The debt of local administration now accounts for 5.6% of the state’s overall debt, but the speed at which it is growing is more worrying. The central administration insists on cutting deficits, which would slow down the rise in the public debt, but the local administration plans to take out loan after loan. In addition, as elections near, promises are made, which cost money, and this could mean yet new loans. The local authorities say they need this money to develop their towns, but economists warn over the risk posed by the indebtedness of the local authorities, citing the example of other countries hit by the crisis.
Economist Aurelian Dochia mentions the tens of towns that went bankrupt in the US because of their indebtedness level and says the representatives of the local administration sometimes go on a spending and borrowing spree safe in the knowledge that if they get into trouble, the central administration will have to come to their rescue.
(English version by Daniela Stoican)