Rising fiscal deficits and the still high external imbalances have increased to Romania's vulnerability to the global financial crisis and its spillovers to the real economy, and the first path to rebuilding foreign confidence is through fiscal consolidation, states Joaquin Almunia , the European Commissioner for Economic and Monetary Affairs, in an exclusive interview with ZF.
"The risks of a more abrupt slowdown in 2009 compared with the soft landing scenario, with GDP growth in 2009 and 2010 remaining in positive territory, cannot be excluded at this point. This is why Romania's government needs to get a tight grip on the deficit, to rebuild confidence and put the economy on a sounder, more sustainable basis," Almunia stated. He believes that in order to mitigate the impact of the international crisis on Romania, investors primarily expect a strong signal from fiscal policy, and not as much the sealing of a financing agreement with the European Commission, the ECB or the IMF.
The Finance Ministry has already raised its 2009 budgetary deficit target from 1.7% to 2% and now to even 2.5% of GDP, without taking into account, yet, all the effects of the anti-crisis steps that would be taken. Amid the slowing economy, Almunia believes fiscal adjustment should be based on cutting expenditure levels and reorienting part of it towards investments, rather than on tax hikes.
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