There's something about Romania that reminds me of home. Reading David Stevenson's description in Money Morning recently, perhaps the similarity is that their economy has also lurched from a fake boom to a real bust. Bigger than ours, true enough – from a high of 8% growth last year to a 7% recession this. Its car-making and housing sectors took a big hit, like ours, though even bigger. Inflation is about 4%. Its debt mounted up – though we've beaten them on that score at least – and even more of our public spending goes on welfare-state services. And our public wage bill is higher.
Like the pound the Romanian currency has slid speedily downwards. Instead of just printing money to pay their debts, though, Romania went to the IMF for a bail-out. And naturally the IMF imposed some strict conditions that will help the country to turn around. That's more than we have – and who knows if our squabbling politicians will be able to come up with any firm economic programme at all.
Romania plans even deeper cuts than Greece, slashing the public wage bill by 25% and welfare benefits by 15%. But at least the country's annual deficit is forecast to be roughly half of ours, so they are going in the right direction and starting to balance their budget – while we are just spending like mad, and hoping only that we might be able, sometime, to slow the rate at which we are adding to the national debt.
