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March 24, 2023

Basescu: We prefer salary, pension cuts to tax hikes

President listed a series of dramatic measures for Romanians: public wages to be cut by 25 pc and pensions by 15 pc, most likely as of June 1. The country needs stability, Basescu said, ruling out any cabinet reshuffle. IMF extended mission until May 9.

The recovery of an economy that did not complete the public sector adjustment process is undesirable, and economic growth is unhealthy if major imbalances are not dealt with, Central Bank Governor Mugur Isarescu said on Thursday.

The ruling power’s commitments so far, regarding an increase in revenue were not met and can be safely described as untruthful, Isarescu believes. He reiterated his position about the tax issue. The governor said that a tax hike would only make things worse in the economy, which is still in recession, and the solution to curb the deficit is cutting social and current expenses, and allotting money to investments.

The central bank revised upwards the inflation forecast for this year, from 3.5 pc to 3.7 pc. According to data released by Central Bank Governor Mugur Isarescu, in 2011 inflation will rise from 2.7 pc to 2.8 pc.

The central lender BNR posted a reference level of 4.1833 lei per euro, 0.82 percent up from the previous session, this being the highest level of the past four months, as the other regional currencies also lost ground versus the euro.

The fourth evaluation misavoided. Sources depict the measure as ‘a fatality’.


In a press statement last evening, President Traian Basescu tried to appease speculation that VAT and flat tax will be increased, following government-IMF negotiations. “The public mood created these days, pushed on the brink of hysteria by televisions, must be clarified,” he said. He explained that during negotiations both he and the government had with International Monetary Fund representatives, two possible scenarios were discussed. The first would be that of ‘lack of trust’ in the government’s capacity to stick to its commitment to significantly cut budget expenses and this would have led to a VAT increase from 19 to 24 per cent and a flat tax hike from 16 to 20 per cent, along with public sector salary cuts, the president said. The second variant was that of trust, “in which the government has to continue its massive expense restructuring plans.”

Basescu gave assurances that the memorandum to be signed at the end of IMF talks will be based on the second scenario. Basescu announced dramatic measures for the population: the public wages will be cut by 25 per cent and pensions by 15 per cent, most likely from June 1, but also the freeze of subsidies. Other measures to cut expenses will follow.

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