Romania’s example for how to address fiscal problems
By Victor Ponta,
The writer is the prime minister of Romania.
On Nov. 6, U.S. voters sent their leaders a message about the future economic direction of America. Europe is currently going through a similar process, country by country. In Romania, our legislative elections will take place Sunday.
President Obama’s reelection last month was a victory for the principles of fiscal consolidation and smart growth. More and more Europeans are expressing their desire for these policies as well.
Romania was one of the countries hit hardest by the economic crisis in Europe. The austerity program enacted at the time was a poorly judged, knee-jerk response that had a devastating social and economic impact on our country. Teachers and doctors were put on lower salary levels than those for unskilled workers, and Romania experienced massive emigration of our middle class.
Our Social Liberal Union — a center-left and center-right coalition — came to power in May and immediately prioritized a sustainable plan of action based on smart, inclusive growth, with the right balance between strict budgetary discipline and economic recovery, between growth and social development.
Our government remains firmly committed to balancing the budget and achieving budgetary consolidation. Romanian public debt has decreased since May, and we have reduced the public deficit from 4.1 percent of gross domestic product in 2011 to 2.2 percent of GDP in 2012. Both indicators met with positive feedback from the International Monetary Fund (IMF).
At the same time, we enacted proenterprise measures designed to support growth and create jobs. We reformed tax reimbursement to support small businesses, reduced tax evasion and began to tackle some of our country’s most entrenched and murky financial arrangements. Our tax rates have stayed low, and, as part of our package of economic reforms, we have planned new corporate tax breaks to promote investment and job creation. All this has been achieved against the backdrop of a seemingly worsening economic climate in Europe.
Europe has witnessed rising popular frustration at the failure of austerity to deliver employment and sound fiscal balances. Voters from Denmark, France, the Netherlands, Lithuania and Romania have put their trust in pro-European Union, progressive governments with economic programs like ours — shunning the values of populist politics based on xenophobia and protectionism.
International consensus, buoyed by the likes of the IMF, has already started to warn of the consequences that too much austerity will have on an already struggling Europe — prolonging the sovereign debt crisis, rather than facilitating its resolution. As IMF Managing Director Christine Lagarde recently argued, we are treading a “narrow path” between the risks of debt and recession, but “without growth, the future of the global economy is in jeopardy.”
Another important lesson both the United States and Europe are learning is that, in the face of daunting economic challenges, it is imperative to ensure that the will of the people is put first. In Washington, Democrats and Republicans are grappling with the best way to avoid the “fiscal cliff.” In Romania, the center-right and the center-left have formed a coalition, putting ideological differences aside to build a common project for a strong Romania.
Both sides of the Atlantic have seen the devastating effects of the global recession and the soul-searching it prompted from political parties. My coalition partners and I eagerly await Sunday’s vote and are optimistic that the Romanian people will return our government and continue down our path of reform. When they do so, one of our top priorities will be to contribute to a more integrated and prosperous Europe, and to strengthen our strategic partnership with the United States.
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