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Financial Times: Romania and Latvia seem controlled experiments of tough austerity policies

Romania and Latvia seem to be controlled experiments of the tough austerity policies. Romania's case is relevant for a presumable introduction of even tougher measures like those in Portugal or Greece, according to a comment released on Thursday by the British daily Financial Times, quoted by Romanian news agency Mediafax. 


This year, the Romanian government adopted some austerity measures that copied the Latvian model, on purpose or not. Romania and Latvia are the only states of the EU that simultaneously dropped salaries with about 30%, increased VAT and decreased the number of state employees by 20%. 
 

Therefore, both Romania and Latvia seem to be experiments controlled for the idea that the benefits of tougher austerity measures will be bigger than the negative impact of the decline of revenues from taxes, an expert quoted by the daily declared. Romania's size, its dependence on internal consumption, high unionship, active unions and a stiff labour market make it relevant to talk about even tougher measures like those in Portugal or Greece. 


The economist quoted by the newspaper reads that on the long term, the situation could improve but so far the austerity deepened the decline, increased unemployment and launched an attack on basic services sector.
 

However, considering the past events in Romania, when police officers protest in the front of the Presidential HQ, when Finance ministry employees take hostage the minister to protest for their salary cuts one should be more cautious when talking about tougher austerity policies.

January 7, 2011, 4:01 pm

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