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September 30, 2022

PM Boc: More cautious budget version does not include salary cuts

Contribution to compulsory private pensions to stand at 3.5 pc in 2012, Premier’s advisor Andreea Paul Vass stated yesterday at a forum on private pensions.

Premier Emil Boc stated yesterday that he will propose to Parliament “a more cautious version” of the 2012 budget, one that would protect Romania from major risks if the situation fails to improve in Europe, however “none of the scenarios includes salary cuts or taxing pensions,” Mediafax informs. Boc also stated that the budget’s priorities for next year will be investments, drawing European funds and creating new jobs. Meanwhile, President of PSD, Victor Ponta, addressed an open letter to Prime Minister Emil Boc, noting that the PSD is willing to participate in substantive discussion, along with the government and National Bank of Romania on budget for 2012. Boc made the statements at Carei, where he laid the foundation of the third hall of the ContiTech plant that belongs to the Continental Group. He pointed out that until now the aforementioned group has invested over half a billion Euros in Romania and has created more than 10,000 jobs.

At a forum on private pensions, Premier’s advisor Andreea Paul Vass stated yesterday that the contribution quota for compulsory private pensions (pillar II) will stand at 3.5 per cent in 2012, compared to 3 per cent this year, according to the draft 2012 budget. She added that the draft 2012 budget does not include the indexing of current state pensions (pillar I). Nevertheless, according to the initial timetable, the contribution to Pillar II should have stood at 3.5 per cent of monthly gross revenue in 2011 and should have climbed to 4 per cent in 2012. But the budget constraints caused by the onset of the financial crisis in 2008 determined the government to postpone the hike by a year. Talking about the structure of Romania’s population, Andreea Paul Vass stated that in comparison with the European average the Romanian population is rather young, but the speed at which it will grow old by 2060 is higher than the European average, ‘Evenimentul Zilei’ informs.

The median age that divides the country’s population in two equal groups is 38.3 years in Romania, smaller than the one in Germany, Italy or Finland. Nevertheless, in 2060 the median age will reach 52 years in Romania, Latvia and Poland, while countries with elderly populations will notice a slower growth in the median age. Thus, Germany’s median age will go from 44 years in 2010 to 49 years in 2030, Italy’s from 43 to 48 years, and Finland’s from 42 to 48 years.

In other developments, the austerity measures imposed by the financial crisis had a direct impact on the European pensions systems, something that resulted in seven states freezing pensions, Vass added. She gave Bulgaria, Estonia, Greece, Italy, Latvia, Portugal and Spain as examples of countries that froze pensions, and Greece and Ireland as countries that cut pensions. Attending the event, Lucian Croitoru, adviser to the BNR Governor said the Romanian government has resisted at the pressure to use money from private pension fund, ignoring the action taken by the Hungarian Parliament late last year when Hungary decided to nationalize private pension funds.

Private pension funds’ return surpasses inflation

The compulsory and optional private pension funds registered an average annual return of 12.1 and 7.4 per cent respectively, return levels that surpassed the annual inflation rate, Cornelia Coman, President of the Romanian Pension Funds’ Association (APAPR), stated yesterday, Mediafax informs. The first contributions to Pillar II were transferred in May 2008. The optional pension funds were launched in May 2007.

Coman added that the Pillar II funds obtained a profit of RON 635 M, the contributions totaling RON 5.16 bln and the net assets totaling RON 5.8 bln, according to data collected on September 30. 5.4 million persons contribute to Pillar II.

Romania “is not mired in the sovereign debt crisis

The Prime Minister pointed out that the Romanian government plans to maintain the flat tax at 16 per cent and to hike the absorption of European funds to 20 per cent. He added that Romania “is not mired in the sovereign debt crisis,” but that there is the risk of seeing the debt growing if the Romanian government will not continue its cautious policy. “Romania’s debt stands at approximately 31.8 per cent of GDP, far below the 60 per cent threshold that Maastricht allows, far below what Greece (162 per cent) and Italy (119 per cent) have. This helps us draw investors,” Boc explained.

Moreover, the Premier stated that Romania and Poland are in the top of countries that earmark most funds for investments, and this is “proof of the fact that we understand that in these hard times development and creating jobs is the only solution to get out of the crisis.”

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