Romania parliament expected to pass government budget plan easily

by Reuters
Friday, 11 December 2015 14:19 GMT

By Radu-Sorin Marinas

BUCHAREST, Dec 11 (Reuters) - Romania's parliament should easily pass a proposed 2016 budget with minor amendments next week, sticking to the government's target of a deficit just below the European Union's threshold, deputies said on Friday.

The one-month old technocrat cabinet announced its budget plan on Wednesday, incorporating already-approved public sector wage hikes and tax cuts. Those will increase the deficit to 2.8 percent of gross domestic product in cash terms from 1.8 percent in 2015, still below the EU limit of 3 percent of GDP.

The former government of Victor Ponta quit last month following massive street protests over a nightclub fire that killed 60. It has since been replaced by a cabinet of technocrats led by Prime Minister Dacian Ciolos.

"This plan strikingly resembles Ponta's and it would be nonsense for us not to vote for it in parliament. It looks good, it's about 95 percent our draft," Viorel Stefan, head of the lower house's budget committee, told Reuters.

One of the key amendments proposed will be a new mechanism to distribute existing budgetary funds among local entities, including communes and municipalities, according to Stefan, who is vice-president of the Social Democrats, the country's biggest party.

"Deficit stays as projected of course. No rises on the expenditure side have been proposed," he said. "There have been some exploratory talks with other parties ... and this bill should quickly clear parliament. Our deputies will all back the bill."

The second-biggest party, the centrist Liberals, has also said the budget should pass virtually "untouched," with massive support from deputies and senators, and that they filed no amendments.

"As long as it had wage rises in it, value added tax cut in it and adjusted state pensions in it and is investment-focused, we will all vote for it," Liberal deputy Gheorghe Ialomitianu, a former finance minister, told Reuters.

"It seems that there's a majority for easy budget adoption next week. We did not want to bombard it with amendments. This new government of specialists needs backing."

The schedule of political debates published on the lower house's website showed that after committees sessions due to run on Friday and over the weekend, parliament's two houses will hold a final vote on the bill on Wednesday.

The budget targets a fiscal shortfall of 2.95 percent under European standards. The shortfall is expected to fall to 1.6 percent in cash terms in 2019.

The new government had to accommodate a cut in value-added tax of four percentage points, to 20 percent, from Jan. 1, 2016. The budget also includes other tax reductions, public-sector wage increases of 10 to 25 percent and higher social benefits.

It did not, however, raise the minimum wage to the leftist Social Democrats' commitment of 1,200 lei ($290.6) from 1,050 lei next year.

"At least for the state sector, our 1,200 lei goal was indirectly attained, as all wage increases included in the proposed budget will lift state wages around that level as of January," Stefan said.

Otilia Dhand of Teneo Intelligence said: "With both local and general elections due next year, parliamentary parties will likely push for increases in social spending. The deficit will likely be nominally kept at the envisaged 2.95. However, in reality, there will be a high risk of overshooting this target."

(Editing by Larry King)

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