The Romanian government has not endorsed the draft emergency ordinance on cutting public expenditures during the April 26 meeting, as initially planned. The ordinance is aimed at addressing a 1%-of-GDP (EUR 4 bln) discrepancy between the revenues initially planned and the updated projections after the Q1 budget execution.

Instead, prime minister Nicolae Ciuca came out with another proposal, which is still subject to debates and calculations: hiking the income tax for those in the public sector earning from wages and pensions more than EUR 5,000 per month (gross) – which is the President's wage.

However, PM Ciuca said the government could not indicate how much money this would bring to the public budget or whether the measure breaches the Constitution or not.

Ziarul Financiar estimates that doubling the income tax for those earning more than EUR 5,000 per month would bring EUR 700 mln (0.2% of GDP) to the budget – but only if enforced over all the Romanian employees, as opposed to only the budgetary sector as proposed by PM Ciuca.

In a broader context, analysts consulted by Economedia.ro estimate that the measures envisaged by the government under the draft emergency ordinance (as leaked last week) would cut public expenditures by only RON 3 bln (EUR 600 mln) compared to the RON 20 bln (EUR 4 bln) target. 

iulian@romania-insider.com

(Photo source: Gov.ro)