ECONOMY FINANCE&BANKING POLITICS

The budget war continues. President Iohannis sends to Parliament for re-examination 2019 State Budget bill, PSD announces it will resend the law to Iohannis without amendments

President Klaus Iohannis Friday sent to Parliament, for re-examination, the 2019 State Budget bill.

The president specifies in his request that, apart from the reasons of unconstitutionality, the law needs to be re-examined because the allocation of budgetary resources is “on the one hand grounded on an unrealistic forecast, and on the other hand does not ensure the real functioning of some public institutions with an essential role in society”.

“The European Commission and international independent bodies have all forecast economic growth rates substantially lower than the ones provided by the National Strategy and Prognosis Commission (CNSP). For instance, the International Monetary Fund has forecast 3.4pct, the European Commission 3.8pct, while the World Bank prognosis parks at only 3.5pct, and the Fitch ratings estimates a merely 3.2pct”, Klaus Iohannis said.

According to the president, the advance of the investment forecast at 6.9pct is “far too much” given that the investment in 2018 only saw a 1.5pct growth; the exchange rate prognosis is “unrealistic” given that the tensions on the foreign exchange market are high, and Romania is facing “the highest macro-economic imbalances” in the region, respectively a budget deficit of EUR 15 billion and a current account deficit of EUR 9.4 billion; the budgetary revenues are “over-estimated” and the 33.51pct share of the GDP of the total incomes provided for in the General Consolidated Budget is “unrealistic”; while “incomes are over-estimated, the budgetary spending is under-dimensioned which has consequences by creating certain blockages” at the level of the main authorizing officer; the situation of DNA [the anti-graft directorate, ed. n.] and DIICOT [the Directorate for Investigating Organized Crime and Terrorism, ed. n.] where the staff spending for 2019 is forecast significantly smaller than in 2018, a reason why the sums allocated for salaries will not be enough to cover the entire year; the Romanian Intelligence Service (SRI)’s budget was cut by 18.04pct “with the consequence of the non-coverage of the pat expenditure for the last four months of the year”; the Foreign Intelligence Service (SIE) where the cut was 9.58pct, the spending with the staff’s payment have no coverage for the last two months of the year, and the Guard and Protection Service (SPP) saw its budget cut by 21.29pct, the staff spending being insufficient for the last three months of the year; following the growth of the pension point by 10pct, the monthly spending with the pensions last year was rd RON 5.51 billion, and considering the forecast increase of the pension point by 15pct with 1 September 2019, out of the calculations results a necessary of RON 69.5 billion, by RON 1.4 billion higher than the budgeted spending in the social security state budget, of RON 68.1 billion; Parliament should analyse the spending related to the quantum of the contribution of Romania to the European Union’s budget, since after the public debate and the draft adopted by the Gov’t, the contribution is sliced from RON 9.18 billion to RON 8.66 billion; for the local authorities, the 2019 budget “will roughly ensure a subsistence funding with zero investment” which will be a source of reorganisation and redundancies; the amount dedicated to the political parties “goes against the electoral reform’s principles of 2015” that aimed at setting certain ceilings for the sums spent in the electoral campaigns.

 

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Presidential adviser:  Parliament ought to provide Romania with credible budget built on solid bases

 

Presidential adviser Cosmin Marinescu on Friday said Parliament ought to provide Romania with a credible, well-founded national budget, built on solid bases that will not burden up the Romanians’ economic future and that will guarantee stability, predictability and prosperity for all Romanians in the years to come.

At a news briefing at the Cotroceni Presidential Palace, he criticised the fact that the 2019 national budget under the ceiling regulations, provides for structural adjustments only in 2021, “which indicates that the Government, missing solutions, keeps postponing its pledged commitments.”.

“Regarding the budget deficit, the budget bill ignores a number of provisions in the Fiscal-Budgetary Responsibility Law, those on the medium-term budgetary objective, those concerning the measures to be taken in case of temporary deviations of the deficit, as is currently the case with Romania. The deficit ratio of 2.76pct of the GDP, shows that the adjustment against the year 2018 is practically non-existent. That violates the EU recommendation of November 27, 2018, referring to the procedure of significant deviation of the public deficit, a recommendation stipulating a structural adjustment of 1pct of the GDP in 2019,” Marinescu said.

He also criticised the appropriations for the social protection system.

“The 2019 budget bill provides for a fundamental change, it is a governmental scheming regarding the funding of the child protection system, centres for people with disabilities and the system for the protection of people with disabilities. All these social services were transferred from the national budget to the budgets of the local administrations. The government’s scheming means an extra bill of about 2.5 billion lei to be footed by the local public administrations from their own revenues, money that could have been used for investment and for the development of local communities,” Marinescu said.

