An adviser to Mugur Isărescu responds to the criticism of Bolojan's austerity program: “For us, now, it's about how to avoid a disaster” / We spend more on interest than on education
The reduction of budget expenditures has nothing to do with Bolojan's will, but is the only possible solution. And to say that cutting costs will take our lives down a negative path is like denying vaccines in the midst of a pandemic, writes economist Eugen Rădulescu, advisor to the BNR, in a polemical article, in the midst of a political crisis.
Eugen Rădulescu, adviser to the governor of the National Bank of Romania Mugur Isărescu, claims in an article published on Thursday, in Contributors, that what Ilie Bolojan is doing in terms of economic measures is not stubbornness, but “the only possible economic policy”.
Rădulescu's public appearance comes against the background of the political crisis. One of PSD's arguments, which demands Bolojan's departure, is precisely this: the policy of austerity.
Rădulescu argues with SNSPA professor and political scientist Cristian Pîrvulescu. In an article also in Contributors, Cristian Pârvulescu criticized the way in which the austerity program was carried out. He believes we are in a situation of “austerity without a state”.
The professor claims that through the cuts made or planned, the state cuts its ability to collect fees and taxes, for example.
BNR Advisor: “Subtleties”
Pârvulescu believes that Romania is in the situation of “a state that adopts sophisticated institutional forms, but fails to transform them into operational results”.
In his intervention in this public debate, BNR councilor Eugen Rădulescu states that arguments of this kind are “macroeconomic subtleties”. Given that “For us, now, it's not about that, but about how to avoid a disaster”.
“If Mr. Pârvulescu was really concerned about the negative effects of budgetary austerity, he should have written his article not now, but in 2024, and show: do not increase the deficit for consumption, that you will then have to have austerity policies, which will lead to much greater losses of production and consumption!”, claims Rădulescu.
We spend more on interest than on education
The economist from the National Bank believes that Romania's real situation is extremely difficult. We will end up with “public debt interest will be around 3% of GDP this year and possibly 3.5% of GDP in 2027. Much higher than total education spending!”.
In a recent interview for the HotNews audience, former minister Radu Berceanu formulated Romania's debt situation as follows: “The Ministry of Interest is the largest ministry in the Government”.
And Eugen Rădulescu claims that an even harder period will follow. Inevitable.
Threat of 'double digit' inflation rate
“The bad things don't stop here: the biggest risk, if we don't reduce the deficit to a manageable level in a small number of years, is that the financial market may stop financing Romania.”
“This means that the balancing of the budget should not be done in 7 years, as the government proposes, but IMMEDIATELY. That is, total blockages of investments, mass unemployment, steep reductions in consumption and, inevitably, cuts in pensions and wages (not necessarily nominal; a high double-digit inflation rate alone solves this!) Here, Mr. Pârvulescu should study the situation in Greece and the effects of the world financial crisis in 2008-2010 on this country”, said the BNR councilor Eugen Rădulescu.
