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April 19, 2021

President Iohannis promulgates Budget Law, draws attention upon certain vulnerabilities

The 2018 state budget law and state social security budget law were on Wednesday promulgated by President Klaus Iohannis, who drew attention upon certain vulnerabilities.

“President Klaus Iohannis draws attention upon certain vulnerabilities of the 2018 state budget and challenges of the current fiscal-budgetary framework, considering that Romania needs a credible, balanced budget to follow consistently the preservation of the fundamental goals of macro-economic stability, predictability and fiscal-budgetary sustainability,” a release of the Presidential Administration reads.

The president stresses that it is essential to Romania to “re-enter a path of responsibility and prudence, and the political and governmental decision-makers do not repeat the mistakes or temptations of certain effusive policies, as the ones before the economic crisis, so that the Romanians’ welfare is not affected on the medium and long term.”

“Our country must avoid the trap of an unsustainable economic growth, mainly based on consumption, budget deficits and accumulation of public debt,” says he.

According to president Iohannis, the budget construction as a procedural element is ignoring the recommendations of the Economic Commission has formulated in respect to the significant deviation procedure of the budget deficit and, according to these recommendations, the national budget was indicated to return to the fiscal consolidation path, through 0.5pct of GDP annual amendments of the budget deficit.

The president emphasises that the analysis of the state budget draft on 2018 underlined certain vulnerability of the budget construction on both the incomes and the spending side.

President Klaus Iohannis says the Gov’t’s priority must be the significant improvement of the tax collections, the main direction that may ensure the sustainability of the Romanians’ pay and pensions’ raises, so that the situation of the public finances and the citizens’ welfare are not affected on the medium and long term.

As regards the budget spending, president Iohannis stresses the importance of backing the investments, given their role in the economic development, especially their practical achievement with prioritisation of the essential ones, in particular in infrastructure.

“The Gov’t must be aware that to sacrifice further the investment factor is capable to undermine Romania’s development potential. It is paramount that the EU funds are capitalised in their entirety, in particular in connection with the infrastructure investment projects,” adds Iohannis.

The president mentions that in the context of certain broad fiscal amendments – long contested in the past months by the social partners – important is for the fiscal-budget approaches for 2018 to rebuild that economic predictability necessary to the investors and the business milieu, so that the trust in Romania’s economy U-turns on a positive trend.

“The 2018 budget is based on a series of fiscal modifications, barely passed at the end of 2017, in an attempt by the PSD-ALDE ruling coalition to place within the governing programme: unification of the social contributions at the employee’s level, and the consistent cut of the income tax to 10pct, from 16pct, fiscal relaxation measures through which the Romanians anticipate an increase of their incomes, in a climate of stability and predictability,” Iohannis concludes.

President Klaus Iohannis considers that the current PSD-ALDE ruling coalition has “the obligation to answer the Romanians’ expectations that our country has got a credible, sustainable budget that is not affecting the economic stability and the citizens’ living standard as promised.”

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