Cutting deficit, more difficult task than adopting the EUR

The adoption of the EUR in 2015 will not be an easy mission, but the most difficult thing will be to cut the budget deficit to below 3 per cent of the gross domestic product by 2011, BNR governor's adviser Lucian Croitoru stated yesterday.

'2010 and 2011 will be two rather difficult years. The reduction of the budget deficit from 7.3 pc to 3 pc GDP takes great willingness,' Croitoru said during a press conference, Mediafax informs. Moving to EUR by 2015 - the target set by the authorities - depends on a number of factors, including the adhesion to the ERM II exchange rate mechanism and cutting the budget deficit to below 3 per cent of GDP.

As for resuming economic growth, Croitoru finds that the third quarter of the year will be 'negative enough' and that only the forth quarter may bring some signs of economic decrease alleviation. According to Croitoru, there are already indications that crisis is over, sustained by the increase in the crude price showing higher demand, as well as by the stabilization of US real estate assets. Even if we are in an election year, Croitoru is of the opinion that the country should not be allowed to derail from the point of view of macro-economic stability.

Romania plunged into crisis a year, a year and a half later and will get out of the crisis later than the powerful economies, the delay being no longer than eight-twelve months, the adviser of the BNR governor also said. 'Just as crisis came down four channels - retail, confidence, exchange rate and financing - I believe it will also go away symmetrically when the economy will start recovering,' Croitoru explained. On the other hand, he is not sure about the extent to which the cyclic factors that caused the crisis had reduced deficits to sustainable levels.

The central bank official also said that 'a Keynesian policy' of stronger state involvement in the economy would be a step taken in the wrong direction.

Gov't credit suffers first correction of the year
The government credit meaning loans taken out by public authorities from banks dropped by 0.6 per cent in August, suffering the first correction since the previous autumn. According to

BNR data, the credit balance came to RON 44.69 bln. The decline was the result of the fact that the Finance Ministry borrowed less from banks after receiving the loans from the IMF, the European Commission and the World Bank. On the other hand, the balance of non-government credit granted by banks in August 2009 went up by 0.4 per cent compared to the previous month, to RON 198.68 bln.

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