Mr. President Basescu’s speech, much ado about nothing

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.



3 thoughts on “Mr. President Basescu’s speech, much ado about nothing

  1. Eu de vreo doua zile traiesc cu o mare intrebare in minte … o intrebare ce este probabil “prosteasca” … dar care nu-mi da pace! Ma tot gandesc ce ar putea insemna declaratia lui Isarescu (vezi mai jos!) … sau este doar un bull-shit clasic … si sunt eu prea tulburat de criza 🙂 🙂 🙂 . Tu ce crezi? Este declaratia lui Isarescu un semnal ca BNR se va pozitiona altfel de aici inainte … sau cuvintele sale nu spun de fapt nimic? Ce inseamna “sa forteze”??? Cum poate face asta? Ce rol va juca (sau ar putea juca) BNR in asta????

    “Anul 2012 si cei care vor urma nu vor mai semana cu anii 2009-2011. ROMANIA VA TREBUI SA FORTEZE IESIREA DIN CRIZA (sublinierea imi apartine!), un proces greu, complex si dificil. Ceea ce va cere, din partea intregii societati romanesti, un nou efort de restructurare, de eficientizare, de perfectionare. Si, mai ales, un efort de adaptare in viteza a economiei la un sistem competitiv”, a declarat guvernatorul BNR Mugur Isarescu cu ocazia decernarii emblemei “Onoarea Armatei Romaniei” din partea MapN, potrivit Hot News.

    “Eu cred ca, in 2012, tara se va putea angaja pe doua fronturi: unul pentru insanatosirea in continuare a bugetului si al doilea pentru consolidarea cresterii economice. Altfel, doar taind cheltuieli bugetare, s-ar putea sa fim loviti de alte si alte disfunctionalitati“, a mai spus Guvernatorul.

    Corectarea erorilor de politica economica este, peste tot in lume, dureroasa, de multe ori greu de inteles de catre public si inerent tarzie, dar este absolut necesara. Stiu din experienta ca negarea nevoii de ajustare nu este o optiune viabila. Este insa adevarat ca asigurarea sustenabilitatii fiscale fara a pune in pericol perspectivele cresterii economice constituie o provocare majora pentru decidenti, declarase anterior Guvernatorul, cu ocazia conferintei “Provocările creşterii economice în Uniunea Europeană. Reforme pentru viitorul Europei”.

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