In his opinion, the social security services transferred to the local administrations requires expenditures of about 6.5 billion lei in 2019 nationwide. “Under the budget bill, the funding sources are made up of Value Added Tax (VAT) revenues for balancing local budgets and own revenues of the local administrations, but VAT rebalancing amounts for 2019 increase by only 4 billion lei compared with the previous year,” Marinescu added.

 

PSD: Iohannis does not understand economy, does not know to read budget

 

The Social Democratic Party (PSD) has immediately reacted on Friday to the Cotroceni Palace’s new critics and said that President Klaus Iohannis “does not understand economy”, “does not know to read a budget”, but blocks the current Government, “instead of apologizing”, after the Constitutional Court rejected his notification against the Budget Law.

“Instead of apologizing, after the Constitutional Court has rejected his notification against the Budget Law, Iohannis insists on blocking the PSD Government in the hope that the citizens will not vote for this party at the upcoming elections. (…) In fact, Iohannis does not understand economy. He proved it even on Wednesday when he showed us that he did not know how to read a draft budget. He said that local administrations would receive one billion lei less, although in reality the draft budget proposes 4.6 billion more”,  a PSD release issued on Friday for AGERPRES maintains.

The Social-Democrats also say that the real problem of local communities is not the budget proposed by PSD, which allocates extra money, “but the fact that Iohannis has blocked the budget”.

“The real problem of local communities is not the budget proposed by PSD, which allocates extra money but the fact that Iohannis has blocked the budget. For this reason, the local elected officials cannot collect 100pct of the income tax, but only 71.5pct, as it was stipulated in last year’s budget. Also because of Iohannis, mayors cannot start new investments worth about 5 billion lei”.

 

Dragnea: The PSD-ALDE majority will not amend the 2019 budget, even if Iohannis sent it back to Parliament

 

In addition, the Chairman of the Social Democrat Party (PSD), Liviu Dragnea, stated on Saturday at Slobozia that the Parliament will not amend the 2019 Budget Law and that will resend it to promulgation in the form in which it was received for re-examination, since the budget was designed very well and by a very rigorous manner.

“Klaus Iohannis is not the head of state. He is the head of state in his mind, because he acts like a head and he doesn’t have desires, he has orders and he is very upset and bothered when someone dares to question his orders. We have nothing to amend, since the budget was designed very well and by a very rigorous manner. It is only his desire, his intention, his will to delay the approval of the state budget as long as possible, to harm Romania as much as possible”

He added that if the Government will approve the emergency ordinance for approving the budget ceilings, the budget will be adopted next week and will be resent to be promulgated.

“We will resend it to Cotroceni to this gentleman, if we’ll find him there, to sign and promulgate it, to be published, in order for millions of children to benefit from their allowances, in order for the investment programs to start being developed in force, in order for the health programs, where huge amounts have been allocated, to start being developed, for the benefit of the Romanians. If the Government does not adopt the ordinance, there will be a delay. But I hope the Government wants to have the budget available as soon as possible, in order to be implemented. (…) If there will be a meeting on Monday, it will be on the agenda for sure, and this means that this (the GEO on the ceilings – e.n.) can be the only reason”, Dragnea added.

 

Transport minister: Blocking budget leads to delayed payment of builders

 

In turn, Transport Minister Razvan Cuc said on Friday in Suceava that blocking the budget would lead to delayed payment of the builders but currently there are no debts to them.

”Look at what the blocking of the budget generates: it generates a delay in payment to serious Romanian builders that do their job and want to complete important investment objectives, essential for local communities. (…) They [the Suceava ring road entrepreneur] submitted the bills somewhere in November-December, and the payment must be made within 60 days. (…) As long as we do not have a budget because that is how somebody understands to work with the Romanian Government, in particular the Ministry of Transport, which is directly affected, obviously there are delays in payment. (…) When we have a budget we will pay. What would you want us to do? Break the law? Make a payment if we do not have a budget?,” said Cuc.

 

Minister of European Funds: Lack of the budget directly affects the absorption of European funds

 

The lack of the consolidated budget directly affects the absorption of the European funds, since all the contracts that are to be implemented are blocked, Minister of European Funds Rovana Plumb stated on Saturday for Antena 3.

The Minister said that working with the twelfth part of the last year’s budget causes a blockage regarding the payments to the beneficiaries, since the co-funding from the Romanian state, ensured by the budget, is the one that must be paid first.

