Governor Mugur Isarescu of the NBR (National Bank of Romania), who was yet to criticise politicians’ decisions, yesterday criticised the Constitutional Court ruling whereby the 15% pension cut was overturned, saying that the vote of the institution was “a vote for corrective inflation”.
“The Constitutional Court vote is a vote for corrective inflation. So, instead of taking from areas where cuts need to be made, you take from everybody. Inflation serves a completely different purpose. It is supposed to bring balance. VAT raise-induced inflation is not monetary, it has a corrective role. Non-monetary inflation does not call for a response from the NBR. If we intervened, the correction would not be achieved,” Isarescu said.
In June the Constitutional Court rejected the Government’s proposal to cut pensions by 15% and later the Cabinet decided to raise VAT from 19% to 24% in order to meet the budget deficit target agreed with the IMF, 6.8% of GDP.
The Governor of the central bank says the Constitutional Court ruling instated the rule that any necessary correction, any curb on spending can only be achieved through inflation.
“Even in the former (i.e. communist) system we learned that economic laws are objective laws. They are like the law of gravity. The Constitutional Court could declare even the law of gravity unconstitutional. If the standards of living were set in the Parliament, you would be hard pressed to find a country not living well,” Isarescu added.

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