If the capping and compensation scheme would remain in its current form and would cost 40 billion lei, there is a possibility that the budget deficit will jump to 9% of GDP this year, says Cristian Popa, member of the Bank’s Board of Directors National Bank of Romania (BNR).

“The Fiscal Council tells us that realistically the deficit is 7% of GDP and also tells us that it is based on a relatively low cost figure of the capping and compensation scheme. So, if the capping scheme were to remain as it is and would cost 40 billions of lei, the deficit would probably jump to 9% of GDP,” said Cristian Popa, at Free Europe.

Asked how he saw the salary increases in the budgetary sector, he said that the mix of monetary policies, which the BNR does, and fiscal policies, which the Government does, is like a car with two steering wheels. When inflation is high, economic policies must curb this inflation.

“One driver is braking and that is us, at the National Bank. For a year already, we have been slowly stepping on the brakes. But, on the other side, of the fiscal deficit, we do not see any braking and then we have only one driver with only one steering wheel braking. This fiscal risk is increasing, I would say, and it is not helping us. Two months ago we were talking about tax increases precisely to reduce the deficit, we were talking about solidarity, now we are talking about increasing spending. I understand that there are social pressures. I understand that inflation affects everyone the Romanians, but we are reaching this fiscal discipline. If you don’t have it, you will create even bigger problems in the future,” said Cristian Popa, according to Agerpres.

Also, when asked what is the danger of increasing the salaries of budget workers, Cristian Popa pointed out that the danger is a bigger deficit.