Romania’s Govt Had To Adopt Fiscal Restrictions On Fincl Crisis – WB

"Recently, Romania’s new Government approved the 2009 revised budget that stipulates a deficit of 2% of GDP, through expense cut," according to the World Bank’s latest EU10 Regular Economic Report.

WB also said the governments from all over the world announced in the past few weeks huge packages of fiscal stimulus aiming to revive the production and stop unemployment growth.

"The EU10 governments, however, have limited scope to deal with this crisis through fiscal easing, due to financing and budgetary constraints. Therefore, fiscal policy has not been actively used by EU10 countries to support aggregate demand. The expected deterioration of fiscal balances in the EU10 in 2009 is more likely to be driven by shortfalls in private demand (both structural and cyclical) rather than by discretionary government activism," the report stated.

The bank’s analysts said that several governments of the states that joined the EU in 2004 and 2007 have limited means of counteract the effects of the financial crisis through fiscal relaxation.

"In Romania, the deterioration comes from the unfunded increase in pension benefits, cuts in the social security contribution rates, discretionary allocations to sub-national governments and other decisions of the outgoing government taken in 2008," the World Bank said.

The institution added that the new government, which took office in December 2008, announced and approved a series of tightening measures that may at least partially offset the deterioration in the fiscal balance.

The EU10 report is published three times a year and analyzes the economies in Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Poland, Romania, Slovakia and Slovenia. This report also includes Croatia, respectively EU10+1.