Romania To Limit 2011 Budget Expenses To Level Resulted After 2010 Spending Cuts

Romania will apply salary and pension cut measures until the and on the year and starting January 1, 2011 the Government will implement social and staff policies meant to keep budget expenses within the limits resulted after applying this year’s cost-cutting measures.

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The provision is included in the draft law concerning budget expenditure cuts, for which the Government will seek a confidence vote in Parliament.

During negotiations with the International Monetary Fund, Romania's Government pledged to limit next year's staff expenses to 39 billion lei (EUR1= RON4.1532). This year's staff expenses rise to RON40.5 billion after applying a 25% salary cut.

The Executive also committed to reduce the number of employees in the public sector to 1.29 million by yearend, which means laying off about 70,000 public sector employees, a little over 5% of their total number.

According to the latest data released by the Government, about 1.36 million employees worked in the public sector at the end of March, down 36,000 compared to December 2008.

Sources with direct knowledge of talks with the IMF told MEDIAFAX that over 140,000 public sector employees will be laid off by yearend to keep 2011 staff expenses within the cap agreed with the foreign institution.

Jeffrey Franks, head of the International Monetary Fund mission in Romania, said public sector staff should de reduced by 250,000 in the following years, a figure which matches the number of employments made between 2006 and 2008.

Romania's Government will seek a confidence vote in Parliament for two draft laws, one concerning budget expenditure cuts, and the other regulating the new contribution-based pension system and reevaluating disability pensions.

Romania, which is relying on a EUR20 billion rescue loan from the IMF, EU and the World Bank, has pledged to take drastic measures to cut public spending and bring the budget deficit to below 6.8% of the GDP from 7.3% last year.

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