Romanian Govt Cuts Budget Expenses To Avoid Excessive Def Procedure

"Given the opinions and recommendations of the European Commission and international financial institutions on cutting budget expenses, in order to avoid the signaled risk and to prevent the European Commission from initiating the excessive deficit procedure, it is necessary to approve a restraint policy of budget expenses and a more cautious approach of the budget deficit," the paper said.

Romanian finance minister Gheorghe Pogea said Friday that he does not expect Romania to be sanctioned for an excessive deficit in 2009, adding that such a procedure would take place in the next year after exceeding 3% of the GDP, and only if it was not adjusted.

Official sources told MEDIAFAX Friday, the Romanian Government will approve various measures to cut budget expenses, through an emergency ordinance, to avoid the excessive deficit procedure.

The draft ordinance stipulates that the maximum threshold of reimbursable funds that can be obtained by local authorities within one year will also include the EU funds already drawn until the implementation of the bill. The legislation in force stipulates an annual threshold of reimbursable funds to be contracted by local authorities, in order not to exceed the annual level of the general consolidated budget deficit.

The threshold will not include the reimbursable funds for pre-financing and/or co-financing EU-supported projects.

The document also stipulates that government cannot observe this year the ordinance on financing the scientific research sector, and that the contribution of employees to private pension funds will be maintained at 2% of the gross income, instead of 2.5% stipulated by the legislation into force.

The ordinance draft also includes the measures already announced by the government on cutting road and airway transport costs for dignitaries’ travels abroad.

Pogea said late January that Romania’s budget deficit of 5.2% of the gross domestic product in 2008 was not necessarily fueled by the international financial crisis, and the EU might punish the member states that went beyond 3% of the GDP threshold due to other reasons.

Pogea added that Romania might avoid EC’s sanctions if it observes its engagements, including a budget deficit of 2% of GDP for 2009.

Premier Emil Boc said Tuesday that the Romanian Government hopes that Romania would not face excessive deficit sanctions from the European Commission, though this is a possibility subject to the latest data.

The prime minister added that EC’s most significant financial sanction would be to cut European funding, which would subsequently trigger tougher lending conditions.