Breakneck Growth Troubles Romania's Newest Central Banker

  • Consumer-led GDP surge isn’t sustainable, Nicolaescu says
  • Parliament confirmed new deputy governor in vote on Wednesday

Romania’s rapid economic expansion, the European Union’s fastest, is worrying the nation’s newest central banker.

The consumer-led boom is unsustainable and risks potentially painful adjustments in the future, according to Eugen Nicolaescu, who was confirmed as a deputy governor at the Banca Nationala a Romaniei by parliament on Wednesday. He plans to push for stronger cooperation with the government to help ensure macroeconomic stability.

“One can’t look at the current growth rate without wondering what risks lie ahead,” Nicolaescu said in an interview in Bucharest before lawmakers voted. “Too often we’ve had fiscal policy going in one direction and monetary policy in another. I don’t think this is good for the country.”

Romania’s economy has taken off after a wave of pre-election tax cuts and pay increases for state employees. The surge is proving a headache for the central bank, which has just steered the eastern European nation out of a record bout of deflation. Meanwhile, the EU is warning that the giveaways are set to push the budget deficit beyond the bloc’s limits. Gross domestic product jumped 5.7 percent from a year earlier in the first quarter.

The leu reversed gains immediately after Nicolaescu’s comments before strengthening again. It was up 0.1 percent against the euro at 3:51 p.m. in Bucharest, trimming this year’s loss to 0.3 percent.

Nicolaescu’s appointment will restore the board of Romania’s central bank to its full nine members. He replaces Bogdan Olteanu, who resigned last July while fighting allegations of influence peddling.

Nicolaescu, a 61-year-old former Liberal Party lawmaker, will attend his first monetary-policy meeting on July 3. He said he’ll propose allowing Prime Minister Sorin Grindeanu to attend some meetings to encourage a better “exchange of information.”

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