Public debt relative to GDP advanced in July as much as throughout the entire Q2, when pandemic reached its peak. Implications
The public debt officially measured by the Ministry of Finance based on the European methodology advanced only in July 2020 almost as much as in… Mai mult›
Infrastructure development mega-plan – mega-business for neighbours: Romania must import 1.8 million tons of bitumen
Romania’s big re-launch plan for the next decade places transport infrastructure at the centre of investments, with an allocation of 60% of the total amount.… Mai mult›
The general consolidated budget registered in the first half of the current year a deficit of about RON 45 billion, equivalent to 4.2% of the… Mai mult›
Siegfried Muresan: The EU is considering the possibility to introduce several types of taxes. The only one on which there is agreement is the one on plastic
At the European level, there is an agreement to introduce a “modest” tax on disposable plastic, a first source of income to support the repayment… Mai mult›
Long-term interest rate fell below 4%. However, a courageous change of economic vision would be required
Long-term interest rate for Romania fell by almost one percentage point in just two months, according to data released by Eurostat. After increasing up to… Mai mult›
de Marin Pana , 24.2.2020
That is well above all the other states of the European Union and far from the European average of just 0.51% in the EU 28 configuration, which also included the United Kingdom until the end of January.
Bulgaria can already access long-term money for development projects at interest rates below the Eurozone average and less than one third compared to the EU average (0.15% per year Bulgaria, compared to 0.19% per year in the Eurozone and 0.49% per year in the EU27-2020). With the note that Bulgaria has a public debt of only 20.6% of GDP (Q3 2019, reduced from 22.3% of GDP at the end of 2018!).
Croatia faces a public debt of 74.9% of GDP (Eurostat most recent data are from Q3 2019). Instead, it announced a firm intention to move to the single currency and applied a fiscal adjustment of the public deficit from -3.3% of GDP in 2015 to a surplus of + 0.8% in 2018 (again, most recent data certified by Eurostat), an evolution which is exactly opposite to Romania.
It is true that both Balkan states mentioned here had a cut in long-term borrowing costs by about four times over the last 12 months (Bulgaria from 0.68% to 0.15% and Croatia from 2.31% to 0.61%).
Methodology note: according to ECB’s definition, in line with article 121 of the Amsterdam Treaty, government bonds’ yield is calculated as monthly averages (not seasonally adjusted) and refers to the gains from investment in the secondary market, taxes excluded, with a residual maturity of about 10 years. Bonds included in the reference basket are periodically replaced in order to avoid gradual maturity changes
In this context, also Romania announced last year at the government level its intention to join the Eurozone sometime (2024 horizon was, from the beginning, less credible). But measures taken have led to an increase in budget and current account deficits. Which, even in the context of the monetary policy relaxation at the European level, only allowed a marginal decrease in the yields on long-term government bonds.
In the context of some contradictory statements regarding this critical indicator for public finances, we can refer to the development of foreign exchange regime colleagues in Central Europe with economies similar to ours by size.
The Czech Republic, Poland and Hungary, together with Croatia mentioned above, have been on a slightly rising trend in borrowing costs since October 2019.
Only that what distinguishes us is not so much the trend (otherwise sinuous) as the level on which this evolution took place in Romania, about two times higher than Hungary and Poland and triple compared to the Czech Republic, not to make an almost useless comparison with Croatia. Beware, with significant long-term effects, even if the adjustment to the financial equilibrium would start tomorrow.
This is the context in which we should carefully think about how long we can still borrow and at what costs, in order to be able to responsibly decide (including for future generations but also for the pensions to be paid ten years from now to those currently working) what would be and what would not be good to do with public money. Which can be borrowed in the long term under the conditions mentioned.