I did not think President Basescu’s speech was worthy of post, at least on my blog. But the mainstream media keeps pushing the subject forward. I got few calls from papers to comment on what the president said, what are the implications etc.Well, I am sorry to burst your bubble but the president did not say anything new. Not to me at least.
He warned us about lower growth in 2012. I have been doing this since the day one of this blog, and even earlier since February this year after abruptly ending my experience in the banking sector.
He talked about a need to inject more capital into European banks. Again, I have been talking about the banking sector here and how even its oligopoly cannot do anything anymore to cover years of bad investments and sometimes internal corruption.
He talked about the increase in the CDS – a proxy for the yield at which Romania would borrow in foreign currency – although the blame should not be entirely thrown into the EU leaders’ lap. As I said here before Romania is a small open economy with a very rigid economy, predominantly industrial and agriculture productions. Thus, it will overshoot any time there is an exogenous shock, positive or negative. In other words an infusion of capital due better international fundamentals will push the Romanian economy to grow faster than its trading partners. The effect is the same but with a negative sign for a negative shock, exit of capital from Romania.
He talked about the banking sector in Romania (not the Romanian banking sector as it is referred to in the media b/c that one does not exist) which might be in trouble as most of the Romanian banks have their parent banks in countries with some sort of sovereign debt problem. I spoke about this at length here and I even said that I see a risk of few banks being nationalized and thus blowing the budget deficit out of the sky.
As you can see most of the topics covered by the Mr. President to me or to the people reading or listening to something else beside mainstream media.
However, there was something new in the speech. What was truly new was the request from the President to have a lower than 3% budget deficit in 2012. I do not have a problem with a lower deficit. But there are many ways in which such a low deficit in times of crisis can be achieved. My way would be lower taxes, privatization, lower government public expenditures with salaries, bonuses, goods and capital which is code for cars and notepads for public workers. But that is me, I am sure Mr. President had something closer to the left in mind.