Central Bank's Radulescu: Macroeconomic key is reducing budget deficit, not interest rate

The macroeconomic key is reducing the budget deficit, not the interest rate, even if it is a rough process and there will be fierce opposition from those who will see their privileges curtailed, considers Eugen Radulescu, advisor to the National Bank of Romania (BNR) governor, in an article posted on the "Opinions BNR" blog.

"The macroeconomic key is reducing the budget deficit, not the interest rate! It is very important that the current parliamentary majority has moved to implement a vast program to correct the public deficit and bring it within the 3% ceiling, established by the Maastricht Agreement, within a 7-year horizon," writes Radulescu.

According to him, regaining the trust of financial markets and EU partners is crucial for maintaining a country rating recommended for investments.

The specialist believes that "reducing the budget deficit will be a difficult process and, most likely, there will be fierce opposition from those who will see their privileges curtailed."

He believes that the idea that the budget deficit contributes to economic growth is false. However, in his opinion, the accumulated public deficit is becoming an important risk factor for national security.

"Unfortunately, there are no miracle solutions. Only the credible and unequivocal reduction in the budget deficit can pave the way for improving conditions on the financial, domestic and external markets. But only after achieving tangible results in reducing the public deficit and after calming the inflationary pressures generated by some of the measures of this program, will it be possible to consider relaxing the National Bank's monetary policy," concludes the article by the advisor to the governor of the National Bank, Eugen Radulescu.