Romania’s President Klaus Iohannis and central bank governor Mugur Isarescu are unhappy with Prime Minister Victor Ponta’s fiscal relaxation, which is part of the new Tax Code.

Isarescu and Iohannis met on July 15 for the first time in an official event and both expressed their disagreement with the tax cuts included in the new Fiscal Code, after Romania’s international creditors (the IMF and European Commission) have also asked the Government to reconsider some of the measures that are likely to result in a higher than agreed budget deficit next year.

“I don’t know how this Fiscal Code would be able to revolutionize Romania’s finances by simply cutting some taxes. I think that we shouldn’t be preoccupied only with cutting taxes, but with the way we do this as well. Such change is useful, but it mustn’t endanger certain benefits, such as the public finance stability, which has been consolidated after serious efforts,” said Iohannis.

Governor Isarescu went along the same line, saying that the future economic policies must be prudent and preserve the hardly attained balance.

“It would be a mistake if we ignored the lessons of the international crisis and our own experience, and fall into temptation to opt for measures with temporary consequences at the expense of long-term development,” he said.

The new Fiscal Code, which includes the general VAT rate cut from 24% to 19% starting January 1, 2016, was passed by the Parliament, but still needs to be signed by President Iohannis, before being enforced.

The President said that he was analyzing the document and that he would decide upon it in the following days.

Prime Minister Victor Ponta said yesterday that the new Fiscal Code is aimed at reducing the gap between Romania and developed countries. “It’s not me or you who wrote it, but finance experts,” Ponta told the President, asking him to think about Romania and pass the law.

The President also has the option to send it back to the Parliament and ask for a review of the measures, but if the Parliament votes it again, than he will have no choice but to promulgate it.

editor@romania-insider.com

(photo source: presidency.ro)