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| MONETARY AND FISCAL POLICIES 05/05/2010 |
| (2010-05-05) |
| Last updated: 2010-05-06 12:58 EET |
The positive consequences of this decision, including a drop in interest rates on loans and the resumption of lending by banks for the population and companies should become visible in about 3 months. The economic analyst Lucian Anghel explains:
“This is a new measure to relaunch the monetary policy by which the Central Bank is trying to help the economy. I believe this will help people who benefit from loans, because the interest rates will decrease gradually and families will have more money at their disposal. It remains to be seen if these additional funds will be used for consumption or will be saved, which depends on people’s confidence that their jobs and incomes are safe.”
The experts from the daily paper Ziarul Financiar do not agree with this view. They say the signal that loans are becoming cheaper comes too late, when the Romanian economy is already on the verge of collapse, with few prospects of recovery. “The National Bank of Romania is doing in 2010 what it should have done in 2009”, headlines Ziarul Financiar, criticising the National Bank’s exaggerated caution last year, when it was very slow in reducing the monetary policy interest rate for fear of inflationist pressures and the depreciation of the hard currency exchange rate.
The criticism bought by the journalists with the Ziarul Financiar extends to the government, which is currently holding tough talks with the International Monetary Fund experts on a visit to Bucharest. The paper presents a yet unofficial scenario according to which, following talks with the Fund, the VAT is to grow in Romania from 19 to 24% and the flat tax from 16 to 20%. The paper believes that the Fund is now pressuring the government to find a credible way of filling the hole in the state budget. Along the same lines, the daily paper Evenimentul Zilei writes that people are now paying with a higher VAT for the government’s indecision. Postponing the reducing of budget expenses and the number of state employees will now lead to an increase in the main taxes and duties levied on the population.
“Incompetence”, headlines Gandul, which then goes on to show how much every Romanian stands to lose if the VAT and the flat tax go up. While the state might receive an extra 4 billion euros, the population will have to cope with a wave of price increases and a 4% reduction in salaries. The option to increase taxes is unanimously rejected by business people and trade unions, who believe these measures won’t lead to economic recovery, but discourage investors and bring the country to economic ruin. Business people say a 1% increase in the VAT means 100,000 people lose their jobs.
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