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Daianu : Romania is still relatively all right concerning public debt
Romania is still relatively well concerning the public debt, around 50%, but our problem is budget deficit, said Daniel Daianu, the president of the Fiscal Council on Tuesday, at the conference “Fiscal Year 2024”, organized by FinMedia and Financial Market.
“An understanding was reached in Europe between Parliament and the Commission, Council about the new economic governing structures, the new fiscal rules, which are new and not very new. They are trying to make the ruling system more flexible. Why? Because, following the financial crisis, the pandemic, of consequences, the need to finance the energy transition and, last but not least, because of the Ukraine war, which sometimes have devastating effects, public debts have grown very much. Although, following the first intervention of central banks and the initiation of the QE program, quantity relaxation, there was a firm engagement to return to a descending path, evolution trajectories of public debt which has grown very much. I remember that in Ireland budget deficit had exceeded 30% because they had taken over troubles of commercial banks balance sheets. Now they have reached an understanding. We have quite a lot European banks with public debts of over 100% of GDP. Now we culd say that Romania has a good standing. Concerning the public debt, let's say Romania is still relatively all right. Because having a 50% public debt is, let's say, reasonable”, Daianu said.
The average public debt in the euro zone is over 80% of GDP. “Our trouble is the dimension of budget deficit, which does not have a conjunctural component, which could disappear graudally. The fact that we returned to normal with incomes and expenses has a structural component,” Daianu said.
The president of the Fiscal Council said that the budget deficit for this year will be around 6.4% of GDP, while last year it was 5.7%, the figure reached after cutting capital expenses. He declared that it would be difficult to reduce the level of budget deficit.
“It is clear that the fiscal regime will have to continue to change. It started, but it will have to evolve in the sense of this target, to increase fiscal incomes. Here, collection should improve. ANAF [National Tax Administration Agency] should function better, customs must function differently, I don't mean much better but different. Because fiscal evasion, tax avoidance, led to this very low level, but also in the fiscal regime in Romania, not just tax avoidance. You also saw the two alternatives the premier evoked, to return to a single share, an authentic one, not devoid of content, or progressive taxing. These are political decisions. It is clear we cannot remain with fiscal incomes frozen around 27% of the gross domestic product,” Daianu said.