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Lazea:Romania's budget deficit has exceeded 3% in 9 of the last 18 years
The budgetary deficit of Romania has exceeded 3% in nine out of the last 18 years of the Maastricht Treaty and the major issue is represented by the fact that it was pro-cyclic, stated the head-economist of the National Bank of Romania (BNR), Valentin Lazea, during the event ‘ Between Budgetary Deficit and Sustainable Economy’ organized by Oxygen Events.
He stated that Romania ‘pressed the pedal when it didn’t belong’ when the GDP was growing very much, during the period of 2006-2008 and again in the period 2016 – 2019. Valentin Lazea said that the effect of the non-necessary pressing of the pedal was that when we were hit by the crises of 2009 and 2020 we had no fiscal space.
He explained that when we compare to the Czech Republic, Hungary and Poland we will see that they have fiscal income of 35-36% of GDP while Romania has 27-28%.
"Because in addition to the evasion that exists in our country, tax evasion, there is tax optimization in dozens of branches, for dozens of professions, laws made with dedication, etc. (...) And there are, why not say some areas, such as property tax or environmental taxes, which are not at all, but absolutely not at all, at the level they should be. Why do I say that? Yes, I agree, there are savings to be made on spending. But those savings, which are not even 1%, maximum 1.5%, from special pensions, public administration reform and so on, will be eaten up in a second by the need to spend on arms, energy, ecology and the ageing population. So are we blind or are we pretending to be blind? We have four icebergs that we are heading towards in a straight line, these four: energy, ecology, armament and ageing population. And we say let's cut spending. Agreed! Yes, let's see how much we can cut, but realistically, with the figures on the table, because three quarters of budget employees are teachers, doctors and public order: police, SRI, SIE and so on," said Valentin Lazea.
He also stated that the growth potential of an economy drops as this develops. Romania had a potential growth of approximately 5.5% between 2000 -2010 dropped to 4.5% in 2010 – 2020 and during the present decade it is 3.5%.
"The danger I feel is that in order to close the budget next year or in 2 years or in 3 years politicians will tamper with the pace of economic growth, not learning from the experience of this unfortunate year, when the budget was made on unrealistic bases, on unrealistic growth and not taking into account that if we continue to have restrictive monetary policy next year, we cannot even be at potential, not even above potential. But of course, when you have to do the budget, when it has to come out well, without you taking concrete measures in the economy, you can say that we will grow by 5% or I don't know how much it takes to get it there, to grow. But, I repeat, the fundamental idea is that an economy must grow no more than its potential and we must all define what the Romanian potential is, in no case is it 5% today when we talk", said Valentin Lazea.
He also explained that the fiscal relaxations lead to the growth of the public debt even in the years of high economic growths.
‘We do not want to admit a very clear fact, namely that starting with 2016 the whole population of Romania: babies, housewives, employees, pensioners, everything you want, we live beyond our means. As it means to borrow and increase your deficits. We live better than we can afford. And we see this, the fact that the foreign debt has reached 160 billion euro, namely 8,000 euro for each baby, senior, housewife or employee, without using the money to make production capacities to repay our debt. We used the debt on trips, villas, Vuitton products, expensive cars and so on. Yes, let us tell the people who is shouting for being robbed, and has lived the worst possible, let us tell them that over the last eight years we have all lived beyond our means. There is no painless method, let me repeat it, to restrain fiscality (…). But, as Mr.Daianu says: really, is it so difficult to understand that it is impossible that nobody pays. And I say even more. Not only is it impossible not to pay, but everybody, absolutely everybody is going to pay at a certain moment’ Valentin Lazea said.
He mentioned that the statements represent his own opinion and not the viewpoint of the central bank.