The Social Democratic Party (PSD)'s decision comes to add fuel to the fire of political and especially budgetary instability, denounced a few days ago by Fitch Agency, which downgraded us practically to a step of "Junk'' status, that is, an economy not recommended for investments, economic consultant, Adrian Negrescu told AGERPRES.
"PSD's decision comes to add fuel to the fire of political and especially budgetary instability, criticized by Fitch Agency, which downgraded us practically to a step of "junk" status, that is, an economy not recommended for investment. The announcement by Romania's main party not to take part in the government throws Romania into the arms of the IMF, because it will be hard to believe that the new government will be able to borrow at sustainable interest rates, as investors are increasingly worried about what is happening on the political scene in Bucharest," Adrian Negrescu said on Thursday.
In his opinion, the solution of a minority government, without real support in Parliament, is likely to raise serious questions about the implementation of the tough but necessary reforms Romania needs.
"Let's not forget Mr. Ciolacu's legacy - the highest inflation in the EU for the ninth month in a row, the largest budget deficit in history (30 billion EUR), the largest public loan ever made by Romania in a single year (50 billion EUR) and the largest public debt in history (930 billion RON), which has practically doubled in recent years. It is a catastrophic budgetary situation, which tends to get worse in 2025. We will need another 7 billion EUR for pensions, money that does not exist, another 3 billion RON for the salaries of public employees and another 13 billion EUR for the investments assumed under PNRR [the National Recovery and Resilience Plan] and the army's endowment. This money does not exist and will probably have to be borrowed," added the economic consultant.
He emphasized that Thursday's decline of the Bucharest Stock Exchange is "a new signal after the others we already know".
"Investors know these figures, proving their growing concern - today's decline of the Bucharest Stock Exchange is just a new signal after the others we already know - a significant drop in foreign investments, an accentuation of the phenomenon of financial disintermediation and an increase in the financial bottleneck in the economy - are just some of the elements that define, at this moment, the situation of the economy, one on the verge of recession amid the sharp decline in purchasing power, in sales in the economy. You know the scene from Titanic, when the ship sinks and everyone escapes as best they can. Romania has the fate of the Titanic: it is sinking in the waters of recession, after having hit the price iceberg hard, and on the upper deck, politicians are still singing our electoral songs," said Adrian Negrescu.
According to him, Romania's lifeline seems to become an agreement with the IMF.
"Romania's lifeline seems to become an agreement with the IMF that would provide us with 40-50 billion EUR, anyway at a better interest rate than the one we are currently borrowing. Let's not forget that Fitch has announced that in February it will make another assessment of the situation in Romania, and the risk of being downgraded to the category of economies not recommended for investment is very high. If we enter the "Junk" category, this will lead to a major exodus of capital, company closures, job losses and higher interest rates on loans," the economic consultant added.
Prime Minister Marcel Ciolacu announced on his Facebook page on Thursday that the PSD is withdrawing from the talks to form the Executive and will vote in Parliament a right-wing government.
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