,” Citu explained.

Regarding the 40 per cent increase in pensions, the minister reiterated that this would have created very big problems in terms of the Government’s credibility in front of foreign investors, “because no one would have thought that we could finance yourself.”

“This year would have meant an additional 12 billion lei to the budget. This means 1.2 per cent of GDP this year alone. Next year would have been 30 billion lei and so on. Enormous additional amounts to the budget (…) We would have been downgraded immediately by the rating agencies if this had happened, and of course, all our international markets would have closed, but that does not mean that we will not get there with the increase in pensions, and it is very important to read the pension law, for it says very clearly that this growth should be staggered. So, in the end, we respect exactly the spirit of the law,” pointed out Florin Citu.


Child allowances to be gradually doubled


Child allowances will be doubled, but in stages, and the lawmakers who vote for populist laws should donate more revenue to the budget to have more money to double the allowances, Finance Minister Florin Citu told Digi 24 private broadcaster on Wednesday.

“The allowances will be doubled, that’s the promise I make, but in stages. Many of these social expenditures are made in stages. At the same time, I tell the lawmakers who are still voting for such laws in Romania in 2020 amid a global economic crisis to find another country in the European Union or in the world that is making such efforts during this period, to increase allowances, to increase pensions, to allocate extra bonuses (…) Maybe more lawmakers should donate from their earnings so that we may be able to have more money in the budget to double the allowances. Perhaps those who have voted should make the effort. Then it would be a credible move, but to pass a law without giving a source of funding is populism. It shows what the Social Democratic Party (PSD) socialists have done from the beginning. From the first moment they joined the Opposition, they have only passed as on a conveyor belt laws that would have blown up Romania’s budget in 2020 in a crisis situation. Let alone the fact that they wanted to vote against the prolongation of the state of emergency, led by their interim chairman, the eternally interim chairman, which was a criminal gesture on their part,” said Citu.

On Wednesday, the Chamber of Deputies rejected, as a decision-making body, Ordinance 123/2020, amending and supplementing Article 3 in Law 61/1993, in order to gradually increase the amount of the child allowances.

As many as 166 MPs voted for rejecting the ordinance, 63 against and 29 abstained.

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