Romanian Ctrl Bker: Wage Cuts, The Lesser Of Two Evils

Romania’s worst case scenario would be to fail at cutting pensions and wages, seen as the lesser of two evils, and to need an increase in the value added tax level, an adviser to the local central bank’s governor said Friday.

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"There are three plans. The first involves amputating wages and pensions, the second one refers to hiking taxes and the third one, discussed right now, refers to alternative measures. (…) The solution chosen by the Government is the more complicated one, but it is the lesser evil," said Adrian Vasilescu.

Furthermore, the current measures are not meant to bring Romania out of the crisis. Romania's crisis will end through the usual means, namely investment, exports, while a recovery in consumption is also needed, Vasilescu said.

He added a recession is preferable to an unhealthy economic growth.

"Greece has a budget deficit of over 10% (of the GDP), and this deficit overlapped with another problem, namely a public debt of 115% of the GDP. Greece's case is the worst. Romania does not have a public debt higher than the GDP, nor a two-digit deficit. However, if we fail to be calculated, we might face both problems as well," Vasilescu said.

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