, 10 tweets, 5 min read Read on Twitter
In case you want a masterclass in how to frame public debt and the poor as THE problem, look no further than the 2018 IMF country report on #Romania imf.org/en/Publication…
1.Using its magic wand that calculates potential output growth with heroic precision, IMF suggests that the Romanian economy is overheating since 2017. As a consequence, inflation is rising.
2. If it hadn’t made elementary ‘spreadsheet errors’ a la Reinhart and Rogoff, IMF output gap numbers should have suggested that Romania has been overheating since 2015 (ups but where is inflation?)
3. IMF attributes overheating to private consumption stimulated by increases in pensions and public sector wages. But really, inflation has been rising because governments have been fiddling with tax rates and because @bnr_ro has little control over banking liquidity.
4. IMF also says public sector wages (and pensions) have increased too much and that overall average wage growth has outpaced productivity - as if average gross monthly wage for the entire economy is really indicative of sectoral wage pressures.
in fact, if one uses median wage numbers, Romania is the second most wage unequal country in the EU (2014 numbers, doubt if much changed), with a stunning level of in-work precariat.
the IMF solution for Romania is absolutely bonkers: cut spending to reduce the already low public debt stock - contrast with Blanchard, their former chief economist, 'stop demonising public debt' recent speech (or @StephanieKelton for that matter)
equally bonkers (or neoliberal), IMF suggests Romanian banks should reduce exposure to their sovereign debt because of potential 'valuation losses' - clearly nobody there has heard of Basel III Liquidity rules and HQLA.
I hear you, ah who cares, old 'IMF neoliberal' news, but
1. IMF powerful in Romania, with @bnr_ro shape narrative of 'economic problems = state'
2. destroying state's capacity to act has severe political consequences, will contribute to ongoing Orbanisation of political discourse
3. Roughly 50% of work contracts in Romania are on minimum wage, as a method for companies (especially transnational) to avoid social sec contributions.
4. Now that 'left' government moved those contributions to employee, nominal wage hikes to keep real constant after new taxes.
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