Governor Mugur Isarescu of the NBR (National Bank of Romania),who was yet to criticise politicians' decisions, yesterdaycriticised the Constitutional Court ruling whereby the 15% pensioncut was overturned, saying that the vote of the institution was "avote for corrective inflation".
"The Constitutional Court vote is a vote for corrective inflation.So, instead of taking from areas where cuts need to be made, youtake from everybody. Inflation serves a completely differentpurpose. It is supposed to bring balance. VAT raise-inducedinflation is not monetary, it has a corrective role. Non-monetaryinflation does not call for a response from the NBR. If weintervened, the correction would not be achieved," Isarescusaid.
In June the Constitutional Court rejected the Government's proposalto cut pensions by 15% and later the Cabinet decided to raise VATfrom 19% to 24% in order to meet the budget deficit target agreedwith the IMF, 6.8% of GDP.
The Governor of the central bank says the Constitutional Courtruling instated the rule that any necessary correction, any curb onspending can only be achieved through inflation.
"Even in the former (i.e. communist) system we learned thateconomic laws are objective laws. They are like the law of gravity.The Constitutional Court could declare even the law of gravityunconstitutional. If the standards of living were set in theParliament, you would be hard pressed to find a country not livingwell," Isarescu added.
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