Eugen Radulescu: Future of economy remains uncertain;few days to save what can be saved from NRRP

  The future of the Romanian economy remains extremely uncertain; we have only a few days left to salvage what we can from the National Recovery and Resilience Plan, and if laws that have been stalled for five years are not adopted, we will lose billions of euros, warns economist Eugen Radulescu."For nearly a decade, we have been living well beyond our means. We are consuming on credit that is growing exponentially and is on the verge of exploding. (...) We are very close to a major crisis?not merely a drop in consumption of a few percentage points amidst stagnant production. No, we are not witnessing the collapse that some seem to desire. Our economy appears to be stabilizing, despite the direst of external conditions: an unprecedented drought in Europe (which even forced the shutdown of the Cernavoda power plant), the war in the Middle East (keeping oil prices 50% above January levels), and major political uncertainties in developed nations, starting with the US. That said, the future of the Romanian economy remains extremely uncertain. We have only a few days left to salvage what can still be saved from the NRRP. If laws that have been stalled for five years are not adopted, we will lose billions of euros?the EU grant funding upon which this year's budget was built. Without them, the situation will deteriorate drastically and rapidly," Radulescu wrote on his Facebook page on Monday.He emphasized that, in the meantime, "the political class remains locked in a hand-to-hand struggle, while the car we are all in is heading full speed toward a wall."For their part, the economist added, the unions are behaving completely irrationally and refuse to admit that there is no money left."The wage law may not be flawless, but what are the alternatives? Do we simply bang our fists on the table and solve the problem? If Parliament yields to union pressure, the speed at which we are heading toward the wall will increase. I repeat, this is not a political comment; it is strictly economic. The only positive development over the past year has been the reduction of the budget deficit. The drop from 9.3% of GDP in 2024 to 2% of GDP in the first half of this year represents a significant achievement. Indeed, this was the authorities' key argument that enabled the maintenance of the investment-grade rating," noted Eugen Radulescu.In his view, however, this reduction has two sides. On the one hand, it was achieved overwhelmingly through tax hikes rather than by cutting public spending or improving revenue collection?"which generated frustration and provided ammunition for attacks on the Government." On the other hand, the hard part is only just beginning; by December, only half of the necessary deficit reduction will have been achieved, and even that assumes the successful implementation of the PNRR program."Whoever forms the new government will be compelled to adopt tough measures to further reduce the public deficit. I heard a union leader propose raising taxes to meet wage demands in the public sector. Such a proposal is beyond shameless; it would be a true tragedy if Parliament were to accept it. Solutions do exist. (...) Perhaps now, at the eleventh hour, our politicians will come to their senses. A government with full powers and a committed agenda of major reforms would be a good start. Rent-seeking from public funds can and must be severely restricted. Only in this way do we have a real chance of avoiding collapse," stated Radulescu, who also serves as an advisor to the Governor of the National Bank of Romania.On Sunday, in a social media post, he warned that "slowly but ever more surely, we are heading towards disaster.""The PNRR [National Recovery and Resilience Plan] will conclude without Romania receiving the final tranches. The politicians' madness has reached a fever pitch: after the PSD crippled public finances with its utterly irresponsible policies in 2024?and fiercely, even suicidally, opposed any reform while in government?it is now acting to ensure S&P downgrades us to the category of countries 'not recommended for investment.' First, it wrecked the ANI [National Integrity Agency] Law, and now it is staunchly opposed to the public sector wage law, fighting side-by-side with the unions?unions that will be complicit in burying the economy and any chance of improvement for more than a decade to come. I am appalled by the unions' recklessness. So, keeping nominal incomes unchanged for some public sector employees is absolutely unacceptable, is it? When the country's public debt has surpassed 60% of GDP and the annual deficit is stuck at around 6% of GDP, who exactly do these unions imagine will boost their incomes in the coming years? (...) Dramatic drops in nominal income, unemployment, and double-digit inflation will follow?and this for many years to come," warned Radulescu.He pointed out that half of our public debt is denominated in foreign currency?amounting to roughly 30% of GDP?but warned that if the country ceases to be an attractive destination for investment, the exchange rate would "plummet," causing the foreign-currency debt to balloon."Capital will flow out of Romania, to the delight of the brainless who want us to be left with the horse-and-cart industry and to eat wild berries. We won't even have those?we'll be eating grass and tree bark," Radulescu wrote on his personal Facebook page. (Photo:https://www.facebook.com/)