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Romania's public deficit could exceed 9 pct without pension increase from 1 September

Romania's public deficit could exceed 9 pct, without taking into account the pension increase from 1 September, Eugen Radulescu, director of the Stability Directorate of the National Bank of Romania (BNR), warned at a select conference on Wednesday. 

"It is not only what happens in the banking system that matters. Everything that happens in the country's financial system matters. We now have a particularly serious problem called a public deficit. It started from the end of last year at a level that was far beyond the much-discussed 3 pct, which is totally enormous for a country that has an economic growth of 4 pct as it was in Romania. At the moment we are heading towards a public deficit of 7 pct, 8 pct, 9 pct, maybe it will go beyond this level, without taking into account the increase in pensions from 1 September. The situation is extremely serious and sensitive. I believe that we have a few basic points at least in addition to the interest that Romania is paying on the loans it takes due to the fact that we still do not know how we manage to make it with the increase in pensions. There is more than a need for a firm response from the Government, a proper legislation is also needed because, currently, the law says that on 1 September pensions increase by 40 pct. If this happens, I don't know what it's going to be next year," Radulescu said. 

According to the central bank's specialist, next year Romania will still have three percentage points of GDP in deficit only for pension increases, and this "creates a very complicated situation". 

"The deficit should not necessarily decrease rapidly, but it must enter a clear decreasing trend. If a rational solution is not adopted very quickly in this regard, we risk that the interest rate decrease may not continue to take place. There are things closely related: the government deficit, the external deficit, the interest rates, the exchange rate. We can't pull them out of a hat. First comes the public deficit and what happens in the next six months with it. On the one hand, we have a general balance situation that is less bad than it was in any of the previous crises. Maybe with the exception of the public deficit, but I'm confident that a rational solution will be found. I can see the danger in the health crisis that we don't know how we're going to overcome and when. So far, all the ways are open and all the instruments are at hand so that the National Bank can do everything it can to make this crisis can be more easily overcome than the crisis of 2008," Eugen Radulescu asserted. 

Representatives of the banking system in Romania address on Wednesday the evolution and economic situation at the ZF Summit Bankers 20 event.