The large budget deficits and the public debt of Romania growing large enough to attract the attention of the big international banks that are increasingly coming to Bucharest to finance the Government. Because Romania's financing needs is increasing, no creditor wants Romania to have problems

The bad news: Due to the large budget deficits, because of the big interest that the government has to pay to finance the deficits and refinance the loans that are due, due to the slowdown of the economic growth, the public debt of Romania will continue to increase at an alarming rate, whatever we do. In the middle of this year, the public debt of Romania, made by governments, regardless of their name, exceeded 1,000 billion lei, reaching 1,040,626 billion lei, ie 57.2% of GDP. By the end of the year, the public debt will increase to 59.6% of an estimated GDP of 1.902 billion lei, that is to end this year with a public debt of 1.133 billion lei. From the public debt since the middle of the year, the debt in lei was 486 billion lei, the debt in euros was 457 billion lei, ie 91 billion euros, and the dollars' debt was 94 billion lei, ie almost 19 billion euros. So, in foreign currency, Romania already has an external debt of the state of over 100 billion euros. Only this year, the government must pay interest of almost 55 billion lei, ie the equivalent of 11 billion euros, for the public debt. Romania has entered an extremely complicated road of very large budget deficits, which have to be financed at market interest, which are extremely large interest, over 7% for lei and over 6% for euros. The budget deficit this year, after rectification, increases to 159 billion lei, which means almost 32 billion euros, a huge amount. It is huge for the government, for the Bolojan government, to reduce the budget deficit, encountering a ferocious resistance from all government parties – PSD, PNL, USR, UDMR, from the central and local administration, from the 1.3 million budgets, from the 5 million pensioners. Prime Minister Bolojan almost has no ally in trying to reduce the budgetary expenses and implicitly the budget deficit. This resistance of the state in the face of budgetary spending reductions will be kept in the coming years, no matter who will be at the Victoria Palace. Rather, taxes of taxes and taxes are more than reducing budgetary expenses. So the large budget deficits in nominal value will continue in the coming years, even if, as a percentage of GDP, it should decrease. Under these conditions, in only 3-4 years we will reach with the public debt to 70% of GDP, if not even 80% of GDP, if no miracle happens. It is unlikely to believe in an exceptional economic growth, of 5% of GDP, which is higher than the need for financing and refinancing of the public debt. It is unlikely to believe that if some privatizations were happening, the resulting money would go to reduce the public debt. In the next decade we are speeding to a public debt of 2,000 billion lei, ie 400 billion euros.The good news: Because Romania has large budgetary deficits and implicitly a very large and very large financing requirement – over 200 billion lei per year, if not more -, plus an accelerated public debt, Romania has become interesting for the big international banks, for the big international funders, for the big international creditors. When Romania had a debt of 10% of GDP, 20% of GDP, at a GDP half compared to now, it was not very interesting for the big international banks. Plus, the interest was much smaller. Now, when Romania needs over 40-50 billion euros a year as a necessary financing, all the big banks of the world are in Bucharest. For example, JP Morgan, the largest American bank, takes extremely determined steps in becoming one of the largest intermediaries and financiers of the public debt of Romania, but also of the great energy projects – the Black Sea Gas project and the extension of the Cernavoda plant, so nuclear energy. Because in the last five years it has borrowed a lot in euros, with a growing financing requirement every year, Romania has become the largest player on debt in the region, even exceeding Poland. In the conditions in which the public debt will continue to increase and the amounts are increasing -both as an annual financing, both as paid interest, both as a level of public debt -, the presence of the big foreign banks is inevitable, especially since Romania cannot ensure the financing of the budget only on the domestic market and that is why it must exit. Last week, after the budget rectification and after finding out what will be the new budget deficit, the Government went out on the external market, where it borrowed with 4 billion euros by selling 7 -year bonds (2 billion euros for an interest rate of 5.5%), for 12 years (1 billion euros with an interest rate of 6.25%), for an interest of 1.25%) 6.64%). Since the beginning of the year, the government has borrowed from the external market in several bonds with almost 16 billion euros. Because Romania is a border country with the Ukraine war, which continues and does not show that it would stop, the European Commission and major international creditors accept access large budgetary deficits, and more, accept the reduction of the budget deficit in several years, without putting pressure on a correction that will destabilize the economy and the country. This was seen in the discussions on the budgetary situation, where the European Commission has accepted the increase of the budget deficit this year from 7% to 8.4%. Probably at the limit will accept and even 9%. The economy of Romania is in obvious decrease, the economic growth has reduced from 2-4% to 0.6%, and any steep correction of the budget deficit would have taken the economy in recession. With a growing social dissatisfaction, with the nationalist and sovereignist current having over 40% in polls, with a fierce opposition from the public administration to the reforms of Prime Minister Bolojan, with the discussed position of Prime Minister Bolojan due to all tax packages, the European Commission has to close the eyes, in order to close the eyes, in order to The war in Ukraine is still high. Neither the European Commission, nor the big international financiers – the EBRD, the World Bank, the EIB – nor the big international banks are desired to wake up with a problem in Romania to overcome the entire investment poprtofol and all the financing granted. Even the rating agencies accept the geopolitical position of Romania and overlook, at least now, the situation of the budget deficit that does not decrease, but even increases, at least this year. Even more than that, it is unlikely that next year the budget deficit can be reduced to 6% of GDP, with a GDP that does not grow, because the economic growth engines have gripped. But as I said, no one wants Romania to become a political, social, financial problem. So everyone wants to borrow Romania, especially since the interest continues to be lifted – double at the euro compared to the European market. Likewise, the big international banks, led by JP Morgan, want Romania to have no problems with the financing of the deficit, because they would create their problems. As you say in the financial world, when you have a small loan you have a problem, when you have a big loan, the bank has a problem. In contrast, what the European Commission, the international banks, the great institutional creditors, is that this government coalition, perceived as Euro-Atlantic, resists, Prime Minister Bolojan to resist and not be taken down by this coalition. In addition to this political stability, the government should take some steps in terms of fiscal reforms, some steps in terms of administrative restructuring, some steps in corruption, a little better steps on attracting European funds. The big financiers will not have social and financial disorders in Romania, and for this they do not have high claims from the Government, from this coalition, except a stabilization in small steps of public finances and, if possible, something reforms. Prime Minister Bolojan obtained the increase of the budget deficit for this year from 7% to 8.4% and the tacit approval from the rating agencies, banks and international financiers. But now it may be to look at the economic relaunch, given that the private economy, private companies, private investors continue to be reluctant to invest, to make new jobs, to let go. Prime Minister Bolojan did not put on the table a concrete plan of economic relaunch, which everyone is waiting for. The private sector is on the money, waiting for a change of perception about the focus that the government should have in the next period. Let's see when this relaunch plan appears, which will change the perception of the private sector from excessive prudence to trust that the economy can recover.
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