FinMin Warns of Hard Landing if Political Instability Persists

Finance Minister Tánczos Barna said on Wednesday that the Romanian economy will face a “hard landing, not to say soft, because it is not credible” and “very hard” if political instability continues, according to Curs de Governare. A day after the historic exchange rate of 5 lei to one euro, the minister announced that there will be a public debate regarding the tax increase and said that a “fiscal reform” is needed. Minister Tánczos Barna made these statements at the Romanian Business Leaders Summit, which was also attended by interim president Ilie Bolojan.   “A hard landing is possible, not to say not soft, because it is not credible – very hard if the political instability continues. If we start the measures, the landing is manageable. It depends on where we land, the deficit is 8.6%. It depends on who is flying the plane, who is the pilot and the runway, on how resilient the economy is. It is solid, we still need a pilot, but the situation is manageable,” said Tánczos Barna, quoted by cursdeguvernare.ro. The Minister of Finance stressed that “the financial situation is not easy at all, but it is manageable.” He also said that a day ago he had “a long discussion” with the governor of the National Bank of Romania, Mugur Isarescu, because “in these moments, communication between the National Bank of Romania, the Ministry of Finance, the line ministries and the banking system are vital”:   “Communication is vital for short-term and medium-term stability. What we need to ensure during this period, in these extremely fluid days, with contradictory messages and a lot of propaganda, is stability from state institutions. Both at the Ministry of Finance and at the National Bank of Romania, we have found solutions for stabilization and predictability in terms of monetary policies, fiscal policies and from the EU.”   Regarding the devaluation of the leu, Minister Tánczos said that “it is a psychological threshold” and that “the pressure is not that great”, arguing that “there is enough money in the reserve” of the National Bank of Romania.   “The psychological threshold of 5 lei – this is a psychological threshold. The pressures are greater, fake news is also appearing. The pressure is not that great, there is enough money in reserve, enough professionalism and stability at the NBR to get through this difficult but manageable period. We have a consistent buffer that ensures the financing of public spending in the short and medium term. We have revenues that give us hope that the economy will remain robust and performing. Even if the first 3 months were not the best, April is a month with good results that show that the economy is still performing – taxes, excises, duties continue to show that the Romanian economy is robust”, the minister also said.   Asked by journalists present at the event whether Romanians could expect tax increases, given the current instability, Tánczos Barna said that a “public debate” must take place in June, before any political decision.   “Tax increases cannot be made without public consultation – we cannot repeat what has been done in the past. We must ask the citizens and companies that pay excise taxes. They must be publicly debated and implemented. I do not see these taxes being implemented on June 1, and certainly not in May. In June, a public debate must take place before any political decision. The political situation offers a new dose of uncertainty, but a public consultation is mandatory. A fiscal reform is needed. A week ago I would have said that 2025 will end without substantial changes on the revenue side (taxes and duties), but after the elections it must be reanalyzed by those who will be in charge. Who it will be, we will decide or Parliament will decide in the coming weeks. But fiscally, things are not so bad,” added the Minister of Finance.