Economist Turned Premier Vows to Safeguard Romania's Credit Rating
(Bloomberg) -- The head of Romania’s three-month-old government says he can not only stabilize the country’s stretched finances but also stop its wobbling credit rating from falling into junk territory -- despite the challenges posed by the pandemic.
Prime Minister Florin Citu, an economist at ING Bank NV before he switched to politics in 2016, has already nixed a scheduled 40% jump in pensions that risked erasing the nation’s investment-grade status. Despite the extra spending demanded by Covid-19, he’s laid out a budget that will curb what was the European Union’s widest deficit when the disease struck.
The major rating companies, which all have Romania one step from junk with negative outlooks, should “appreciate” the measures the government has taken, according to Citu. But he says that while the companies are quick to lower their outlooks, it takes longer to improve them.
“The fact we’ve shown a clear and credible path should help,” Citu, 48, said Tuesday in an interview from his office in Bucharest. “We’ll see if they improve the outlook this year.”
With Romania’s economy notching the EU’s best performance in the final quarter of 2020, Citu and his cabinet are drawing up plans for gradual and sustainable increases in retirement benefits after capping total spending with state salaries.
These -- combined with long-delayed plans to streamline state-owned companies, closing those that drain public resources -- should help narrow the budget deficit toward the EU’s limit of 3% of economic output by 2024, from 9.8% last year. Gross domestic product is set to jump 4% or more this year, according to the prime minister.
Headwinds remain for Citu, who was educated in the U.S. and worked for a stint at New Zealand’s central bank. The EU’s east is currently the world’s deadliest region as a third coronavirus wave sweeps the continent. Maintaining restrictions on daily life risks chipping away at his ruling coalition, while pushing through deep reforms isn’t easy in one the EU’s most corrupt member states.
Citu’s longevity could well become a hot topic in a country that’s had nine prime ministers in the past decade alone.
“There’s a resistance to reform and to change and it’s clear that it can’t be done overnight,” he said. “But I’m willing to pay any political cost to do it. I’m convinced that this ruling coalition will govern for the next four years.”
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