Romania's political risk has become of topical interest foranalysts once again, after the euro has already climbed to nearly4.3 RON on the forex market, the highest level of the past twomonths, following the replacement of six ministers last week thatfailed to quell talks on the dismissal of the currentgovernment.
Disputes on the political scene overlap with a new deteriorationin players' sentiment regarding the international situation, andcome at a time when fears of a slowdown of the major economies andof a potential deepening of problems for heavily indebted Europeancountries have been rekindled.
"If financial stability is the prime concern (of the NBR - NationalBank of Romania), it should keep the exchange rate as stable aspossible, because a depreciation would put significant pressure onrepaying foreign currency-denominated loans. If you want to find away to stimulate the economy using monetary tools, you can eithercome up with extremely lax policies as far as interests areconcerned, or use the exchange rate to encourage exports to acertain extent. Things are very complicated, however, because thepolitical picture is a moving one, and in the fiscal department itis not clear enough whether the VAT adjustment will have realeffects on budget revenues," says Dorin Badea, head of theUniCredit Ţiriac Bank treasury.
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