Romania’s central bank: VAT cut will reduce credibility, affect monetary policy

Representatives of Romania’s Central Bank (BNR) said that they welcomed the fact that the political parties considered the bank’s position on the VAT cut and the deficit target assumed with the international partners, but that the problems remained the same. “When you have such increases in wage costs, a reduction of one percentage point in the VAT rate can’t substitute them,” said Lucian Croitoru, advisor to the BNR governor, quoted by Hotnews.ro. “The effects will be the same: a reduction of credibility, problems with the debt cost, and the monetary policy will suffer. In a word, this relaxation is too massive and too early.” The political parties agreed yesterday to reduce the VAT rate to 20% starting next year and to 19% starting 2017. Romanian President, central bank governor oppose PM’s Fiscal Code Romania’s Central Bank governor: Economic growth reaches its limit at 4% editor@romania-insider.com