“It is clear that this crisis in the United States is affecting the entire world. It is a crisis that is spreading. Rapidly or slowly, it all depends on the exposure each country has to the American market, but it is spreading. To America, this crisis means a correction, especially if we look at the real estate market. After the intervention of the state at Fannie Mae, Freddie Mac or the intervention in March when it took over Bear Stearns, we are seeing another type of relationship form between the state and the private sector. That will lead to a new regulation of the governmental policy, to rules being redefined. We will see a redefined number of banks in the international system, some will merge, others will disappear. A new map of the global financial system will be redrawn,” commented Mihai Tanasescu, Romania’s representative to the IMF.
“Romania, too, is connected to the crisis on the foreign markets, we cannot say it is isolated, unaffected, but it is not directly involved. The Romanian banking system is still sound, because the parent-banks did not have a high exposure to America. Yet the global cash crunch persists, and everybody is anxious to find a place in this context. As such, financial flows to Romania will decrease and lending, consumption and implicitly economic growth will in turn slow down,” Tanasescu went on.
“The markets had a very harsh reaction to these changes. What happened in Moscow can be explained in two ways. Besides the lack of confidence on the part of investors, as foreign analysts comment, the crash of the stock exchange came as a result of the war with Georgia and of the financial flow exodus. The state had to intervene to stop this haemorrhage. At any rate, we are witnessing global turmoil,” the former PSD (Social-Democrat Party) finance minister said. He added that a slowdown of the economic growth would be desirable.
“In my opinion, it would be good for economic growth to see a correction to 5% or 6%. But that depends on the new Government, on the programme it will come up with. There is an expectation that the economic foundations will consolidate. For instance, a slowdown of the leading growth will lead to a reduction in the current account deficit, which is very high, 14% of GDP and of course, the fiscal policy will have to be cautious, in sync with monetary policy. This is actually a responsible answer to this situation: public policies need to be more cautious, not add to the already existing risks,” Tanasescu said. Should the state intervene?
“As far as NBR’s intervention in the banking sector, the governor said a few months ago that if foreign shocks were to occur in the Romanian banking system, the Central Bank would make cash available. Yet such shocks have not occurred; the state does not need to intervene for the time being,” Tanasescu explained.