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REGULATIONS IN TIMES OF CRISIS 30/06/2010
(2010-06-30)
Last updated: 2010-07-05 13:21 EET Print
The articles in question referred to the 15% cut in regular pensions and the recalculation of magistrates’ pensions. However, state employees’ salaries will still be cut by 25%, while the VAT will rise to 24% starting on July 1st. Meal vouchers, child allowances and holiday benefits, as well as royalties, bank deposit interests and transactions on the capital market will all be taxed. The Government says that all these drastic measures are a prerequisite for Romania to receive the following installments of the IMF and EU loan, worth some 20 billion Euros. Raising taxes should keep the budget deficit at 6.8% of the GDP. In these times of economic uncertainty, the national currency has started to depreciate strongly against the European currency. When news that the government could not cut pensions came out, the markets reacted violently. Investors started worrying about the budget deficit, taxes and the IMF loan, so the panic grew and both the leu and the stock exchange collapsed as a result. After a year and a half of stability, during which the Euro was traded at 4.1 to 4.2 lei, the exchange rate is now soon to reach 4.4. The stock exchange fell dramatically, just as indicators appeared to be recovering. On July 2nd, the IMF will decide whether Romania will get the 5th payment of 900 million Euros from the its loan to this country. According to sources in Washington, the increase in the VAT could have the same effect on the budget deficit as the pension cuts and thus the conditions imposed by the IMF would be met. In March 2009 Romania signed an agreement with the IMF, the EU and the World Bank, for a loan of 20 billion Euros for this country to deal with the crisis. The disbursement of the 5th installment is crucial to Romania.

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