Liviu Dragnea, the leader of the ruling Social Democratic Party (PSD), told Reuters that the Romanian government will continue to cut taxes and increase the minimum wage and pensions until 2020, as it wants to increase the living standard in the country.

“The need for fiscal relaxation both for the private sector and for employees was acute. And ... it will continue, we will lower both the number of taxes and their amount,” Dragnea said.

In the interview with Reuters, Liviu Dragnea also referred to the private pension fund system in Romania, about which he said it could become optional. Moreover, he said that, in the next two years, Romania would also push for investment to generate budget revenue and attempt to sell stakes in government companies on the Bucharest Stock Exchange.

The government has taken several fiscal measures in the past year, such as cutting the income tax and social security contributions and moving their payment from the employers to the employees. It also enforced wage hikes at the expense of infrastructure investment, Reuters reported.

The European Commission has expressed its concern that, due to these steps taken to loosen fiscal policy, the country could fail to meet budget targets this year. However, Liviu Dragnea said Romania would meet its 2018 deficit target.

In a recent press conference, Romanian president Klaus Iohannis said the government should explain if it has enough money to pay salaries and pensions until the end of this year and what it plans to do with the mandatory private pension funds (Pillar II), following recent controversies. He accused PSD of inducing uncertainty about this subject and asked what their true intentions were.

His reaction came amid public discussions about the future of the private pension system, which have intensified in recent days after the information that the government is planning to suspend the contributions to mandatory private pension funds appeared in an official document.

A EUR 10 bln dispute: Private pensions spark new political debate in Romania

Irina Marica, irina.marica@romania-insider.com