Rovana Plumb mentioned that her Ministry’s target for this year is an absorption rate of 40pct. In 2019, which means we need the budget, in order to make payments to beneficiaries on time. “We can make payments in a much lower proportion than the requests coming from beneficiaries”, the Minister said.

For the co-funding of the European funds, the Ministry has received an additional amount of 6.4 billion lei, the total allocated amount being 9.9 billion lei, the Minister of European Funds stated.

 

PNL senator: A new no-confidence motion is needed

 

The PNL Senator Iancu Caracota stated on Saturday that the Opposition “must” submit a new no-confidence motion against the Executive and that “PSD’s refusal to amend the Budget Law throws the country into a crisis”.

“The fact that the PSD leadership refuses to bring the 2019 Budget Law within bearable parameters for the Romanian economy shows irresponsibility. The budget of the country cannot be designed on illusions and supported only by reasoning of electoral campaign. The current budget is overestimated and based on illusory revenues which cannot ensure the operational expenditures of the state, and even worse, it does not provide real funds for the major investments that can bring a long-term development for the economy”, the PNL Senator Iancu Caracota stated.

He claims that the budget does not ensure the achievement of any infrastructure investment.

“PSD-ALDE’s 2019 budget is a budget that does not build anything: no major highway section, such as the Tg. Mures-Iasi-Ungheni highway sections, the Sibiu-Pitesti highway sections, the Bucharest Ring Road highway section, the Comarnic-Brasov highway section. Furthermore, no major hospital can be built, such as the Iasi, Cluj or Craiova regional hospitals. The companies, which are large contributors to the state budget, will be strangled by this budget and by other absurd fiscal regulations, such as the ones provided by Ordinance no.114/2018. Furthermore, Ordinance 114 can lead local authorities to bankruptcy, since they are forced to take local taxes and fees to the maximum level in order for them to survive. The Government’s attack against the companies and the overexposure of the local authorities will affect, first of all, the Romanian citizens. The salaries in the private sector will freeze and local fees will increase for every citizen”, the Liberal added.

The PNL senator asks the Opposition parties to submit a new no-confidence motion.

“The only solution is submitting a new no-confidence motion which should be supported by all the Opposition parties. This motion is needed more than ever, Romania needs a Government that does not design budgets only based on the electoral campaign calculations”, Caracota concluded.

 

Victor Ponta: We’re living in a “budgetary Caritas”, crisis will come

 

The Pro Romania Chairman Victor Ponta stated on Saturday, at a press conference, that Romania will face an economic crisis right after the presidential elections of this autumn.

Victor Ponta announces a disaster for Romanians. “I wish I’ll not be right, but all of you know I’m right. The expense account, the bill will come after the presidential elections, as it came in 2009, too. We’re now living in a ‘budgetary Caritas’. We don’t have a budget, but they give money to everybody. We borrow at a higher cost than Greece. A budgetary and economic crisis period will come. We have been throuwn into this crisis by Dancila and Valcov, together with Teodorovici, but Ludovic Orban or USR will not be able to take us out of it. Unfortunately, I say. I want to make this team of former ministers at Pro Romania (…) to take the country out of the pit, because we are in a very large pit”, Victor Ponta stated.

The Pro Romania Chairman Victor Ponta said on Saturday at a press conference that the stake of the EP elections of May 26 will be the score to be obtained by PSD, which will show if Liviu Dragnea will continue to have the formal legitimacy to rule Romania, referring to the percentage obtained by the Social Democrats in 2016. The former PM also said that he will open the EP election list, and Corina Cretu will be on the second place.

“Mr. Dragnea rules Romania invoking the 46pct score from the 2016 elections. I, Mihai Tudose, Gabriela Firea, Adrian Tutuianu, we are saying this is not Dragnea’s score. We are saying we have also brought our contribution to it, and we’ll see on May 26. If Dragnea continues to get 46pct without us, it means it’s his score, we have nothing to do and he is allowed to continue ruling Romania. But if he will not get 46pct, it means he rules with your votes, while he doesn’t even give us the right to speak in Romania’s Parliament. (…) If Dragnea doesn’t get 46pct, it means you, Liviu Dragnea, are no longer allowed to rule the whole Romania and appoint your people. (…) I believe these elections are more important than usually. The stake will not consist of the 33 Romanians who will go to the European Parliament, but to see if Liviu Dragnea still has the formal legitimacy to rule Romania, or if an important part of the 46pct of the votes are mine or those who have been pushed on the stairs by him”, Victor Ponta said.

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