Romania's Constitutional Court rejected the Government's objections to a decision of the Parliament, which scrapped the Executive's emergency ordinance aimed at partly deferring the 100% rise in child allowances.

The Court rejected as unfounded the Government's objections.

The Parliament voted to double child allowances at the end of last year, and president Klaus Iohannis promulgated the law in January. Still, the Executive claims the promulgation took place after Parliament adopted the budget planning, and the additional expenditure would put excessive pressure on the public deficit.

As an alternative, the Government sketched a calendar for doubling the children allowances, starting with a 25% hike in September. The Parliament, however, scrapped the Government's plans included in an emergency ordinance.

In response to the Constitutional Court's decision, prime minister Ludovic Orban confirmed that the Government would stick with the gradual increase sketched in the ordinance until it receives the Court's detailed ruling. The cost of doubling the allowances is RON 7 billion per year or 0.6% of GDP, PM Orban said.

Although the impact is lower, the children allowances issue broadly resembles that of the 40% pension hike: the increase was decided by a law already promulgated by president Iohannis, and the Government wants to defer it while the lawmakers oppose such plans.

A Constitutional Court's decision to find the Government's objections to the 40% pension hike as groundless would have a much higher macroeconomic impact - namely a public deficit of over 11% of GDP in 2021, according to Romania's National Bank (BNR).

iulian@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)