President Klaus Iohannis met on Tuesday with Prime Minister Viorica Dancila and Labor Minister Lia Olguta Vasilescu, a context in which he warned the Executive that the effects of the public-sector pay legislation are in contradiction with the principles of equality and predictability and required prudence in addressing economic policies, so as to ensure the sustainability of citizens’ living standards.
“The President of Romania warned the Government that, after the first three months of application, the effects of the new legislation on the remuneration of the staff paid from public funds are in contradiction with the principles of equality and predictability from which it has emanated, given that there were exceptions for different categories of staff, which cancels also the unitary character of the legislative intention,” according to a release from the Presidential Administration.
According to the cited source, Prime Minister Viorica Dancila presented to the head of state the salary situation, giving stability assurances regarding the financial resources necessary for the application of the Law on salaries and the salary increases assumed to date. In her turn, the Labour minister detailed the principles underpinning the current salary framework, referring to the salary scale that will fully produce its effects in 2022. At the same time, the Government’s position on the wage framework established by Law 153 / 2017 was voiced.
The head of state has shown that the overlapping of Law 153/2017 on the remuneration of the staff paid from public funds with the amendment of the Fiscal Code through OUG 79/2017 has led to wage cuts for some categories of staff at both central and local level, negative consequences that the Government did not foresee.
“Although 25% wage increases were promised as of January 1, 2018, these increases have in fact been canceled by moving of the social contributions to the employees,” the communiqué said.
The Presidential Administration mentions that the remedy of these deficiencies required the adoption by the Government of ordinances that brought amendments to Law 153, such as OUG 62/2017 and OUG 91/2017. By exceptions from the phased-out application, contrary to the principle of sustainability laid down in Law 153, the current salary framework moves away from the requirements of the remuneration of the work performed and reaches the point of capitalizing rather on staff’s membership to an institution or another.
In this regard, President Iohannis pointed out that the salary situation is constantly changing, far from satisfying the principles and criteria of stability initially assumed, as well as the electoral promises of the PSD-ALDE coalition.
“President Klaus Iohannis pointed out that this carousel of salary changes and unpredictability must be avoided, otherwise Law 153 will soon become another form without substance, given its continuous amendment through ordinances that not only solve but also create new problems,” the statement said.
President Klaus Iohannis has shown that there is no predictability in the wage setting mechanism as long as various new amendments are introduced for different categories of staff, introducing wage discrimination and encouraging similar requests from other categories of staff, at the cost of some risks related to the budgetary targets assumed by the Government.
In connection with the much-anticipated increases in the wages of physicians and staff in education, measures that solve only partial problems in these areas, the head of state mentioned that such salary increases should be accompanied by guarantees for the future so that these salary policy priorities meet their performance targets.
Also, President Klaus Iohannis stressed that, on the back of imprudent and uncoordinated fiscal and budgetary policies with overall economic dynamics, there is a risk that the Romanians’ purchasing power will continue to fall.
“The transfer of social contributions to the tax burden of the employee and the reduction of the tax on wages from 16% to 10% has so far led to a modest increase in net salaries of about 5% on average in the budget system. And this slight increase in net wages is canceled by the rise in inflation, which reached 4.7% in February 2018,” the press release said.
In this respect, President Klaus Iohannis has demanded from the Government prudence in addressing economic policies so as to ensure the sustainability of citizens’ living standards.
The meeting took place at the request of President Iohannis to discuss, at the end of the first quarter, the effects of applying the legislation on wages in the public sector in light of the principles and commitments in the field of wage policy assumed last year by the PSD-ALDE coalition.
Controversies over content of talks with President Iohannis
PM Dancila retorts after Presidential communique: Let them show the minutes of the meeting. I’m a bit surprised
Prime minister Viorica Dancila says she amazed at the communique released by the Presidential Administration after the meeting she had with President Klaus Iohannis, adding that the transcript of the meeting would be better to be made public.
Quizzed at the Parliament on the conclusions of the meeting with Iohannis, Dancila said: “Truly, I’m a bit amazed. I saw Mr. President’s communique. I’m amazed at that communique, but I won’t be the one not to believe what Mr. President has written in the communique or what I’m saying. I think the best would be that Mr. President show the meeting’s transcript and then we’ll all be enlightened.”
Asked if from the Cotroceni Palace lies went out about the meeting, she specified: “I cannot say about someone that they are lying, but things didn’t stay the way they are released in the communique.”
Labour Minister after meeting at Cotroceni: Iohannis wants to turn attention away from scandal concerning SRI-Prosecutor General’s Office protocol
Labour Minister Lia Olguta Vasilescu stated on Tuesday that the meeting convened by President Klaus Iohannis on the topic of the salary law was allegedly meant “to turn the public attention away” from the scandal of the moment regarding the declassification of the protocol concluded between the SRI and the Prosecutor General’s Office.
According to Labour Minister Olguta Vasilescu, the Presidential Administration communique did not include what was discussed at the meeting at Cotroceni.
“I believe the communique was written beforehand, because it disregards what was discussed. (…) With this topic concerning the salary levels, the President wanted to turn the public attention away from the scandal of the moment, regarding the SRI protocol,” Olguta Vasilescu stated on Tuesday for Antena3.
In what concerns the discussions between Olguta Vasilescu and the Romanian President, the Labour Minister said that she told President Klaus Iohannis that the salary law is implemented in a phased manner.
