The Romanian Anti-Crisis Plan Is Vague, Lacking In Foundation – Analysts

"The measures are formulated too vaguely to allow an evaluation, but, at first glance, it is possible they will have a relatively low impact on the economy on the medium term, because, generally, they are not directed towards the structural issues of Romanian economy. For example, we cannot keep avoiding the restructuring of the budget apparatus through staff cuts and/or pay cuts," said Nicolaie Chidesciuc, senior economist at ING Bank Romania.

In his turn, BCR chief economist Lucian Anghel said details are needed to show the specific submeasures, the timeframes for implementation, the budget effort involved and the benefits brought by these measures, as well as the people in charge with implementing each measure.

"Secondly, any anti-crisis plan needs to be implemented very fast. We need to see Germany’s example, who, after announcing the anti-crisis plan, moved to implementation the next day," Anghel said.

The ING economist said the main issue with the current Executive, considering the very high budget deficit at the end of 2008, is the lack of maneuver space regarding new measures for fiscal stimulation, which means higher spending and, implicitly, a wider budget deficit.

"At this moment we need to regain the trust of foreign investors and this means, among others, credible measures for the reduction of the budget gap below 3% of the GDP by the end of 2011. Spending should target investments, not new social measures. The gain would be much higher compared to any measures for the stimulation of the economy with positive effects in the short run, but negative ones in the medium term," Chidesciuc said.

"Regarding liquidity in the banking sector I believe there is already an institution handling this matter, the central bank, and is doing a pretty good job at the moment," the ING economist concluded.

Anghel appreciates the propositions regarding investments in agriculture, respectively environment and irrigations, but fears that in the next budget revision the Ministry of Agriculture will once again be one of the institutions with the greatest reductions in the sums allotted.

"Also interesting is the proposition regarding the fiscal credit for the renovation and upgrade of homes and buildings, which, applied correctly, could stimulate the construction market, the construction material market. It remains to be seen when and how it will be applied," Anghel added.

He also called attention on the fact that this anti-crisis plan should not stray from the agreements with the IMF and with the European Commission.

"Anything we would implement, it must no go against agreements, because this would do more harm than good," Anghel said.

He agreed that the money from the budget should be directed mainly towards investments, but only through the resizing of other public expenses so as not to widen deficits.

Mircea Geoana, head of the Romanian Social Democratic Party, announced Monday after the ruling coalition’s meeting that PSD and PDL agreed on 32 anti-crisis measures that would be enforced on September 1.

Geoana added that 15 measures target the economic stimulation, 9 refer to the increase of budget revenues, 6 aim to keep tight grip on budget spending and 2 measures refer to hiking monetary liquidity in the banking sector.

PSD head stated that, by adopting the 32 anti-crisis measures, the ruling coalition managed to overcome a “political deadlock”.