Monday, May 26, 2008

Romania deems impact of crude price rise as inevitably recessive

BUCHAREST, May 23 (Xinhua) -- The impact of the rises in the prices for crude oil is almost inevitably recessive that weakens economic growth, stressed Mugur Isarescu, Governor of Romania's National Bank on Friday.

"Any increase in a reference price that spins the entire modern economy will certainly have an impact on the overall level of prices," said Isarescu at a press conference here.

In the same context, he voiced hope that the mistakes of the 1970s, when a similar phenomenon occurred, will be avoided and so stagflation will be avoided, "which is a highly unfortunate combination of economic stagnation and even recession coupled with high inflation."

Attending the press conference on Friday was also Secretary General of the Rome Club Martin Lees, who emphasized the idea that any rise in the crude prices will have an impact on all food prices, because one of the reasons is that in order to make farm fertilizers very much energy is required and food production and transport are two activities also requiring very much energy.

Lees pointed out that the oil prices are not determined by supply and demand, but by speculations.

He said he does not believe the prices will go down any soon, only maybe if the world were headed for recession that would still entail only a temporary, not a permanent change in fundamentals.

The press conference was held as part of an ongoing conference in Bucharest of the Rome Club on what forces are driving Europe ahead.

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