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Daianu:Big problem this year is to keep spending under control

June 20, 2024

The big problem this year is to keep budget expenditures under control, says Fiscal Council chairman Daniel Daianu, who also mentioned that last year's budget execution in the first months shows last year's postponements to reduce the deficit."We have some gains in revenues, even tax revenues, but expenses are not kept under control," Daniel Daianu said on Tuesday at the "Financial and banking market" conference, organized by Bursa newspaper.Daianu said Romania has a "still reasonable" public debt of 50 percent of GDP, but the problem is that Romanian society spends on 6-7% of GDP more than it produces and this is a situation that cannot be perpetuated."The (European, ed. n.) Commission sees 7% this year (budget deficit, ed. n.) if corrective measures are not taken, if there is no drastic reduction in capital expenditure, as was done last year. They were predicted around 7% and were brought in a little, very little below 6%. Something could be done this year as well. It may be that this year we will resort again to the reserve fund of the Government as a way to make budget amendments, not as is traditionally done, you do one halfway through the year and you do another one towards the end of the year. Something like that could happen," said the Fiscal Council's head.Daianu added that Romania would have to make a correction of the budget deficit, and that it would take more than three years."This correction, in essence, means that more than 4% of Romania's domestic product in the coming years will have to stop being consumed inside. It would be a transfer abroad that would be tantamount to reducing the need for loans. Folks, do we realize what more than 4% of gross domestic product means? Even more, because you have to be visibly below 3% with the budget deficit," Daniel Daianu said.The chairman of the Fiscal Council noted that deficit adjustment cannot be made predominantly on the expenditure side."To think that it could only be done on the spending side, this rhetoric looks good on TV, it looks good in the election campaign. I also hear specialists in economics talking that this can be done. And I sit and marvel. When you have spending of 26-27% of GDP, with chronic underfunding in Health and Education, when we will have to increase defense spending. We had 2.5% commitment and we had 1.6% last year. We may actually need to spend 2.5%. So that would be almost 1% of GDP to give to Defense. Let's face it, these are the realities. These figures are cold, dry. So we talk, we talk, we can talk. So here it seems to me a great lack of realism. And I don't rule it out, I was thinking about whether to use this expression, I called it a little more euphemistically distributional tension. There will be a distributional war in society, who will contribute, with how much? Between employers and employees. In fact, it is the relationship between capital and labour. And you can see that they came out with documents and quite well elaborated related to large contributions, that is, taxation of labour versus taxation of capital. The relationship between public sector employees and the private sector," Daniel Daianu said.  

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