ECONOMY

Deficit must go up to prepare Romania for EU entry, its finance minister says

BUCHAREST (Reuters) – Romania needs to target government deficits despite running surpluses this year to entice ministers to set up viable infrastructure spending projects, the finance minister said. Finance Minister Sebastian Vladescu is facing growing criticism for increasing spending plans four times this year and raising the deficit target five-fold even though the government continues to run budget surpluses each month. Observers say delays in the planning of projects and wrong estimates of future needs obstruct budget planning in Romania and muddle the macroeconomic picture. «Romania is like a hungry man who starved for years and all of a sudden has a full meal. If he eats too quickly, he risks choking,» Vladescu told a private television station. «I offered my colleagues a chance to start projects.» The 2006 government budget envisions a deficit of 2.5 percent of gross domestic product (GDP), up from the initial plan of 0.5 percent. Next year’s deficit is planned at 2.8 percent. But so far this year the government has run surpluses of just below 2 percent. Vladescu, who admits the government will end the year with a deficit smaller than planned, also praised the country’s flat tax system and said budget revenues were on the rise in coming years. Romania has a 16 percent tax rate. «We are going for budget revenues of 32 percent of GDP, without EU grants, in 2006 and 33 percent in 2007,» he said.