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Economists: Romania must get on international markets. Current public debt structure is unhealthy

Luni, 23 august 2010, 11:52 English | Business

The current structure of Romania's public debt is not "healthy", economists warn. "There are hardly any long term resources beyond those from international institutions. Tenders with 3 or 5-year deadlines who have been accomplished managed to draw rather little of their initial purpose. The current state is that we have a high enough short-term effort to roll public debt and that exposes us to risks", Ionut Dumitru, chief economist at Raiffeisen Bank and head of the Fiscal Council, has said.

He showed that the appearance of a new political crisis or a series of turbulence movements on international markets would put pressure on the deficit and the public debt refinancing.

Risks may be fought by attracting long-term loans, but for that a fiscal consolidation is needed. "The market has to understand that such a fiscal consolidation is serious. Without it and when markets see that in fact you don't have a trend to reduce the budget deficit as you're using temporal solutions, deadlines become almost inevitably shorter and shorter, as the funder's trust is lacking", says economy professor Daniel Daianu.

He says that unless the economy returns to growth and fiscal consolidation is accomplished, there is a risk that the Finance Ministry enters a vicious circle as it would be forced to go the route of shorter and shorter-term issues at higher interest.

Regarding to central bank governor's recent urging that authorities try all loaning tools, the two economists believe Romania has not been present on foreign markets for the past years because it did not show credible economic policies.

Daniel Daianu gave the example of Hungary, a country which could draw loans from international markets after dropping a deal with the IMF because it had a budget deficit much lower than Romania's.

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