Working Lunch with the Finance Minister, Sebastian Vladescu

Few days after the stat budget for 2010 was adopted, Aspen Institute Romania hosted a working lunch focusing on policy coordination between the public and the private sector at the beginning of a challenging year. The Aspen Institute Romania invited high level representatives of both sectors in a dialogue searching for ways to tackle the crisis faster and with lesser economic and social costs. The Economic Strategy Committee of the Aspen Institute Romania convened one hour before the Lunch and discussed various subjects related to the activities of the Institute as well as the topics of the following Lunch.

Some key speakers at this discussion were the Finance Minister, Mr. Sebastian Vladescu, Mr. Bogdan Chiritoiu President of the Competition Council, Mr. Valentin Lazea, Chief Economist of the Romanian National Bank and Ms. Claudia Pendred Director of the EBRD, representatives of Romanian and multinational corporations. The meeting was opened by Aspen Institute Romania President, Mr. Mircea Geoana and aimed at contributing to the creation of an increased convergence between sectoral efforts and policies of the government and business, from the beginning of financial planning and budget cycle, in order to maximize economic performance and decrease pressure on the labor market and investors. The meeting was excellently moderated by Aspen Romania Executive Board Member Vasile Iuga (Country Managing Partner at PricewaterhouseCoopers).

Aspen Institute Romania tradition in meetings between government and business representatives continues with this event, part of a series initiated last year with the topic "Managing the international financial crisis on Romania". This was in turn part of the continuos policy dialogue fostered by Aspen Institutes worldwide and in particular in Aspen countries. Among the participants in the Aspen Romania government policy dialogue in 2009 speakers included i.a. Emil Boc Prime Minister, Minister of Economy AdrieanVideanu, Finance Minister Gheorghe Pogea, Agriculture Minister Ilie Sarbu, or Minister for SMEs Constantin Nita. Aspen members, representing leading domestic and foreign investors, large corporations, civic and political leaders as well as experts always offer an interesting and valued contribution as partner in this policy program.
The debate took place according to the Aspen Method, on the basis of information material and documentation that were distributed in advance to the guests and that included the vision of the investment-corporate environment, discussions are closed to the public. The event is open to Aspen members and guests only. Aspen is a nonpartisan, independent, and progressive policy institute fostering democratic values and effective dialogue.

Main points made by the participants during the discussion referred to 2010 as a stabilisation year and a window of oportunity to mend past faults of the system:
- the start of 2010 is marked by a more predictable environment, which allows for more strategic measures to be devised and implemented, looking to the mid- and long-run;
- social and political forces could use this respite to show solidarity and a strong sense of common purpose;
- in terms of short-term measures, following the IMF agreement provisions is paramount;
- the main focus is on improving the fiscal policy stance, coroborated with: (1) better control of transfer pricing schemes, (2) designing efficient and compliant state aid programmes, (3) better EU funds absorbtion;
- the main point of action to focus on is the idea of sustainability of the economic development we are aiming for;
- Romania has to take a hard look at what sort of economic development model it has followed so far and whether such model is sustainable;
- until now, GDP structure has been 85% consumption, -10% net exports and +25% investments - this is not sustainable;
- the dramatic narrowing of the current account deficit due to economic crisis, from -14% to -5%, should be maintained, for the sake of future sustainability;
- lack of sustainability in the past came from: (1) low savings propensity (fiscal policy, consumption patterns), (2) excessive RON appreciation (monetary policy), (3) investment policies (geared towards local consumption rather than exports), (4) reckless wage policies (which dented competitiveness), (5) suboptimal structural policies (e.g. lack of agricultural policy, which left arable land atomised to this day, although it could be solved by introducing land taxation and "renteviagere");
- competition policy plays a very important role in the current context: (1) keeping inflation at bay on a background of quantitative easing (currently, anticompetitive investigation are at a historic high), (2) helping the Government come up with much-needed EU-compliant state aid schemes;
- recommendations from members refered to: (1) improving the tax system, which currently destroys private initiative, (2) work on a backup plan for worst-case scenario (e.g. Greece contagion), (3) ensuring that the current budget revenue assumptions are realistic, (4) more transparency in the way fiscal policy is devised.

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