Update: BNR Governor claims paradox – Romania has never been in a better situation, but risks have never been so high

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Central bank Governor Mugur Isarescu considers populist currents may lead to euphoria for beneficiaries, but the economic costs are not at all negligible. During a Coface conference on country risks in Bucharest, Isarescu said “Romania has never been in a better situation, but risks have never been so high,” referring to the profound changes worldwide that he sometimes find hard to understand, hotnews.ro reports.

“We are in a very good macro-economic situation. “Romania has never been in the past 26 years in a better situation, but risks have never been so high. It’s not low risks, it’s about high risks. There were populist measures during the ‘90s, but then we were very low. When you fall from somewhere high, the risk is larger,” he said.

Under the circumstances the BNR chief says the main priority is protecting of macro-economic balances, any consequent adjustment is painful, Isarescu said.

“Macro-economic balances should be protected, otherwise corrections will follow that bring along pain and are hard to put off for years.” The BNR Governor stressed structural reforms are needed, as well as financial stability. Referring to the banking system, Isarescu said bankers should be benevolent too, they should sit face to face with their clients and discuss, as risks sharing is needed.

Isarescu commented further on economic growth, saying that in most world economies the target was growth stimulation. “We have taken it obsessively. I believe it would be wise to be less preoccupied on growth and to not forget the way growth is obtained,” he said.

The BNR Governor said the country risk does not depend only on macro-economic indicators. It includes the principles of the rule of law and of the market economy. Such an evaluation can be negatively influenced by measures encouraging payment indiscipline and contractual indiscipline. I am referring not only to country risk, but also to the risks related to company financing,” Isarescu said on Tuesday.

According to the governor, the link between the rating and the state’s and all companies’ funding costs is scarcely known by the public.

“Certainly institutions such as the ones that organized the today’s conference are well positioned in order to bring to the public opinion these details. A 0.1 — 0.2 percentage points in the funding costs of Romania represent tens and hundreds of million Euros saved or additionally paid. It is only up to certain institutions of the state, but also to market people to make aware the Romanian consumer and the ones who enjoy a brief advantage also about the associated costs of several populist steps,” the BNR governor underlined.

The head of the central bank mentioned is important for the messages regarding the financial stability and economic sustainability to reach the public.

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