NBR governor, Mugur Isarescu held yesterday a speech at Romanian Academy. He stressed that it would have been much easier to Romania to battle crisis if the government had ran a surplus in the two years before crisis. “I believe the lesson we should learn from this crisis is that running high budget deficits when the economy grows stronger is doomed to failure”, said the governor.

The governor shortlisted some of the lessons learned from the economic downturn. “Going forward, I will present nine valuable lessons for global financial architecture, and two of them with special reference to emerging markets, such as Romania”, said Isarescu.

“To make it perfectly clear, I wish to define in the first place what the following lessons don’t refer to. Firstly, they don’t address to shorter or longer economic cycle issue, and don’t suggest that a crisis is not closing an economic loop. Secondly, don’t expect to find the answer to whether we could ever avoid a financial crisis or not”.

1. A low inflation rate is not a condition to secure a long-term financial stability. The past experiences seem to confirm that inflation is the core source of financial instability. Usually, the episodes of high inflation corresponded with severe financial instability and crises in the banking industry, or they were followed by recession, resulted from actions to stabilize inflation.

2. At a certain point, regulation and oversight are outpaced by the market. The markets always seem to find the pathway to innovation as long as the economic agents are always in a race to meet the real needs. Innovations spur efficiency; hence the innovation process will never end. Not even the administrative barriers could put an end to market’s dig for solutions to meet demand. A clear example was when NBR attempted to slow down the frantic pace of foreign currency lending. We used administr