Romanian Union Leaders Say 25% Wage Cut For Employees Of State-Run Cos Is Illegal

The head of the National Union Bloc, Dumitru Costin, said Wednesday that the measures recently announced by authorities are "thoughtless and desperate" and that many valuable employees of state-owned companies will seek employment with competitors in the private sector. Costin added that this decision will further lower market competitiveness standards.

Cartel Alfa union federation head, Bogdan Hossu, said that by prescribing the 25% wage cut, Romanian Prime Minister Emil Boc has violated the law on collective labor contracts. According to Hossu, it seems these measures are simply meant to oust the government. During the Tuesday meeting in Parliament, President Traian Basescu commended state-owned companies for their austerity budgets and massive restructuring, added Hossu.

Romania's Prime Minister on Wednesday called for 25% wage cuts for employees in state-owned companies, including state-owned banks Eximbank and CEC Bank, and a 20% cut in spending on goods and services in ministries, government agencies and state-run companies. Last year, these institutions' expenditures took a 15% cut, with the exception of the country's army and police force, which will be exempt from cuts in 2010 as well.

Finance Minister Sebastian Vladescu said Monday the government is considering the introduction of a solidarity tax for employees in state-run companies, adding these employees' wages would not be slashed by 25%, as planned for the entire public sector.

Recession-hit Romania, which is relying on a EUR20 billion IMF-led loan, has pledged to drastically cut public spending and reign in this year's budget deficit to 6.8% of GDP. Cuts include a 25% reduction of public sector salaries and 15% of pensions, unemployment and other social benefits.

The IMF is expected to disburse a tranche of nearly EUR0.9 billion when Romania implements its promised reforms. The country has already drawn about EUR11.5 billion from the credit line provided by the IMF, EU and the World Bank.

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