Presidential aide: Current inflation is the bill for pandemic fiscal policies

The Presidential Adviser for Economic and Social Policies, Cosmin Marinescu, said on Tuesday, at the “Financial Education and the Banking System” conference that “the global reality of current inflation, extremely painful at the moment, is in fact the bill for monetary and budget policies from the pandemic”.

“It may seem surprising that we are still talking about the need for economic and financial education, after three decades in which we have lived through everything: economic transition, reforms, crises, European accession. It has been 30 years in which the economy and society have evolved significantly, but we must be aware that we will continue to make changes and reforms, from now on, in education, health, economy or administration.

One of the elementary economics lessons I present to my students, from the first courses, says that “there is no free lunch”, that everything has a cost, for everyone, sooner or later, regardless what we choose, as individual choices or political decisions. But, perhaps taken for granted, this simple truth is often ignored, with profound consequences for critical decisions. Too often we encounter views and behaviors that seem to say that education is free – because schools are generally run by the state, that the natural environment is free – because it belongs to everyone, or even peace is free – because we benefit from security , without having felt the war,” the adviser stated.

Marinescu argued that, before we talk about money, about how to manage it, we need to know first about the costs of our choices and their effects on some or all, not only as direct effects, but also indirect effects, and not only in the long term short, but also in the long term.

“It is important to know, for example, that inflation does not come by itself, but is the result of decisions. And let’s understand why the global reality of current inflation, extremely painful at the moment, is actually the payment bill for the monetary and budgetary policies of the pandemic, policies of the “whatever it takes” type, through which the states of the world sought to save the economy from the pandemic crisis, by multiplying the money supply and budget deficits unprecedented in recent decades. And to these is now added the inflationary spiral of war and a severe energy crisis, also potentiated by the green objectives,” he said.

President Iohannis’ aide further pointed out that the costs of post-pandemic recovery are doubled by the effects of war, exploding energy and raw material prices, severe inflation and climate change.

“As far as we can see, we still have consistent steps to go before we can talk about economic stability and predictability again. Looking to 2023, the economic outlook is still burdened by uncertainty, hence various recessionary expectations. Last year’s signs of recovery in major economies were virtually canceled by the war’s effects on the energy sector and key supply chains in the global economy. Economic growth forecasts for 2023 have been downgraded quite heavily. The International Monetary Fund and the OECD estimate modest economic growth for the Eurozone and the US, below 1%, which confirms the fragility of the economies and calls for appropriate measures based on prudence, balance and honest responsibility for the future.”