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December 2, 2021

Incoherence and delays with tragic effects

An IMF mission has been to Bucharest, to evaluate how well the Boc Government did enforce the agreed measures aimed at restructuring and cutting public spending down to a level that would take macroeconomic indexes within the set limits, with emphasis on the budget deficit target of 5.9 pc of the GDP. Yet, in the few months that passed since the previous mission of the Fund in Bucharest, almost nothing moved the right way. Even Romania’s envoy to the International Monetary Fund (IMF), Mihai Tanasescu found it appropriate to warn about this issue before the present visit, saying that authorities did not take measures to curb public expenses. Certainly, the IMF officials could not go public with statements against a member country, before evaluating the situation in the field.

But, as financial experts, neither could they stop from noticing the Bucharest government’s complete lack of progress in breaking the bureaucratic apparatus gridlock. Thus, it seems natural that the warning signals are drawn precisely by the country’s own representative.

The IMF mission already dismissed an attempt by Transport Minister Radu Berceanu to have the budget deficit limit increased by 0.5 pc – a sign the situation is getting very serious. We may somehow anticipate what the fund will find out in its analysis. One conclusion will be the government did not keep its promise about layoffs in the public sector – which has been also noticed by President Traian Basescu, who summoned the Cabinet at the Cotroceni Palace precisely for talks over this particular matter. Still, nothing happened, and Premier Emil Boc hid behind long and convoluted phrases how pleased he is with himself for keeping everything unchanged.

The Boc Cabinet boasts achievements that actually do not exist. The press was right to notice the gap between the data provided by the Government and the National Statistics Institute (INS) regarding the budget apparatus.

In a recent interview, presidential counselor Sebastian Lazaroiu – the voice of President Traian Basescu – warned about a possible reshuffling, if the government does not take urgent measures to restructure the public sector and increase its efficiency.

Meanwhile, the government announces – through the voice of Gheorghe Gherghina, state secretary in the Finance Ministry – “the number of occupied positions in the public sector has decreased by 36,404 between December 2008 and February 2010.” On the other hand, INS claims the contrary: “the number of public administration employees rose by 26,000, from 334,300 to 360,000.”

The matter posed a dilemma to the media, so one might expect it will give some headaches to the IMF delegation as well. To make things even more complicate, former premier Calin Popescu Tariceanu (who was accused by the acting Cabinet of hiring more people than allowed by law, during 2005-2008), claims that the number of civil servants actually declined while he was in charge.

Various officials disclosed different layoff schemes in 2010, anywhere between 65,000 and 100,000 employees. What is known for sure is that, under the figures agreed with the IMF, some 4 pc of civil servants should leave the system. The government’s target is set by the blanket salary law: curbing public expenses for salaries, from 9.4 pc to 8.7 pc of the GDP in 2010.

On paper, the ministers made various changes in the structures they are managing, but in reality, far from going down, the personnel even increased in some ministries, like the Transport Ministry led by Radu Berceanu.

Following talks in Cotroceni, ministers were asked to submit, within three weeks, restructuring plans for each ministry. Later, Adriean Videanu said that the Ministry of Economy, Commerce and Business Environment has been already restructured and now has little over 700 employees, down from 896 when he became minister. “I admit there might also be people hired on political criteria – though I don’t support this practice,” Videanu said. In its turn, the Ministry of Regional Development announced it will lay off 17 pc of its staff, meaning 158 people, out of about 900. But the ministers also made similar announcements last year, yet none of them gave clear figures about how many people they sacked and hired meanwhile. Last August, Premier Boc announced that over 10,000 jobs would be cut from 226 state agencies, of which more than 8,000 are actually occupied (the others being vacant). However, the Executive is still unable to disclose the actual number of people discharged from these agencies.

Set aside the (more or less) official figures, the IMF seems totally unimpressed by the achievements of the Boc Cabinet with this respect and rather blames it for its incoherence. As Fund experts keep revising down and down again the country’s economic performance in 2010 (with zero economic growth being the latest best-case scenario), Finance Minister Sebastian Vladescu spells out: “We’ll restructure as many jobs as needed to make the system operate efficiently.”

But time has run out. Fed up with the government’s delays, the IMF wants clear measures to restore the balance between budget incomes and expenses. These days, we have heard rumours about the VAT rising to 22 or 25 pc, and the flat tax being pushed up to 20 pc. Nothing is certain in this context, but it is beyond doubt that the two taxes will increase, followed by others. This is a well-known scenario: with initial rumours speaking about catastrophic hikes, the final figures tend to look mild and are easier accepted by the population. Anyway, hard times are far from over. On the contrary, 2010 seems to be another very difficult year for Romanians.

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