Radio România Internațional

Tag: budget revenues

  • Budget bills, closer to endorsement

    Budget bills, closer to endorsement

    The draft state budget and social security budget laws for next year have entered the parliamentary debate stage, after the specialised budget and finances committees in the Senate and Chamber of Deputies passed them last week. The state budget bill submitted by the Government was slightly changed in the committee, with the most important amendment concerning the transfer of nearly 1 billion euros to local budgets. The amendment, tabled by the Democratic Union of Ethnic Hungarians in Romania, stipulates an increase from 75% to 100% of the income tax quota channelled into the local budgets of administrative units. The Finance Minister Ionut Misa explains:



    “What I can tell you at this point is that most administrative units will be affected, particularly smaller ones. But we must make an analysis, see the exact figure and the impact of this amendment that has been approved.”



    The Finance Minister added that the amendment was designed to offset the income tax reduction from 16 to 10%. The impact of this amendment is yet to be established, but should the figure be substantial, it could push the budget deficit above the estimated limit, Ionut Misa also says.



    The Liberal Senator Florin Citu, in Opposition, says the debates in the parliamentary committees were smoother than in previous years. But the Liberals accuse the Government of increasing personnel and social assistance spending, and of cutting investments in order to make up for it. Florin Citu:



    “Of course we cannot back this budget structure, because it cuts down resources that should have been channelled into investments and takes them to salaries and social assistance instead. We will be reaching a 17-year peak of social assistance and salary expenditure, and record-low investment.”



    The Opposition also says that the revenues on which the public budgets rely are overestimated by at least 2 billion euros, and that the breakdown by expenditure category undermines the national economy.



    The 2018 state budget calculations take into account an economic growth rate of 5.5%, an average exchange rate of 4.55 leu for the euro and average monthly wages of around 565 euros. The Government expects next year’s budget deficit to account for 2.97% of the GDP and says funds have been allotted for the promised pay raises and the 10% increase in pension point value as of July 1, 2018.


    Parliament is to cast the final vote on the 2 draft laws on December 21.


    (Translated by A.M. Popescu)

  • Opinions on Romania’s economy

    Opinions on Romania’s economy

    The European Commission has warned Romania that in 2016 it swerved significantly from the medium-term budget objectives and that this year there is the risk of another deviation. The Commission expects Romania this year to have a budget deficit of 3.5% of the GDP and of 3.7% next year, above the 3% EU level, given the envisaged pay rises and tax cuts. The Brussels officials are worried about the enforcement of the unified pay scale law triggering an increase of spending much above what the government can afford.



    That is why the Commission recommends that Romania use any additional revenues to slash the budget deficit and also take measures for a better tax collection and for fighting illegal work. The warning has also been forwarded to the EU Council which might call on the authorities in Bucharest to straighten out the problem until October 15th so as to avoid sanctions. It is the first time that the Commission makes use of such a warning actually laid down in European treaties. Romania’s president Klaus Iohannis has responded to the Brussels warning pointing out that the government is responsible for avoiding economic imbalance. Klaus Iohannis:



    “It is important that everybody and lawmakers in particular should understand that not only economic stability, but also budgetary stability is extremely important. This stability is absolutely necessary and the government is responsible for planning next years’ budgets and the spending for instance on wages so that this important balance should not be endangered.”



    The leader of the Social-Democratic Party, Liviu Dragnea is dissatisfied with the European Commission’s recommendations to Romania and believes that the Commission applies a double standard to our country, demanding that this country enforce austerity, even if it has the biggest economic growth in the European Union. The Social-Democrat leader argues that it is necessary for the Romanians’ wages to go up so that they may no longer leave the country, which would involve bigger budget expenses. He has given the example of Spain and France, which were not sanctioned when they exceeded the 3% deficit threshold.



    On the other hand however, Liberal senator Florin Citu has explained that the European Commission applies the same standards to all member countries exceeding the budget deficit and has warned that the enforcement of the unified pay scale law will deepen that deficit. The governor of the National Bank, Mugur Isarescu said that the country’s macro-economic situation was among the best in the last 27 years, but there were bigger risks in the current period. (Translated by A.M. Palcu)