Romania Can’t Monetize Its Public Debt – Ctrl Bank Chief

„If banks were to reach an exposure level beyond which they believe they can no longer lend the state, then financing the budget gap becomes problematic,” Isarescu told a financial forum. „Our physical limit for a high deficit is rather stringent.”

Isarescu said banking exposure to the local market has increased to around 15%, from earlier levels of 3.5%.

Finance Minister Sebastian Vladescu said last week that the country’s public debt is expected to widen to around 40% of the gross domestic product by end-2011 from approximately 30% of GDP currently.

In the absence of the recent additional spending cut measures agreed with the International Monetary Fund, the country’s government debt would reach 50% of GDP in 2011, Vladescu said.

End February, Romania’s public debt stood at around EUR37 billion, or some 29% of the GDP.