We do not want to admit one thing clearly. Namely, that since 2016, the entire population of Romania has been living beyond their means, National Bank Chief Economist Valentin Lazea stated on Thursday (clarifying that he was speaking for himself) at the conference “Interbudget Deficit and Economic Sustainability”, organized by Oxygen Events.

“Because it means borrowing and increasing your deficit. We live better than we can afford,” said Lazea, adding that we can see this from the fact that the external debt has reached 8,000 euros per person, while this money has not created the productive capacity from which we can pay it.

“I spent it on trips, villas, Vuitton, luxury cars, etc.,” Lazea muses. “Let’s tell the people who are screaming that they are in trouble and that they can’t live worse, because in the last 8 years we have all lived far beyond our means,” he added.

What else did the Chief Economist of the BNR say on Thursday:

On tax avoidance and optimization: how many people benefit from this tax optimization? So many – those with SME’s, PFA’s, hell knows what else they have…

In our country, in addition to the existing evasion, there is optimization of taxes in dozens of industries for dozens of professions, our laws are made selflessly and so on. And the government has just begun to investigate this tax optimization, and look at the roar and howl it has caused.

There is, I repeat, no painless method of limiting taxation; one or the other will still howl. How many people benefit from tax optimization? There are extremely many – those who do not pay CAS, who have SMEs, PFA, who knows what else they have… They will all take it like a snake in the mouth.

But Mr. Dayan’s words, sir, do we really not understand that no one can pay? And I go further. Not only can no one pay, but absolutely all of us will have to pay at some point

About the budget deficit: We are in the situation in which a driver who accelerates on a downhill

If we compare ourselves with the Czech Republic, Poland and Hungary, we had the largest budget deficit in 10 of the last 18 years. What is the real problem? Throughout this period, our deficit has been procyclical, meaning it has grown strongly even in years when gross domestic product has grown, sometimes above potential, giving that growth an unnecessary boost.

This is exactly the situation that occurs to a driver at speed during a descent: the car is already accelerating due to the force of gravity, and he, a reckless driver, presses on the gas pedal. Or, when he has to climb a hill, he has to brake because the car has already reached a speed that he has little control over.

This is how fiscal policy has been conducted for the last, let’s say, 18 years, with the exception of the short period of 2012-2015.

In essence, we were pushing the pedal when it wasn’t, when GDP was growing very strongly in the period 2006-2008 and again in the period 2016-2019. And the effect of this unnecessary pressing of the accelerator pedal was that when the crises hit us – both the crisis of 2009 and the crisis of 2020 – we no longer had the financial space.

What’s next for fees and taxes. We have four icebergs to which we are headed in a straight line

And there are, why not say, some areas, such as property tax or environmental taxes, which are generally, but not at all, at the high level at which they should be. Why am I saying this? Yes, agree, you can save on expenses. Only those savings – which are not large – will be eaten up in a second by the need for expenditures in the field of weapons, in the field of energy, in the field of ecology and in the field of population aging.

Are we blind or pretending to be blind? We have four icebergs to which we are headed in a straight line. Those four are energy, environment, armaments and aging population, and we say let’s cut costs. Agree, yes, let’s see how much we can reduce, but realistically, with the numbers in the table. Because three-quarters of state employees are teachers, doctors, and public order security. Do we want to reduce? Let’s discuss the numbers in the table and then see where and how much we can reduce. Let’s see how much we can cut spending to get into the deficit.

Valentyn Lazei’s accusations: We did not explain to the public what a massive mistake they are in

We have not explained to the public what a huge mistake they have made. Some say that the faster the economy grows, the better. The economy should not grow in any way and it should grow according to the potential of the economy. Potential growth is either the annual increase in the domestic supply of goods and services, so if you grow more than your domestic supply can increase annually, then you automatically go into debt, imports, deficits, etc. Or increasing the potential of this rate growth that does not create macroeconomic imbalances. Even with us, we economists have not told people clearly these things.

The problems with potential growth are two: one is that it cannot be observed, so one can only guess how much it will be, and the second is that this potential growth diminishes over time as the state develops.

Here in Romania, if we have to estimate, in the decade 2002-10 this potential growth was probably somewhere around 5.5%, in the next decade 2011-2020 it was probably around 4.5%, and in this decade we’re talking about, probably around 3.5%.

If you cut taxes significantly during years of high economic growth, your national debt will increase.

The danger I feel is that, in order to close the budget from a year or 2 years or 3 years, politicians will overestimate the rate of economic growth without learning from the experience of this unfortunate year, when the budget was drawn up based on unrealistic on unrealistic hikes and given that if we still have tight monetary policy next year…

We do not want to admit the very obvious thing, which is that since 2016, the entire population of Romania is living beyond its means. Because it means borrowing and increasing your deficit. We live better than we can afford. And we see this, the fact that the external debt has reached 8,000 euros per person, and this new money has not created the productive capacity from which we can pay it. I hacked it on trips, on vines, on Vuittoanes, on cars and so on

So let’s say to the people who are screaming that they are sorry and that they can’t live worse than this, we have all lived far below our means for the past 8 years.

N. ed. Valentyn Lazeya made a speech on his own behalf, without involving institutions with which he may be associated