PM Ponta: We propose budgetary discipline instead of austerity

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The 2013 budget is built on a deficit of 1.8 pc of GDP, up by 0.3 pc because of supplementary expenditures estimated at EUR 800 M.

The government proposes budgetary discipline instead of austerity, development through support offered to the private sector and social justice.“These are historical conditions that only history can judge, but in the last four years in particular the main elements of fiscal and budgetary policy consisted of austerity, underdevelopment, because obviously when you cut too much you also have underdevelopment – that was seen in the GDP drop – and inequity – the fact that the cuts and austerity measures were applied against the rules of social equilibrium. What we propose: budgetary discipline instead of austerity, which is something else, obviously development through what we are trying to do when it comes to public investments and support for the private sector, and social justice, which is what we did in 2012 and we will continue to support in the following budgets,” Victor Ponta stated on Thursday evening during his state of the nation address in which he analyzed the 2013 budget. Social assistance, health and transportation are the domains that will benefit from the highest budget appropriations in 2013, totaling EUR 27.6 bln of the EUR 49 bln budget. The budget appropriations for education and research total EUR 4 bln, those for public order and national security EUR 2.7 bln, those for administration EUR 2 bln, for housing, services and public development EUR 1.5 bln, for defence EUR 1 bln and for environment protection EUR 1 bln. The number of employees will be cut by 5-10 per cent in most ministries and 2013 will not see new hikes in public sector salaries and pensions, the Premier pointed out. The 2013 budget is built on a deficit of 1.8 per cent of GDP, up by 0.3 per cent because of supplementary expenditures estimated at EUR 800 M for the payment of pharmaceutical drugs within 60 days at most, Liviu Voinea, delegated minister for the budget, stated in his turn. Voinea pointed out that an average exchange rate of RON 4.5/EUR was taken into account, compared to the current level of RON 4.37/EUR. Thus, the budget deficit of EUR 3 bln would represent 2.1 per cent of GDP, including supplementary expenditures on the payment of pharmaceutical drugs within 60 days at most, a request made by the European Commission and the International Monetary Fund, whose effects will not be taken into account however when calculating the deficit of 1.8 per cent of GDP. According to the delegated minister for the budget, the government estimates that Romania registered an economic growth of 0.7 per cent in 2012 and in 2013 the economic growth will reach 1.8 – 2 per cent. The general consolidated budget’s appropriations for personnel will surpass this year the initial target of 7.1 per cent of GDP, reaching 7.3 per cent of GDP as an effect of restoring public sector salaries to their pre-austerity levels. The appropriations will then be lowered gradually, to 6.8 per cent of GDP by 2016, Voinea stated.

Privileges in state-owned companies

State-owned companies offer a lot of privileges, such as preferential consultancy contracts signed with consultancy companies owned by their own employees, Premier Ponta offering assurances that some of the privileges were and others will be eliminated. Voinea stated that a source of corruption within state-owned companies consists of the sums of money they have at their disposal for investment contracts. At the same time, Premier Victor Ponta expressed his dissatisfaction with the fact that the criminal complaints that pointed to irregularities discovered within companies such as the Romanian Post, Hidroelectrica, Oltchim, and the National Health Insurances House lack “juridical consequences.” Moreover, the Premier pointed out that both he and President Traian Basescu have to discuss the CFR Freight issue with the IMF delegation, explaining that Romania changed its mind when it comes to the privatization of this company and its external financial partners have to agree. Finance Minister Daniel Chitoiu listed other deficiencies discovered by the audits that took place within state-owned companies, such as direct deliveries, preferential contracts when it comes to the procurement of consultancy services, juridical assistance, consultancy contracts signed between the state-owned companies and companies belonging to their own employees. The Finance Minister also announced that the Fiscal Inspection, the Financial Guard, customs supervision and anti-fraud authorities will be grouped into a single structure that will conduct controls once every three years in the case of SMEs and once every five years in the case of large taxpayers. Premier Ponta also announced during his address that the concessions of litigation rights have to be taxed because they have a commercial purpose. According to the data that the government presented on Thursday, Romania has already paid a total of RON 5 bln in damages for nationalized plots of land and buildings and there are demands to pay another EUR 8 bln. “80 per cent of the money are outside Romania, there are citizens that claimed properties and that no longer live in Romania,” Ponta stated on RTV.

Auto tax still debated

Premier Victor Ponta stated on RTV that the owners of vehicles registered before 2007 could be exempted from the payment of the first auto registration tax, a tax that was suspended last year but that came back into force at the start of this year, stating that taxing this type of cars represents “an aberration.” Environment Minister Rovana Plumb stated on RTV that the environment stamp draft will most likely be presented within the government this week and then a public debate on this tax which meant to replace the first auto registration tax will follow. Plumb added that the environment stamp will correlate the auto vehicle’s cylindrical capacity to its emissions, the draft of the new tax being currently under work. Referring to the requests to refund the auto tax, the Environment Minister estimated that approximately RON 350 M will be paid this year, the courts currently registering 80,000 refund requests.

Reactions

The budget proposed by the Ponta Government is a budget of survival and the Premier’s goal to return to the economic conditions of 2008 is very difficult to accomplish, economy professor Mircea Cosea stated. Cosea stated for Business24 that the introduction of taxes on wealth or on high incomes is not ruled out in the second half of the year. The financial analyst estimates an economic growth of 0.4 – 0.5 per cent of GDP this year in the best scenario. PDL MP Elena Udrea considers that Premier Victor Ponta’s “state of the nation” address was nothing but a badly failed PR action, one that nevertheless reminded her why PDL registered such a shameful loss in the December 9 elections. “We found out that Romanians won’t live better. Expenditures are rising, revenues are falling, he didn’t say where the budget revenues will be coming from and especially how he will be generating economic growth. He didn’t prove he will manage to hike the number of jobs,” Elena Udrea stated on Romania TV (RTV).In her turn, PDL MP Andreea Paul claims that the document that Premier Victor Ponta presented on Thursday is “an attempt to deceive Romanians” and should instead be called “the state of the deceived nation.” “Romania has ended up being a country in which the Prime Minister is vulgarizing the budget on TV and is losing his tongue when the market is concerned,” MEP Cristian Preda wrote on his blog.