Four officials, analysts and company managers analyzed the state of the Romanian economy and the construction of the 2012 budget against the tensions in the euro zone during the ZF Expert open editorial meeting on Wednesday.
“Romania’s economy is an appendix to the European Union. We cannot but care about what is going on,” said former finance minister Daniel Daianu.
Valentin Lazea, chief economist of the National Bank of Romania said EU leaders were doing what they should have done two or three years ago and that the euro would most likely survive.
“The steps towards the fiscal union are delayed because Germany has the right approach as a principle. You can stick to your principles but if that turns you into someone walking sword in hand over a pile of ruins, you haven’t solved anything.”
Investors, economists and leaders of the other major economies of the world expect the summit to end the series of hesitations and ineffective actions that Europe took to react to the sovereign debt crisis.
The hesitations allowed the crisis to propagate through the banking system, a department where Romania is extremely vulnerable considering that many local banks are controlled by foreign groups, which, faced with the crisis, are considering restricting lending and that would have a serious impact on the economy.
The plans on which the Europeans insisted, i.e. more austerity, risks pulling the euro zone if not the entire EU into a long recession that will only serve to make Europe’s problems worse and cause the world economy to slow down. The first large-scale recession signs are already here.
The US want a greater role of the European Central Bank in the battle with the crisis and want it turned into an institution resembling the Federal Reserve, which funds the government and the economy. The markets expect a stronger anti-crisis defensive system, in which the main tools might be the euro zone bailout funds EFSF and ESM.
France and Germany decided on a direction the talks of the European leaders will follow early this week, suggesting modifications to the EU treaty to tighten budget control in order to strengthen the monetary union and introduce penalties for countries that do not comply with budgetary discipline.
The new wave of recession, which is expected to affect the European Union countries soon is just a continuation of the crisis that started in 2008. There are already signs of trouble on markets, which will have a different impact on the European economy than in 2008. Under the circumstances, Romania has to find avenues for growth considering there is no spectacular consumer spending increase in sight for the next few years.
“The good news this year is that the economic growth in the first three quarters of the year (2.5%) was higher than expected. The bad news is that this is why we might see 2% growth next year. The fact that the budget set a deficit target of 1.9% (cash) and 2.5% (ESA), covers the risk of a lower economic growth,” said Valentin Lazea, chief economist of the National Bank of Romania. “Compared with 2008, however, Romania is doing much better in terms of public finance and banks. In a non-catastrophic scenario, where the euro remains the common currency, investors can positively discriminate the country and will come to invest in Romania.”
On the other hand, Daniel Daianu, former finance minister, believes that 2012 will be a year with many uncertainties, already threatened by an impending recession.
“Romania’s economy is an appendix to the European Union, it is not large in size and greatly depends on what goes on in Europe. The geographic proximity allows us to change the structure of trade or the structure of bank shareholders,” Daianu said.
Dragos Damian, chief executive officer of drugmaker Terapia Ranbaxy, which owns a plant in Cluj, says the budget that the government prepared for 2012 lacks fiscal predictability.
“Next year’s budget lacks the fiscal predictability that would enable me to recapitalize from the parent company and convince shareholders to continue to invest in Romania,” Damian said.
Matei Paun, CEO of investment firm BCA Investment, says he finds it hard to be optimistic about the coming period although the government built the 2012 budget on a 2% economic growth and a 1.9% budget deficit, half this year’s level.
“2008 was the equivalent of 1989 economy-wise. We will have a long and hard way ahead of us, years of stagnation, which is why consumer spending will not rebound. I find it hard to be optimistic about Romania over the coming period,” Paun said.
(English version by Loredana Fratila-Cristescu)