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| Economic Developments 16/06/2011 |
| (2011-06-16) |
| Last updated: 2011-06-17 13:33 EET |
After nearly two years of crisis, Romania emerged from recession earlier this year, with signs of economic growth steadily becoming manifest, authorities say. Bucharest officials decided to keep austerity measures in place, while at the same time looking for new means of curbing expenditure. X is in the studio with a report on this issue.
The governments in Romania, Latvia and Iceland last week sold bonds to private investors. This is indicative of economic growth in the three European countries that were forced to call on the IMF and the EU for financial aid in order to overcome the economic downturn. All three of them have a long way to go before the effects of the crisis wear out.
However, economic analysts are saying, they are well ahead of countries such as Greece, Ireland or Portugal, that started to recover from the crisis with a much higher level of debt. At the end of 2010, the government debt of the three states stood at 142%, 96% and 93% of the GDP respectively.
By contrast, Latvia’s government debt was 45% of its GDP, while Romania’s was 31% of the GDP. At present, Athens officials are negotiating a second rescue plan with its partners in the Euro zone.
The negotiations unfolded against the backdrop of street protests, while there is increasing talk of Greece switching back to the Drachma. Economic analyst Bogdan Chireac looks at the possibility of Greece being pushed out of the Euro zone and examines the current situation in Romania and Greece, two countries with a good representation of Greek investment:
“Should Greece revert to the Drachma, economic analysts have issued a bleak forecast, which we Romanians experienced in the early 90s, namely a three-figure inflation rate. Nomura Bank, a highly respectable Japanese bank, has highlighted the fact that branches of Greek banks in Romania and Bulgaria have been financing their mother-banks, thus ensuring a steady flow of cash to Greece. Otherwise, it’s not clear what will become of these banks. These are Romanian banks with Greek capital, but should Greece go bankrupt and banks collapse, the Romanian Central Bank might certainly step in. The problem is that it lacks the funds to rescue Romanian banks.”
Bucharest authorities have extended the austerity measures that brought Romania out of the recession, and are currently looking for new means of curtailing expenses. PM Emil Boc has warned in an interview with the Romanian Broadcasting Corporation that a crisis rebound has been signaled at global level. In this context, the administrative-territorial reorganization of Romania that is being debated at present in Bucharest would be instrumental in curbing expenditure in the public sector.
According to the Romanian official, the reorganization would result in a better functioning of the state, coherent development policies and a higher rate of absorption of EU funds. In order to access EU funds, the PM argues, Romania would need administrative-territorial units with a population of at least 3 million inhabitants each.
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