Despite premier Ponta’s insistence to enforce the law as quickly as possible, President Traian Basescu refused to promulgate it and signed on Wednesday the request of re-examination by the Parliament of the law on the cuts to social contribution (CAS).
In a press conference at Cotroceni Palace, Basescu reiterated the social security contribution cut is a good move, which he supports, but explained he had sent the legal text back to Parliament to re-examine it, since he had reservations about the measure being sustainable, Agerpres reports.
He showed that the estimate compensation of law’s negative impact on the state budget is very vague, only mentioning potential budget revenue sources, mainly from improved tax collection, fighting tax avoidance, and possible effects of more investments or of the creation of new jobs; on the other hand, certain income sources and expenditure necessary for the compensation are not mentioned.
“Considering the evolution of the budget estimates, and the failure to collect as planned both in 2013 and over the first six months of 2014, it is vital to have the exact income compensation measures specified in the justification of the law, as also requested by the international financial institutions (the International Monetary Fund, the European Commission, and the World Bank)”, the re-examination request reads.
President Basescu asserts that if the social contribution cuts are not compensated, Romania runs the risk of termination of its agreement with the IMF, the EC and the World Bank.
‘We also must take into account the fact that Romania signed an agreement with the International Monetary Fund, the European Union and the World Bank, by which it committed to abide to the fiscal compact, to reach its structural target, and to maintain a deficit of the consolidated budget deficit. Without a compensation for the cuts to the social insurance contributions, Romania runs the risk of termination of its agreement with the International Monetary Fund, the European Union and the World Bank, resulting in an immediate loss of the facilities under the ‘top-up mechanism’, that is, the 10 percent added to the European co-financing,’ the re-examination request argues.
Ponta: Next year Basescu can at most serve some jail sentence
After Basescu speech, prime Minister Victor Ponta told Antena 3 private broadcaster on Wednesday evening that President Traian Basescu can postpone the promulgation of the law for a cut in the social security contributions (CAS) until after January 1, 2015 if the president challenges the law with the Constitutional Court after a revote on it in Parliament.
“What is certain is that he misspoke and I want to be very clear. He said let us wait and maybe we do the cut on January 1. Mr Basescu on January 1 can at most serve some jail sentence. No way can he do the cut in CAS or promulgate laws because he will no longer be Romania’s president”, said Ponta.
Asked about what he will do with the CAS cut, Ponta explained, ‘The law will return to Parliament, first to the Senate and then to the Chamber of Deputies. We have not changed our mind, in that we will pass it again. After that, President Basescu may promulgate it or challenge it with the Constitutional Court (CCR), which means he can potstone it until after January 1.’
The same evening Ponta told RTV private broadcaster that no legally drawn pensions will be diminished, not even by a single penny as long as he is in office. Ponta’s remark came in response to a statement by President Traian Basescu that the public pension pool risks becoming frail if social security contributions (CAS) are cut.
“ As long as I am in office, I can guarantee, the same as I did before the Romanian Parliament, there will be not a single penny cut from the public pensions (…) the only time in the history of Romania when public pensions were cut it was Traian Basescu who did it, and fortunately, I do not believe there will be another Traian Basescu to follow suit”, Ponta said.
PNL says budget revision imminent
The National Liberal Party (PNL) asks Prime Minister Victor Ponta to provide explanations on the massive drop in budget collections, to present remedy solutions and specify which expenses will be cut given the upcoming budget revision. In a release on Thursday to Agerpres, the Liberals said that according to official data, RON 2.4 billion less then planned entered the Treasury of the Ministry of Finance in the first six months of the year. “There are signs that uncollected taxes and fees advance at the same pace in the second half of the year too, the more so as the campaign for the presidential elections takes place in the same period. Consequently, a linear estimate shows that from this perspective, this year will end with an underperformance of almost 5 billion lei. Given the steady downward trend of collections to the state budget caused by the overall poor performance of the current Ponta Government, we are rapidly headed for the sad scenario of tax hikes. This is why the National Liberal Party insists that the Ponta Government provides public explanations about the veering off this target in the first six months and present the steps taken for the situation not to repeat in the second half of the year”, the release says. PNL requests the Government to provide explanations for the VAT collection rate of mere 13 percent. The Liberals also ask the Prime Minister to specify which spending items will be cut back at the budget revision.