IMF Says Romania Forced To Hike Taxes If Pension, Wage Cuts Prove Ineffective- Senate Chairman

Romanian Senate Chairman Mircea Geoana stated Sunday that the International Monetary Fund experts “clearly” said the Romanian Government will have to increase taxes if planned salary and pension cuts prove ineffective in point of slashing public spending and implicitly, reducing the budget deficit.

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Geoana added that the decision to cut salaries and pensions in the public sector, which he deemed totally wrong, is purely political and belongs to the ruling democrat liberals.

Geoana underscored that the harsh spending cut measures announced by the Government must necessarily be debated upon and voted in Parliament, as they bring changes to the state budget and to the salary and pension systems.

"Clearly, these measures, which I deem totally wrong - I am not talking about the need to cut spending in the public sector, but about the way spending cuts are made - will have to be sent to the Parliament. There is no other way, as we are talking about changes to the state budget and to the country's salary and pension systems," Geoana said.

According to Geoana, IMF experts said the measures to cut public salaries and pensions will be applied as long as Romania registers a high budget deficit.

Romanian President Traian Basescu said Thursday, after talks with International Monetary Fund officials, that pensions will decrease by 15% and salary funds in the public sector by 25%, which will also impact the minimum wage, adding subsidies will be drastically reduced.

Basescu said Romania is forced to drastically cut public spending to avoid raising its main taxes and called on unions to assume their part of the responsibility for the allotting of funds in public institutions.

The IMF mission is in Romania until Sunday to decide whether to disburse a fifth installment worth EUR850 million of a total stand-by loan of EUR13 billion. In a statement released Friday, the IMF said Romania's austerity plan to cut public salaries and pensions by 25% and 15% respectively was developed by the authorities in Bucharest and was not proposed by the Fund.

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