Consumption-based policies, budget deficits drove us away from joining Eurozone target, President says

President Klaus Iohannis has said on Thursday, while attending the first edition of the Financial Education Forum, organized by the Financial Supervisory Authority, the Bucharest Academy of Economic Studies and the Romanian Association of Banks, that Romania has undertaken “large-scale reforms and investments , which will generate added value, well-being and sustainable development over time ”.

The president also spoke about cryptocurrencies, financial education or digitization. At the same time, the Romanian head of state pointed out that consumption-based policies, pre-pandemic budget deficits and rising public debt “have taken us away from strategic country goals, such as joining the eurozone.”

“The pandemic and the related economic crisis have caught us unprepared in terms of public finances, with the largest deficit in the Union in 2019, a path that then favored the rapid growth of public debt,” Klaus Iohannis said.

Such policies, he added, have taken us away from strategic country goals, such as joining the eurozone, and now make the adjustments necessary for an effective fight against inflation even more difficult.

“The deepening of current account deficits, the loss of competitiveness amid the energy price crisis, the sharp intensification of inflation in recent months, to name just a few developments, require responsible policies and reforms to bring resilience to the economy and modernize Romania,” he also stated.

According to the president on medium and long term, changing the development model means making investments a zero priority. In 2022, budget allocations of almost 7% of GDP for investment indicate a firm direction, which needs to be implemented and maintained.

“A decade and a half after joining the European Union, our country is still far behind in terms of inclusion or financial intermediation. Since European accession, we have benefited from remarkable economic growth, ranging from a Gross Domestic Product of around € 100 billion in 2006 to almost € 270 billion this year, despite the two severe crises that intervened during this period.  The financial-banking sector, with a key role in mobilizing resources for financing, has also developed significantly. In these 15 years, non-government credit has increased almost 4 times, and the value of the stock market is now 3 times higher. But Romania continues to have the lowest rate of financial intermediation in the European Union. Almost 20 million bank cards are currently issued, and the e-commerce sector has exceeded 6 billion euros. But we are still well below the European average of online shopping,” the Romanian President argued.

In his view, education, financial or not, is also about future lessons, about how we relate to medium and long term development, while digitization is needed as it leads to innovative technologies, which provide efficient answers with a high degree of integration of financial services in the daily life of users.

“I appreciate the efforts made, including the concern of the Legislature to have a symbolic day of financial education. However, I believe that there is room for more and better in terms of concrete and pragmatic initiatives and projects. As a country, we aim to make far-reaching reforms and investments that generate added value, prosperity and sustainable development over time. The quality of economic policies, laws and governance must be based on sound economic education, which generates responsible decisions and measures, through which we can return sustainably to the area of ​​monetary stability and macroeconomic balances. Banking and financial bodies, which are in daily contact with their customers, with the citizens, can get involved and get more involved. This interaction can be well exploited through specific information programs and dialogue with customers, through joint projects with universities,” Iohannis also said.

budget deficitsconsumptionEurozonefinancial educationGDPpoliciespresident klaus iohannis
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