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May 16, 2021

Ponta Cabinet gets IMF green light for hiking salaries and pensions

Following marathon talks with Romania’s international creditors, incoming Finance Minister Florin Georgescu said the public wages will increase by 8 pc as of June 1, while pensioners will start to get their money back that same month.

The talks with the International Monetary Fund, the World Bank and the European Commission, talks that started in force on Friday at the National Bank of Romania (BNR) headquarters, were successfully wrapped up some 12 hours later, the Romanian side and the representatives of international institutions establishing on Saturday the terms of the new letter of intent to the ongoing precautionary agreement. Thus, the representatives of the international financial bodies accepted a hike meant to restore public sector salaries to their June 2010 levels, the first hike of 8 per cent set to take place on June 1. Pensioners will get back their money that same month. “As an effect of the firm character of the policies and of the structural and sectoral reforms included in the agreement, supplementary funds were identified, funds that allowed the hiking of the budget deficit while respecting the 3 per cent threshold agreed with the European Union for this year and the commitments taken before the IMF,” Finance Minister-designate Florin Georgescu stated on Saturday. “[This agreement] ensures the country’s economic and financial stability, ensures Romania’s external financing, because Romania is consuming more than it produces and it has to borrow, but it can’t borrow in reasonable conditions without this agreement. On the other hand, (…) solutions were found for the two problems that USL plans to tackle, namely the problem of public sector employees and of pensioners,” Georgescu added. The cash deficit previously agreed with the IMF stood at 1.9 per cent of GDP, and the target established by the European Commission was 3 per cent of GDP. Restoring public sector salaries to their June 2010 level, as well as giving back “the sums taken without a legal basis from pensioners” are some of the main points of the Ponta Government’s programme. More information about the conclusions of the fifth IMF evaluation mission will be presented on Wednesday during a press conference. The representatives of the international financial bodies are scheduled to leave Romania the next day.

President Basescu: I support “without reservation” public wages and pensions restoration

President Basescu said yesterday in a statement after IMF-EC-WB meeting that he supports “without reservation” public wage and pension restoration at the values from 2010. “The interpretation appeared in the media was totally wrong. (…) We have room to fully pay the difference in salaries for state employees. Salary increase does not cause structural deficit increase, but on the contrary, this decision reduces it, especially in pension fund case”, argued Basescu.Initially, press agencies said that president Traian Basescu set some conditions regarding public wages and pensions increase, stated that maintaining the current deficit levels for the health insurance and pension funds represents the essential element in the upcoming period, pointing out that he will not send the letter to Parliament if this principle is not respected. The Head of State added that he hopes the process of reforming state-owned companies will be more successful in the following period, given the fact that it has not made a lot of headway. Jeffrey Franks, head of the IMF mission, stated in his turn at the start of the meeting that the fact that the members of the toppled government and those of the designated government are cooperating and are adopting joint positions is satisfying, being indicative of a continuation of Romania’s commitments. Likewise, he underlined the “excellent progress” made in talks with the Romanian side in recent days. Finance Minister-designate Florin Georgescu, secretary of state within the Finance Ministry Gheorghe Gherghina, Romania’s representative at the IMF Mihai Tanasescu and BNR representative Adriana Marinescu also attended the meeting that took place at the Presidential Palace. In reply, PDL President Emil Boc pointed out on Sunday, during the launching of PDL’s local elections candidates, that the talks on restoring public sector salaries to their pre-austerity levels is “a hundred per cent the result of PDL efforts,” of the efforts made by the governments led by Boc and Ungureanu. He pointed out that PDL prepared the measure through the letter with the IMF and through the stipulations of the 2012 budget. According to Boc, Romania has the lowest public debt in the EU and had PDL adopted populist policies the country would have been in Greece’s situation. The Prime Minister-designate had previously stated that neither the Boc Government nor the Ungureanu Government earmarked funds for restoring salaries, claiming that the situation found is “much worse” than it was presented. On Saturday, President Traian Basescu met former Prime Minister Mihai Razvan Ungureanu, as well as other former ministers, in order to be briefed ahead of his meeting with the IMF delegation.

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