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Isarescu: Treating superficially the deficit financing seems a huge error

In the current context, treating the deficit financing as a piece of cake is a huge error, National Bank of Romania (BNR) Governor Mugur Isarescu said on Tuesday, at a forum on Romanian financial markets.

'Day by day we find that, not only in Romania, but everywhere in the world, financing budget expenditure is difficult. ... For example, what can be more serious, not to say critical, to Romania than to release a range of fiscal incentives that cannot be supported? As they find they have no financing in six months or even sooner from the package launching, as we currently forget we have a 4 percent current account deficit in recession conditions. It could increase, we do not know. We have a big unknown. How will the Romanian economy react to a 4 percent economic growth? Will it remain with a 4 percent external deficit?, Mugur Isarescu rhetorically asked.

He also said that, as everyone knows, 'the social contributions must be reduced in order to have economic growth, taxes must be cut down, the budget expenses must not increase, but on a second judgment you find that both things can fail in the first six months.'

'Prioritizing investments, indeed, 5 percent of the GDP for public investments is very much. ... Any unfinished investment is a blocked resource. We know this from the first Economics lesson and a country develops and increases its living standards as it mobilizes its resources, not as it immobilizes them. Immobilized resources, roads halfway completed, motorways built on a sector after which another break follows. What is the benefit of such a construction? It is true, prioritizing investments is essential, but let us see if we can do it and what it means when you have 40,000 unfinished projects,' the BNR official also said.

Changing economic growth forecast will affect budget construction

Changing the growth forecasts for 2012 will have consequences for the budget construction, said on Tuesday the Governor of Romania's National Bank / BNR /, Mugur Isarescu, on the occasion of the Romanian Financial Forum.

'We change forecasts for economic growth mainly because we can no longer stake on the same exports growth. We would be unrealistic. When you change your forecast, a series of consequences follow for the construction of the budget and the problem between reality and perception. The political world operate on perceptions and we must accept that perception is stronger than reality ', said Isarescu. Romanian exports rose 25.5% on the year to EUR25.8 billion in January through July, data from the national statistics institute showed. In 2010, the exports totaled EUR37.2 billion, up 27.3% on the year.

The government estimates an economic growth of 1.5% in 2011 and of 3.5%-4% next year. However, the authorities indicated the forecasts might be revised downward, due to difficult conditions in international markets.

The BNR official stressed that Romania is ahead of an election year and not only the specialists in economics and finance have become aware that there are strong budget constraints.

'There is a lot of talk about most different solutions. Sometimes solutions look like jokes to us, but they are discussed nevertheless. In the Romanian society these highly publicized debates cannot be overlooked ', the central bank governor also said.

The coalition Government will discuss, within two weeks, the possibility of modifying the budgetary deficit and the economic growth for 2012, coalition sources told AGERPRES on Monday. For 2012, the Government established with the IMF and the European Commission a budget deficit target of 3 percent of GDP and an economic growth of 3.5 percent, but the Prime Minister, Emil Boc, acknowledged that the objectives will be changed in the midst of economic problems in the euro area.

We are witnessing rapid dissolution of capitalism's working mechanisms

We are witnessing a quite rapid dissolution of capitalism's working mechanisms as they existed in the previous century, Governor of the National Bank of Romania (BNR) Mugur Isarescu told the 3rd edition of the Romanian Financial Forum on Tuesday.

'Some three, four years ago quantitative easing and direct funding of budgets by the central banks would be unconceivable in Europe or the US, they would be blasphemy. Had you advanced such an idea you would have been excommunicated from the club of international bankers. Today, they are instruments often used in special situations and their rationale is to give the Government time to find solutions, because, as it happens in any crisis, the Government is taken aback. And I mean here any government, not just the Romanian Government,' said Isarescu.

He added that over-indebtedness in times of plenty is the current problem facing some countries as such countries were unable to borrow more when the crisis hit them.'It's in crisis that inventive is born, as well as discoveries, and big strategies. He who overcomes crisis, overcomes himself, without getting overcome. He who blames his failure to a crisis neglects his own talent, and is more respectful to problems than to solutions,' said Isarescu, quoting from Albert Einstein.

Sursa: http://www.actmedia.eu

Tags: economic percent growth government crisis isarescu budget deficit financing romania romanian bnr euro

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