Macroeconomic stability is by no means guaranteed, whereas Romania's European Union accession in 2007 is not a done deal, Willem Buiter, chief economist of the European Bank for Reconstruction and Development (EBRD), the largest investor on the Romanian market, said yesterday.
"The loss of fiscal control in Hungary, Poland, and the Czech Republic should be a warning sign of mounting pressure upon the budget and the inflation rates, as accession is getting closer and the country needs to fund growing investments in infrastructure, the environment and the energy sector," Buiter told a meeting in Sinaia, attended by members of the Government and representatives of the foreign investors in Romania.
Premier Adrian Nastase replied to the EBRD chief economist, saying the bank could go bankrupt in several months if the situation in Romania were indeed as bad as Buiter had suggested.
The EBRD exposure in Romania exceeds two billion euros.
The speech delivered by Buiter was in stark contrast to the statements uttered by the Romanian Premier, who did not dwell upon Romania's weak points, macroeconomics included.
"Romania has to deal with permanent structural challenges and must learn from the experience of its neighbouring countries. In the past months, inflation showed a tendency to break its descending trend, whereas fiscal balance is permanently exposed to pressures," Buiter stated.
National Bank of Romania Governor Mugur Isarescu extended his congratulations to the EBRD chief economist. "I greatly appreciate the statements made by Buiter. These are things I have already considered," Isarescu said.
Willem Buiter restated the position of the EBRD and other international financial institutions, according to which "progress in the field of reform was painfully slow in 2003." "This raises the question of whether the progress was enough to secure the successful accession in 2007," Buiter said. According to the EBRD official, Romania faces a significant challenge when it comes to closing the productivity gap separating it from the EU members and the other candidate countries. The GDP per capita in Romania accounts for only 25% of the EU average, as compared to the 40% attained by the ten states that will join the European Union this year. Moreover, Buiter added Romania's was the largest and least efficient agricultural sector of all the candidate countries. "It would take enormous efforts to bring Romanian agriculture in line with the 21st century," the EBRD official stated. At the same time, he mentioned that Romania would no longer be able to resort to the classical stratagem of attracting foreign investment by granting fiscal incentives. Moreover, it will have to face the competition coming from the EU and from countries such as China and India.
In the opinion of Willem Buiter, the Ministry of Finance and Romania's central bank need to work closely together. "You can see what happened in Poland and Hungary, where these two institutions did not cooperate," he said. However, PM Adrian Nastase said that, although he had talked about a war being waged between the Government and the National Bank in the past two years, "cooperation was in fact excellent."
razvan.voican@zf.ro
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