1/5 Of Romanian Household Loans Provided To State Employees

Bankers who wished to remain anonymous told MEDIAFAX the data indicate the volume of loans provided to civil servants varies from bank to bank, with the highest level accounting for 25% of the total loans granted by a single lender.

According to the bankers, the government’s planned austerity measures could drive half of the civil servants into default, in which case banking solvency ratios cannot fall below 10% this year. Currently, local solvency rate is at 14.7%.

Romanian authorities recently decided to cut public wages by 25%, alongside 15% reductions in pensions and unemployment benefits, in a move aimed at reducing expenditure and tame the budget deficit.

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Moreover, around 70,000 of the employees in the public sector could lose their jobs by year-end.

Bankers believe the 25% wage cut in the public system is less risky than the collective layoffs, arguing a jobless client is bound to face difficulties in finding a new job in due time.

On the other hand, the available data suggest the wage cut could lead to increased individual default and, subsequently, to more non-performing loans compared with the estimated overdue payments of RON1 billion triggered by the layoffs.

Romania’s public sector employs about one third of the total workforce, of 4.5 million people.