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| PRESSURE ON THE ROMANIAN ECONOMY(2.11.2007) |
| (2007-11-02) |
| Last updated: 2007-11-02 17:04 EET |
On November 1st, pensions rose by 30% for Romania’s 5 and a half million pensioners. This looks like a spectacular rise, but if we recall that the average state pension stood at 120 euros and that it has now reached a mere 155 euros, many pensioners will obviously continue to live on the breadline. Not to mention pensions for agricultural workers, which stand at a mere 65-euros. This is what Preda Nedelcu, deputy head of the National Pensioners Federation had to say:
“The pension increase is strongly counteracted by the sky-high increase in prices. Our federation has called for pensioners who have pensions that are lower than the average salary to be granted social aid from the state budget, which can help pensioners at least reach the minimum average salary.”
A new increase worth 7.4% will be applied to all pensioners starting January 1st which, in raw figures, again translates into an insufficient amount. The Romanian economy seems unable to cope with rises above this level. So, while understanding the pensioners' discontent, we must also understand Mugur Isarescu, governor of the central bank, who sounded the alarm:
“If I were to sum up the message of the National Bank, it would be: “Stop playing tug-of-war with the economy, unless we all want to break it to pieces.” One cannot afford so many claims: both increased pensions and increased salaries, as well as social aid and tax cuts for business people. A list must be drawn up at some point and we must run through our priorities. The Romanian economy has worked at full potential in recent years. We have entered the 9th year of continuous economic growth. We could follow an upward trend another 9 years, but only if we follow wise policies.”
Mugur Isarescu also called attention to the excessive use of monetary mechanisms, that is the reference interest rate, recently increased. Its further increase could lead to an unsustainable appreciation of the leu, although, in the short term, such moves support the disinflationary process. The governor also referred to the current account deficit which should remain stable. He called for a more prudent, even austere economic policy at a time when all trade unions announced the start of a labour conflict due to the restriction of the minimum wage. We have yet to see whether the government will cave in to pressure, before an important election year.
(Mihai Radulescu)
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