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| The Week in Review |
| (2011-08-12) |
| Last updated: 2011-08-16 14:25 EET |
1. Romania’s fiscal and budget policy for 2012-2014 has been passed.
The Romanian government has approved the fiscal policy for the 2012-2014 period based on austerity and an increase in the investment fund. Under the new policy the next 3 years will see no rise in state employees’ salaries and the pensions of the people who worked in special conditions or retired in 2011. The strategy also provides for employment restrictions in the public sector, a ban on meal vouchers and bonuses as well as a rise in taxes for owners of more than one property. The reduction of the social security contribution by 2% has also been postponed. The strategy also provides for the reduction of the budget deficit to 2.2% of the GDP by 2014, a gradual increase in the amounts allocated to investment and a cut in personnel expenses. Trade unions say they will oppose the new strategy and threaten with protests.
2. The tensions on international markets could be felt in Romania as well.
Against the backdrop of investor anxiety and fears that the world economy will be swept by a new wave of the financial crisis, stock markets from all over the world have reported significant fluctuations. The Bucharest Stock Market was no exception and fell by 12% in what was the severest correction in the past 15 months. Towards the end of the week, however, the Bucharest Stock Market saw a slight growth.
3. President Traian Basescu says Romania should remain cautious given the current international context.
Romania’s president Traian Basescu, fresh from a meeting with government officials and bank experts, said “crisis” is not the best word to describe the current international situation because what we see is a reaction of markets to a number of unconvincing decisions made in the US and Europe. President Basescu said Romania should continue to be cautious over the high volatility of world markets. Traian Basescu urged politicians, in particular the government coalition, to give up populist promises of possible salary and pension rises. The president called on the government to press ahead with the fiscal consolidation process and the reduction of healthcare, pension and social security budget deficits and to speed up the restructuring of state-owned companies.
Traian Basescu: “The main priority should be to continue the policies meant to cut the expenses incurred by the state apparatus and the social spending and to start a programme, as soon as possible, to balance the pension fund in the medium term. Reducing the deficit of various funds must be a major priority in the medium term”.
While the Liberal Democratic Party, the senior partner in the government coalition, hails the president’s call, the opposition sees it as unconvincing.
4. Romania’s annual inflation rate dropped significantly in July.
According to National Institute for Statistics, Romania’s annual inflation rate dropped by more than 3% in July for the second consecutive time, to reach 4.85%. This was due to the dwindling effects of last year’s VAT rise from 19 to 24%. Consumption prices also dropped in July following the decrease in food prices. The advisor to the National Bank governor, Adrian Vasilescu, says this decrease is significant given that Romania used to have the highest inflation rate in the European Union. He also believes this downward trend will continue. The National Bank of Romania this week revised its inflation forecast down from 5.1% to 4.6% for 2011 and to 3.5% for 2012. The central bank governor Mugur Isarescu has warned, however, that the inflation rate and Romania’s economy depend on international developments.
5. PM Emil Boc is visiting China.
The Romanian Prime Minister, Emil Boc, started a one-week trip to China accompanied by members of his cabinet and Romanian business people. He said the purpose of his visit is to convince China to become involved in major investment projects, mainly in areas like road transports, energy and agriculture. During his trip, the Prime Minister visited the high technology industrial park of Shenzhen and attended the opening of the World University Summer Games. 60 Romanian athletes are participating in the event in 9 sports: athletics, basketball, artistic and aerobic gymnastics, swimming, weight lifting, judo, fencing and table tennis.
6. Spain introduces restrictions for Romanian workers.
The European Commission approved Spain’s request to restrict the access of Romanian workers to the Spanish labor market temporarily, until December 31st 2012. The European Commission thus accepted the justification of the Spanish government, according to which the labor market deteriorates in summer when thousands of Romanian seasonal workers arrive in Spain to work in agriculture. The European Commission reserves its right to change its decision at any moment, if the situation changes. Restrictions do not apply to the more than 800,000 Romanians who are officially registered in Spain. The Romanian labor minister, Sebastian Lazaroiu, said a hotline would become operational next week where Romanian nationals can find out more about the restrictions on the Spanish labor market.
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