Economist Radu Nechita explains, in an interview for “Adevărul”, why the European Commission is in the position of asking Romania for a series of measures, some harsh, but also where Brussels is exaggerating. In his opinion, the blame for the current economic situation of the country belongs exclusively to the last governments that led Romania.
The Prime Minister and the Minister of Finance do not find solutions for the deficit PHOTO: Inquam Photos/ George Călin
Romania’s huge deficit and the country’s financing and debt problems are causing debate, especially after the negotiations with Brussels have not led, at least for now, to a consensus on the necessary reforms.
Furthermore, the Minister of Finance, Marcel Boloș, complained that the European Commission officials are demanding some measures that would lead to Romania entering insolvency. And Boloș listed here the reform of the single salary, the pension law and the reduction of the budget deficit, which, if done at the same time, would endanger the country’s economy. At the same time, the introduction of progressive taxation and the reduction of VAT rates from three to one would lead to price increases in the chain, and food prices would immediately increase by at least 10%, the same minister claimed.
“Budget crunch” brought us here
“Adevărul” spoke with the economist Radu Nechita, associate professor at the Babeș-Bolyai University in Cluj, about the risks that these measures would entail for Romania’s economy.
The professor from Cluj believes that Romania ended up with this deficit because of the bad decisions made by the last governments.
“We have reached this situation, with the deficits we have, after a succession of economic policy errors. During periods of economic growth, you do not run a budget deficit, but reduce the public debt. During periods of economic growth, you run a budget surplus rather than a budget deficit. What did the Romanian governments do? All of them, regardless of political color, ran deficit after deficit. What this means? It means that all governments spent more money than they collected in the budget”, points out Nechita.
Why are we being asked for harsh measures?
The European Commission seems to have lost its patience and is firmly demanding tough measures, which will affect the population, says the professor, who emphasizes that Brussels is not to blame for the delicate situation in which Romania’s economy finds itself.
Radu Nechita
“They come and set us certain conditions, they tell us like this: “We don’t want to give money for nothing, to throw some money into a bottomless bag. We want these resources that we make available to you to have an impact, to allow you to rise from the mire in which you have been complacent for so long, to generate economic growth», he adds.
An exaggerated requirement
However, there is also an exaggerated measure that would be required from Brussels, says Radu Nechita.
“On this existing logic of Brussels, certain problems can be grafted that have nothing to do with our interest, but with their interest. Namely, the fact that we have a tax system that, at least on paper, looks very competitive. We have single rate, we have a tax system with taxes at least at the percentage level and the way they are calculated, at a reduced level. And this thing drives them out of their minds. Because they have progressive taxation, they have a much more complicated tax system than ours, and instead of changing it and making it reasonable, they want us to change ours, even though it’s better than theirs. All for political reasons”, claims Nechita.
There is also a paradox here, explained by the professor from Cluj. On the one hand, these tax measures and discipline would help us, but changing the tax system would cause a lot of dissatisfaction among investors. Moreover, raising taxes would be a toxic measure.
“This package, the conditions they put on me, part of it is common sense, part of it is really solvable. But the idea of increasing taxes, tax rates, is toxic. We must reduce public expenditures, especially those that are not necessary, those that are useless. Some of them are downright harmful,” adds Nechita.
The European Commission also strongly requested a salary law and a pension law updated according to Romania’s needs. Here, the Romanian authorities have no excuse, says Radu Nechita.
“So, the Romanian state is a monster, a parasite of the economy that absorbs all resources to feed itself. We have far more public sector employees than other Central and Eastern European countries. Of course, you cannot apply the single wage law when you have about 500,000 more employees in the state than would be normal. But that’s not the EU’s fault for demanding the Single Pay Act. And look into the pension system. There is a small percentage of very, very large pensions that belong to this aristocracy, to this budget snitch, which manages to extract some absolutely colossal resources from the state budget and ultimately suffocates the private sector that generates the country’s wealth. We get everything from this hood”, says the teacher.
All economic imbalances were caused by politicians, by those who governed Romania, regardless of political color, by all those who tolerated a harmful system, is Nechita’s conclusion.
“We can reproach the European Commission for perhaps asking us for a progressive system that would turn us upside down, but not for the slander and mockery of public money that this scumbag, this junta that claims to be a state. If they had done their job, stolen less and taken the appropriate economic measures, we wouldn’t be in a position to go to Brussels again with our hats,” concludes Radu Nechita.
2023-09-11 18:31:50
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