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| THE BLACK DAY OF PRICE HIKES 27/06/2008 |
| (2008-06-27) |
| Last updated: 2008-06-30 16:02 EET |
Gas prices are to increase by 12% on an average, while electricity prices will move up by about 5%. The authorities say these price rises should have occurred a few months ago, but the measure was postponed in order to help the population get over winter, when the costs of utilities are higher. Furthermore, according to Gabriel Sarbu, director with the National Authority for Energy Regulation, there are numerous objective causes of this fresh wave of price hikes.
“Concerning the rise of the natural gas price, this has been triggered by the increase in the imported gas price. As you may know, gas imports from the Russian Federation cover one third of Romania’s need. Gas prices on international markets, including gas prices imposed by foreign providers in their relation with Romania have been hiked by about 30 % in the first semester. Of course, electricity will become more expensive as a result of recently hiked fuel prices.”
In order to offset the effect of the price hikes, the government promises compensations for families in low income brackets. According to labour minister Paul Pacuraru, the draft law regulating those compensations will be passed next week:
“The government has decided to grant an additional aid to make up for the upcoming gas price rises, to benefit the families with low incomes, those who were granted heating aid last winter.”
Pundits expect a chain reaction in terms of prices, anticipating an inflation rate of 9-9.5% in July. In a bid to keep inflation at bay, the National Bank of Romania has decided to increase the reference interest rate for the sixth consecutive time.
An 0.25 percent rise has brought the reference interest rate to 10%. Analyst Razvan Voican will dwell on the knock-on effects this measure will have on the Romanian economy.
“ Coming back to the two-digit interest rate could mean a return to the situation on the financial market three-four years ago. It points out the central bank’s fears that all interest rises so far were unable to curb the rising credit tendency and consumption and additionally, the economic growth rate. If we speak about the two-digit interest rate, the market is sure to face additional increases, mainly as more inflation pressure is expected against the backdrop of higher utility prices in July.”
July 1st will be a pain in the neck for the authorities as well. Dissatisfied with the government’s inability to raise the minimum wage up to 540 lei, that is about 150 euros, trade unions threaten to stage protest rallies. However, government officials fear that additional inflation pressure might appear at a moment when inflation is at a high level as it were. Here is labor minister Paul Pacurariu again:
“Romania’s major interest as regards macro-economic stability is to preserve all that has been achieved so far and avoid rampant inflation which might jeopardize the entire economic stability.”
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