Could the real budget deficit please stand up?

Yesterday I watched some guy from the ruling party PDL on TV talking about the budget deficit for the first 10 months of this year. He was boasting about the 2.5% deficit allowing room to reach the 4.4% target for the year.

This morning I was watching a report showing that a hospital doing lab analysis for the Police Department is about to close its doors because it has not been paid for a year by its client.

Of course I know that the guy yesterday was talking about the cash budget deficit and not saying a word about the arrears. I do understand the politician trying to hide the truth. I do not understand the independent media and analysts not telling the real story about the budget deficit.

What Romanian politicians do not understand is that while cash budget deficit is not directly affecting economic growth the size of arrears does. But independent analysts  should and is their role to tell the real story.

P.S. I would, but the mainstream economic media has no love for me

12 thoughts on “Could the real budget deficit please stand up?

  1. A right-on-target article fully consistent with the brand (Citu). One objection, however: let’s not give the self-styled Caesar more than actually is his (accuse independent (?) media of taking sides); simply put it is mostly incompetence closely seconded by professional and/or personal negligence that we commonly know locally as “… las’ca merge s’asa!…”. Needless to say, commenting on the quality of the governance act rendered by most of the Romanian politicians is, at best, futile!

  2. I agree with you but, as everything else in economics, this should be taken with a pinch of salt. Companies operating with the Romanian Gov. know that arears are an issue and budget their cash flow accordingly. Moreover, the final costs include this “inconvenience” and are, as expected, bigger then those inccured in other countries.

    This can be easely observed in the construction (transport infrastructure) and pharmaceutical sector.

    In other words, the private sector has addapted to this issue and is charging bigger fees when working with the Romanian Gov.

    Btw, in 2012 the deficit will be measured by taking in to account these arears.

  3. @Florin Citu
    “P.S. I would but the mainstream economic media has no love for me”

    “When you’re one step ahead of the crowd you’re a genius. When you’re two steps ahead, you’re a crackpot.”

      1. Exactly. And that’s better if you consider that the crackpot is one step ahead of the genius. This is the case through the perception of the common people.🙂

  4. There is a guy, not an analyst, but a treasurer in a commercial bank, that said it sound and clear, even from the summer of 2010: the romanian state is in default, we can consider that they defaulted on their debt, actually, and they should find a solution to step out of this shame. He is not very loved by the media either, as they don’t ask him to many questions, very often :)). The guy proposed to transform the debts in bonds. I think that at least for some of them, it may be an idea. On one side this would make the debt and a default more clear, because a bond is a bond, you can’t tell anybody, anymore, that there is no deficit and no default, when the principal reaches maturity. So you will be obliged to pay, if you don’t wanna make a default and support its consequences. And then, some of the financial players may became opened to buying at least some of them. This would provide the companies owning them with some liquidity, which would be better than what the state gives to them, like nothing. Of course, I don’t know if that hospital will be of really much interest for the guys in the market, but there may be other debts that could become more interesting to deal with. But at least that hospital will have an a clear and sound commitment to pay, from the romanian state, a bond being stronger than just a supplier commercial debt.

  5. Of course, the romanian state is not interested in the guy’s proposal, as they know they actually are in default, and can’t pay :)))) And a bond would indeed bring the shit to surface, which they don’t want, of course🙂.

  6. Statul roman a fost, este si va fi organizat pe baze feudale, pe principii de vasalitate! Care stat roman? Aratati-mi o insitutie, una singura, de stat care are principii si legi de functionare si functionarea de zi-cu-zi bazata pe vreun fel de moralitate, de etice, de ce vreti voi! Din ce in ce mai multa lume se imbata cu “statul minimal” dar nimeni nu vrea sa spuna cat de putred e sistemul actual, nimeni nu vrea sa ii expuna racile, sa scoata scheletii din dulap. Nimeni nu vrea sa realizeze ca un sistem ca cel din romania nu se poate decat autodistruge – cum, in ce fel ci cu ce consencinte nu vrea sa gandeasca nimeni. Intr-o societate in care ipocriza a ajuns cea mai de seama valoare personala, in care ipocriza ne ajuta sa trecem peste defectele sistemului, mai sunt unii care spera in statul minimal??? Cand sa se intample asta? Cum? Care sunt pasii de la starea actuala de echilibru mlastinos in care zace societatea catre un alt echilibru? Despre care nu e clar cum arata?

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