“At the same time, the President was informed that Law no.153/2017 is being applied in a phased manner, until 2022, moment in which the inequalities in the system will be eliminated, inequalities that appeared over the years and could not be corrected at once, precisely because the imbalances were so high that correcting them immediately would have entailed an unsustainable budgetary effort,” reads a communique remitted by the Labour Ministry on Tuesday.
Lia Olguta Vasilescu suggests Klaus Iohannis should consult the BNR
On Tuesday, the Labour Minister also responded to Iohannis’s criticism regarding the inflation rate: “We hope he isn’t suggesting solutions such as the ones taken by the Boc Government in 2009. He should talk with the BNR,” the institution led by Lia Olguta Vasilescu transmitted shortly after President Klaus Iohannis met the Premier and the Labour Minister to discuss the salary law.
In an official communique, the Labour Ministry points out that the principle of equality included in the new salary law consists of the fact that public sector employees who perform the same type of labour, regardless of the institution in which they do so, will be paid similarly in 2022, when the phased implementation of the provisions of Law no.153/2017 will be finalised.
“The predictability of the salary law consists of the fact that the salaries are included in the scales that are an integral part of Law no.153/2017, just as the annual growth rhythm is, which is 25 percent of the difference between the currently paid salary and the one included in the 2022 scales, for each employee, of course with the exceptions in the healthcare and education systems, which were assumed as national priority through the Governance Programme and treated as such by the Government and Parliament of Romania. At the same time, the President was informed that Law no.153/2017 is being applied in a phased manner, until 2022, moment in which the inequalities in the system will be eliminated, inequalities that appeared over the years and could not be corrected at once, precisely because the imbalances were so high that correcting them immediately would have entailed an unsustainable budgetary effort,” the communique points out.
The expenditures on public sector salaries rose by RON 12 billion in 2017, year-on-year, and included hikes ranging from 10 to 50 percent in 2017 alone, for various categories of public sector employees, the ministry informs.
“Likewise, we point out that the return of the tax liens, carried out subsequent to the mentioned raises in 2017, was covered by the 25 percent hike offered to the whole public sector on 1 January 2018, which, likewise, led to a growth of approximately 4 percent in net incomes, less for the 3 percent of public sector employees who were surpassing even the scales established for the year 2022,” the communique reads.
The Labour Ministry also states that the transfer of contributions has nothing to do with the salary law but is entailed in the Fiscal Code instead.
“In what concerns the emergency ordinances that amended law no.152/2017 and law no.153/2017, about which the Romanian President expressed his concern, we assure him that the amendments adopted by Parliament did not affect the balance of the salary law, but actually led to a drop in the percentage of those who suffered the adjustment of their net incomes, from 3 to 1 percent, most of the employees of the Presidential Administration being among them. Thus, these salary hikes covered the return of tax liens, but were also made so that the Government would remain within the deficit limit of 3 percent,” the institution states.
“Regarding the inflation rate hike, we hope the President does not consider that it occurs because of the hiking of salaries and pensions and does not suggest solutions such as those adopted in 2009 by the Boc Government, and we recommend he should have an applied and fair discussion with the officials of the National Bank of Romania, in order to discover the multitude and the complexity of the internal and external causes behind the inflation rate’s evolution,” the ministry chaired by Lia Olguta Vasilescu adds.
Tariceanu: If the President wants to inform himself about economic situation, he should discuss with members of Gov’t
Senate Speaker Calin Popescu Tariceanu commented on President Klaus Iohannis’s statements regarding the economic situation, explaining that if he wants to inform himself he should discuss with the members of Government. Tariceanu says that the hiking of salaries and pensions boosted the Romanians’ purchasing power, even though the inflation rate is at a higher level.
“I believe that if the President wants to inform himself and to have a discussion with the members of the Cabinet, with the Prime Minister, of course this can be considered very useful. (…) I don’t want to enter a polemic with the President. In principle, against the backdrop of the consistent hiking of salaries and pensions in Romania in 2017 and 2018, the purchasing power of Romanians, and this is visible in statistics, has risen, even though at this moment there is a higher inflation rate, but this inflation rate will die down, settle down in the second half of the year. Overall, there will be an inflation rate that cannot erode the purchasing power in any way. So, the significant salary and pension hikes are far above the inflation level,” Calin Popescu Tariceanu told news.ro.
Basescu on Iohannis’s meeting with PM and Labour Minister: He acted correctly. Constitution gives him the right to summon the Gov’t to consultations or to attend the Gov’t meeting
Ex-President Traian Basescu stated on Tuesday, referring to President Klaus Iohannis’s meeting with Premier Viorica Dancila and Labour Minister Lia Olguta Vasilescu, that he acted correctly, because the Constitution gives him the right to summon the Government for consultations or to attend the Government meeting.
“I can tell you that, from a constitutional standpoint, the President acted absolutely correctly. The Constitution gives him the right to summon the Government to consultations or to attend the Government meeting. He preferred the option of summoning the Government to consultations on a clear issue. I believe he did very well, in line with the Constitution, considering that, in their inability, Daddy’s Social Democrats have managed to throw the Romanian tax system and salary system into chaos and are getting ready to obliterate the pension system too. Considering that for three months now they keep patching up the salary system, I have no kind of confidence they will manage to understand what they have to do in what concerns the re-arranging of the pension system,” Traian Basescu said.