The European Commission notes that, following discussions with Romanian authorities, it has been agreed by both parties to increase in taxes if the Executive's measures are not enforced in due time.
"There have been discussions with the Romanian authorities on new measures that could be adopted if the situation does not improve. It has been agreed to adopt additional measures for increasing state revenues, like the increase in taxes, to limit an unprecedented increase of the budget deficit, for example, should the current measures not be implemented in due time or are incapable of securing the expected consolidation", Romanian news agency Mediafaxreads, quoting an answer sent to them by the EC.
The Ec also notes that in the first additional memorandum, the Romanian authorities accepted the implementation of additional measures, in the case when reaching the budget deficit target for 2010 was insufficient.
The Commission informs that the Romanian Government was left to decide the measures and it decided to focus the consolidation effort on spending. The only worry expressed by the EC was the possibility to implement the measures. Romanian authorities replied, by reassuring that they have taken the engagement of implementing also measures to move up own revenues, should they be necessary, to reach the deficit target", the Commission reads.
Following IMF and European Commission negotiations, the Romanian authorities chose in favour of a programme to cut public spending. Among the measures, they also intend to cut salaries in the public sector by 25% and pensions by 15%.
According to the quoted source, a EC formal evaluation of the Romanian Government's measures social impact does not exist. The EC says that their opinion, there is sufficient space to reduce salary spending in Romania's public sector; between Q1 2005 and Q1 2009, the average gross income in the public sector went up 17%. As a consequence, the EC goes on, salary spending in the public sector went up from 7.4% in the 2005 GDP to 9.5% in 2009. Average pensions tripled between 2004 and 2009, and the number of retired went up 6%, which endangered the public pensions' system sustainability. Anyhow, with an average monthly pension of 722 lei in 2009, the social costs of cutting pensions are not to be neglected, the EC adds.
The EC says that in February 2010, the Romanian authorities accepted the implementation of measures, among which cutting salaries and freezing pensions. The EC mission to Romania in April-May noted the measures have not been good enough.