The Romanian Government has decided to increase the Value Added Tax (VAT) from the current 19 percent to 24 percent, after a Government meeting held earlier today. The decision came after the Romanian Constitutional Court has ruled the 15 percent pensions decrease as unconstitutional.  The measures should trigger an increase in the budget, after the failed attempt to cut budget spending.

Meanwhile, the International Monetary Fund (IMF) has delayed its meeting where it was supposed to discuss about the fate of the stand-by agreement which Romania, which was supposed to unlock the next loan installment. The Romanian Government will have to negotiate another set of measures with the IMF in order to comply with the budget deficit requests.

Read more about the Constitutional Court's decision announced yesterday.

UPDATE 1: The VAT increase will be enforced starting July 1st. The measures has already been agreed with the IMF, having been preliminary discussed in the previous round of negotiations with the Fund.

"The initial package proposed by the Government, which aimed at cutting budgetary spending, was better than this option, according to Prime Minister Emil Boc.

UPDATE 2: The VAT increase will lead to an increase of EUR 2 billion in the amount the Government hopes to cash in every year. This is similar to how much the state would have  saved after cutting the pensions.

The Romanian Government and the IMF have been negotiating on six to seven options, all of which included tax increases, in order to keep the budget deficit to 6.8 percent of the GDP.