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December 9, 2022

CDR: New pension law unsustainable, public spending double by 2021

The draft of the new pension law that almost doubles the public spending with the pensions by 2021, namely it will make them grow by over 130pct until 2022, is unsustainable, since it is not accompanied by the public revenues’ increase measures, Coalitia pentru Dezvoltarea Romaniei (Coalition for Romania’s Development -CDR) warns in a press release issued on Monday.

The CDR notes that the new draft pension law will generate an additional burden of rd 6.6pct of the gross domestic product estimated for 2022, that is adding to the optimistic projection of an annual 3pct budget deficit.

“According to the Gov’t own estimates, the assumed increases will represent for Romania a 18 billion euro annual additional cost starting with 2022. So, as of 2022 and the years to follow even presuming a 8pct optimistic annual nominal increase of the GDP for 2018 – 2022, the new law will generate a rd 6.6pct additional burden of the estimated GDP for 2022 that will add to the 3pct optimistic annual budget deficit projection. By comparing, in 2017 the public pensions’ pay represented nearly 6.7pct of the GDP, whilst the spending with the education mounted to 2.9pct of the GDP, and the spending with the public health care system was 4pct of the GDP,” the CDR officials say.

In the CDR members’ opinion, the public pension system’s implicit debt in Romania was approximately 275 billion euro, namely “over four times higher than Romania’s public debt at that time.” Also, they believe that the increase in the retirement benefits without rewarding measures being added to them, will only worsen the budget deficit’s situation, by weakening the public finance.

On the other hand, the CDR mentions that a significant imbalance exists between the pension rights received by over 5 million Romanians, financed through contributions and based on the contributiveness principle, and the special pensions, granted to over 150,000 Romanians.

CDR is a private, apolitical initiative built as a collaboration agreement through the collective participation of its members gathering 45 organisations and associate members. The coalition represents over 54,000 companies that generate around 1.2 million jobs and over 50pct of the GDP.

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