The Romanian Government will not introduce any new taxes to compensate for the social security tax (CAS) cut which it wants to implement starting July 1, 2014, prime minister Victor Ponta said on Wednesday, June 4.

His statement comes after Romanian media wrote on Tuesday that the International Monetary Fund IMF mission to Romania asked the Government to come up with measures to compensate for the 5 percent reduction of CAS paid by local companies for their employees.

The Government needs to come up with some EUR 590 million to balance its budget this year if the CAS cut will be implemented starting July 1, according to official estimates.

“Let us talk at the end (of the negotiations – e.n.). Of course, the IMF and especially the European Commission representatives have asked us to come under the deficit limits of the Fiscal Stability Treaty (necessary for the Eurozone entry – e.n.). How we are to do this remains to be discussed in the following period,” Ponta added.

Romania’s standby agreement with the IMF and the European Commission includes budget deficit target of 2.2 percent of GDP. That is some EUR 3.16 billion.

Prime minister Ponta however said on Wednesday that the budget deficit target will be raised by some EUR 160 million due to higher spending for the Defence Ministry. He mentioned that this has already been negotiated by budget minister Liviu Voinea with the European Commission.

Andrei Chirileasa, andrei@romania-insider.com