The private sector is to blame for the foreign deficit widening to more than 14% of GDP this year, as well as for the wage increases above productivity, which fuelled inflation, the media instigates price increases and the NBR can no longer anchor the inflationary expectations under the circumstances, nor it can efficiently resort to rate increases or administrative measures to contain consumption, NBR Governor Mugur Isarescu explains.

"There are principles that have to be observed in order to achieve low levels of inflation. One cannot have two wage raises in one year. One cannot request 20% salary increases when inflation is at 4-5%, just because of a wage gap between Romania and Germany. One narrows the gap by improving labour productivity. Previous productivity gains were lost because of wage increases," the head of the central bank said yesterday, during a dialogue with the Economy and Finance Minister Varujan Vosganian, at a financial seminar.

Isarescu said that the NBR had reached its limit in terms of using the available instruments: "If we raise the RON interest rate any further, foreign currency lending will explode, (when) we increased the minimum mandatory currency reserve to 40%, the loans were outsourced."

Although sitting next to each other at the same table and trying to convey the same message, the NBR Governor and the Finance Minister have completely different views.

"I remain in favour of controlling demand. The wages have to go up less than productivity does, and we need to be careful with the growth of the private sector, because foreign investments are not a panacea," stated Isarescu, and further stressed that "now is not the time for fiscal relaxation."

"We are not building budgetary surplus, I want to be clear on that. I don't want fiscal restrictions placed on consumption, I want supply brought up to par with con