Romania's recession is low because the fiscal space to push the economy is low, Romanian Central Bank Governor Mugur Isarescu declared. He appreciated that the budgetary correction measures will be difficult and painful from a social point of view. The illusion that we can find solutions to a higher budgetary deficit is wrong: an increase in taxes is inefficient if budgetary spending is not decreased.
The economic growth Romania witnessed in the last years was based on unsustainable disequilibrium, Isarescu said. The deficit was huge, stimulated by capital entries and the crisis taught us that these disequilibrium needed to be corrected.
- the real estate boom was registered in some cities
- the state increased salaries and pensions without grounds
- the good news are that we did not have banks crash, we do not have a huge public debt and we did not have toxic actives