Romania Most Able To Adjust To Economic Shocks, But Based On Poor Tax Administration – S&P

Romania has substantial potential for growth in revenues without increases in tax rates, S&P said in its report on the study “The 2008 Fiscal Flexibility Index”.

"Romania’s top placement in the Fiscal Flexibility Index is, however, something of a crown of thorns, as it reflects poor tax administration and a slippery tax base," Standard & Poor’s credit analyst Eileen Zhang said.

The ranking includes 30 states, namely the 27 members of the European Union, and Norway, Iceland and Switzerland.

Results of the study indicate the ranking is dominated by small European countries, by size of total gross domestic product, while Nordic or older EU members are less flexible in terms of governments’ ability to adjust to adverse economic trends.

"At the opposite end of the flexibility scale, continental European sovereigns are among the most constrained. Of the 30 countries, Belgium is placed lowest, preceded by Austria, Germany, Sweden, Denmark, and Italy, with Norway, Finland, and France not faring much better," Zhang added.

Romania and Bulgaria, which joined the European Union in Jan 2007, were first included in the 2008 flexibility index study.