As international tension mounts, Romania has to be prepared for the worst-case scenario if European leaders fail to reach an agreement regarding the euro zone debt crisis, recapitalizing banks and solving Greece’s debt problem.
A worst-case scenario would have tension on foreign markets worsen, banks stop lending money to each other and stocks plummet. Interest rates and risk aversion would rise, and financial flows would freeze, creating the risk that Europe might relapse into recession.
Romania will not be safe from the fallout, so that its export growth pace may significantly slow down or return to negative territory, while domestic consumer spending will continue to decline. Interests on lei and euros will shoot through the roof, foreign lines of credit will decrease or the country will see even withdrawal of money, while the domestic currency will seriously depreciate.
Under the circumstances, Romania’s economy may relapse into recession.
The country is looking for a shield by building a budget with a tighter deficit and reducing the need to borrow money.
Firm decisions made at European level are therefore of utmost importance for Romania, too.
European politicians met for the 13th crisis summit of the last 21 months at the end of last week, but the decisions brought about by the three days of talks will not arrive any sooner than Wednesday.
President Traian Basescu said before leaving for Brussels that Romania, which took austerity measures in due time, was seeing its economic growth called into question because of the huge delays of the euro zone in making decisions. He added that Romania was borrowing at higher interests than in 2010 because of the credit default swap of the region.
(English version by Loredana Fratila-Cristescu)