Daianu: Romania will need 2-3 years to make public finance healthy

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Even if the important economies of the European Union start recovering, Romania will need another 2-3 years till it operates the necessary corrections in order to make its public finance healthy, thinks former Finance Minister Daniel Daianu.

„If the recovery signals from France and Germany turn out to be true and the economic relaunch takes place at the end of the third quarter and in the fourth one, then there are more chances for a stabilization of the situation in Romania too in 2010. Still it is not enough to stake on the recovery of the EU important economies as Romanian economy needs essential corrections, which will take another 2-3 years to make,” said Daniel Daianu.

Romania’s main problem refers to the rapid increase in the public debt and in the excessive short-term indebtedness of the private sector. „The public debt sector grew very rapidly because the state was forced to get in debt in order to cover the budget deficits.

As the interests are very high, the public debt service grew a lot and there is also a decrease in the budget receipts that will prevail in 2010 too, even if we witness a resumption of the economic growth, the budget deficit will be considerable and will have to go on being financed.

This is why the public debt service will stay a key position in the structure of the budget and will make other expenses imperative,” warns Daianu, who mentions the fact that, in order to join the euro zone, anyway Romania must make its public finance healthy and diminish its deficit below 3 percent.

In his opinion Romania can stick to the schedule of adhering to the single European currency in 2014. He emphasized the fact that there was the risk that going away from this aim should be interpreted as a relaxation of the efforts for making these painful corrections of the public finance.
Daianu defended the decision made by the Romanian Government of resorting to the 20 billion euro loan from the international financial institutions.

„He who rejects this foreign financing programme underestimates the systemic risks. But for this foreign financing, dysfunctions in economy would have been even more severe and we could have even seen the collapse of the banking system,” he thinks and adds that it is quite reasonable to ask why the state has to rescue the private sector.

„This is what happened in Asia too when the private sector was no longer able to fulfil its obligations as a whole for various reasons and it was threatened by the collapse of the entire financial system and, further on, of the entire economy.

The same thing happened in the West, in France, Germany and, especially, in the US, where citizens rightly ask why losses should be socialized and profits should stay private. But in order to answer this question one must examine the relations between the financial system and the real economy, the relations within the capitalist system, what another meaning of the social contract nowadays is, etc.”

What can be discussed in Romania’s agreement with the IMF are the conditions. „If we have a stagnation, do you realize what it means to reduce the share in the budget of the expenses brought about by salaries and pensions from over 9 percent, as it is now, to 6 percent as it is stipulated in the agreement with the IMF and the European Commission?

If you have an increase, not 6-7 percent, but if you have a growth amounting to over 3 percent, you can hope that in 3-4 years you will be able to make a correction that should increase the share [of salaries and pensions] to about 7 percent,” opines Daniel Daianu.

In Romania it will be possible to resume the economic growth by means of two main engines: on the one hand, the relaunch of the important economies in the EU, which would stimulate Romanian exports, and on the other hand, the use of the European funds.
„If we absorbed between 3 and 4 billion euros a year, it would stand for about 3 percent of Romania’s GDP.

If we had this possibility, it would be much easier for us to make painful changes in the public finance, in the sense of reducing the number of employees and the salaries in the budget sector as these massive injections by means of the European funds would finance infrastructure works, would help private companies get strong again, it would create jobs and would help Romania’s economy switch to an over 3 percent growth,” also said Daniel Daianu, who mentioned again the fact that so far Romania had had an unfortunate experience with the community funds.

Nevertheless, it would be helpful if the European Commission were more „inventive” and, besides simplifying the procedures meant to access funds, thought more imaginatively of the means to spend the European funds, appreciates for former MEP.

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