There are a lot of erroneous ideas circulating in the public space, one of which is that the budgetary adjustment could only be made on the expenditure side, claims the chief economist of the National Bank of Romania (BNR), Valentin Lazea.
"Today, when we talk about the budget, there are a lot of erroneous ideas circulating in the public space that, how should I say, shape the public and political agenda in a way that they shouldn't. And I'll give you three examples. A first idea that was very popular, now it seems to be losing ground, is that the budget adjustment could be made only on the expenditure side, thus not touching on the revenue side at all.
But now it seems that political leaders have understood that this cannot be done and that it must be done both on the expenditure side and on the revenue side.An open discussion with specialists from the Ministry of Public Finance was enough to see from the start, from day one, that that initial idea was not working.
Why? Because we have a very large adjustment size. 40 billion lei or 8 billion euros cannot be reduced only on the expenditure side. The second idea that is still circulating, but still losing momentum, but unfortunately shaping expectations, is that, "let's cut spending first, then wait for better tax collection and only as a last resort, if these two don't work, let's increase taxation".
"Or when those who say this neglect the urgency of the adjustment, an urgency that is given by the Commission's expectations, that we come in June with a credible program, for external financiers who are also expecting this and not least for the rating agencies, which in August and September will re-evaluate Romania," said Valentin Lazea, at the 17th edition of the annual conference of the Association of Financial and Banking Analysts of Romania (AAFBR).
He mentioned that Romania does not have time to wait until collection improves, indicating that the urgency of the adjustment makes that idea irrelevant.
"A third idea that is again circulating in the public space is that we could present ourselves with measures that are difficult to quantify or unquantifiable and with measures that can be contested in the Justice system, such as improving collection, collecting VAT better, reducing special pensions and so on. Romania has a credibility handicap from previous rounds of negotiations, when it kept promising such measures that it did not deliver, so such measures will have no success either with the Commission or with the rating agencies. We must come up with very clear quantifiable and uncontestable measures in the Justice system. And with that, I think I have answered 20 questions in advance," declared Valentin Lazea.
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