A budget deficit occurs when a government's spending (or a micro level, say a company's) is higher than incomes. The total budget deficit includes the structural deficit and the cyclic deficit. The structural deficit 95% in Romania's case) is the deficit the budget would record if the economy would increase to the level of the potential GDP. According to the circumstances, when the economy grows more rapidly, like in the past years, the budget deficit is lower than the structural deficit.

The cyclic deficit represents the price of the necessary loans during crisis, when the unemployment is high, public incomes are dropping and social spending are up. The economy theory says that the cyclic budget deficit will be cushioned by the cyclic surplus which occurs during economic boom.

The budget deficit problem is not only specific to Romania. But the risk of these deficits came to worry the entire Europe. Why are there deficits dangerous? Because there is a difficult cost at the expense of their finance. If a country prints money, than you’ve got inflation. Economy manuals say that a healthy way to reduce this imbalance is to reduce public spending, administration spending, cut subventions, increase the tax base (from as little as possible to as many as possible) and to focus on indirect taxes.

According to Eurostat data, HotNews.ro put together the budget deficit map of EU members. Click the picture and see.