Central Bank Governor warns over fiscal policies shortages

The application of an excessive monetary policy at the expense of a strong fiscal position may lead to alarming foreign deficits, National Bank of Romania (BNR) Governor Mugur Isarescu stated yesterday in an address at the Western University in Timisoara on the macroeconomic policy mix, Rompres reports.

"In Romania, in 2005, 2006 and 2007 the monetary policy has made up for the insufficient strength of the fiscal and salary policies, and the costs are evident today: a disquieting and growing current account deficit. Sometimes imbalances are so deep that economic policies no longer manage to redress the balance," the BNR Governor emphasised.

Isarescu warned on the weaknesses facing the Romanian economy at present.

"The relatively high level of the current account deficit reflects, to a significant extent, the real-terms convergence process with the European Union, but it also indicates that the national economy is vulnerable to a change in the perception of foreign investors. The foreign weakness is generated by the adjustment of the exchange rate, which would accompany a decrease in foreign financing once the perception of foreign investors changes, while the domestic weakness is generated by the gap between business operators' growing forex liabilities and their forex assets," Isarescu explained.

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