Press review (Aug 3)

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The Romanian newspapers on Monday give main coverage to the talks held by the governmental authorities on the need to cut the public sector staff, the financial effects of charging a minimum tax on the state budget revenues, a possible drop in the National Bank of Romania’s key interest to 8.5 percent following the significant contraction of the economy and the opinions voiced by the Romanian Construction Entrepreneurs Association of the programme for building motorways.

The Romanian governments since 2005 have bolstered the number of the public sector staff at the World Bank’s recommendation in order to be able to coherently manage the European integration, but they have done nothing to measure the competence and efficiency of the administration, the Cotidianul says.

President Traian Basescu’s recent remarks that the public sector personnel should be cut 20 percent and that he is considering not running for a fresh term have stirred reactions from the parties and the civil servants’ representatives, the Jurnalul National reports. Spokesman of the ruling Social Democrats (PSD) Bogdan Niculescu Duvaz said the party cannot accept the president’s proposal to make redundancies in the public sector.

Neither do their ruling partners Democrat Liberals (PD-L) agree with President Basescu. PD-L vice president Ioan Olteanu said he hoped the Government, ‘in its wisdom’ could find solutions to cutting the public sector spending 20 percent without affecting the personnel.

Leader of the opposition National Liberal Party (PNL) Ludovic Orban believes the president’s demand ‘smacks of electioneering’ and ‘it seems to have been made so as to once again cheat the IMF expert mission currently evaluating Romania, in order to get a respite from the IMF without meeting the commitments’, the Jurnalul National reports.

The ministers had separate meetings with the prime minister, over the weekend, to cut the staff in the agencies responsible to them. After this Wednesday’s meeting of the Government, Prime Minister Emil Boc will be able to announce a leaner and less costly executive, the Ziua says.

The most ruthless ministers were Constantin Nita, who proposed to lay off 130 staff from his SME ministry and Ilie Sarbu, who wants to dismantle 13 agencies and sack a fifth of the Agriculture Ministry personnel. Other ministries, such as culture and finances, keep their teams almost entirely, the daily announces.

The governmental agencies are the ones to have practised the most aggressive policy of personnel hiring and salary rises. Quite often there are agencies and offices in the same ministry that have similar scopes, the Cotidianul adds.

The minimum tax will bring roughly 1.16 billion lei (about 277 million euros) in budget revenues by year-end, which is three times higher than the finance ministry officials had estimated.

Thus, in just three months since the tax is charged, the state has cashed 291.7 million lei (69 million euros), from nearly 65 percent of the firms, the
Gandul quotes Sorin Blejnar, the chairman of the Tax Administration National Agency as saying.

When this tax was introduced, the finances ministry hoped to collect just 350 million lei in eight months – since May till year-end. Giving up the lump sum tax has already become a political, not economic issue:

the prime minister backs the tax, while the PSD is against its very ‘brainchild’, says the Gandul in an item headlined: ‘The lump sum tax: 100,000 bankruptcies for 217 million euros’.

The national budget implementation at mid-year observed the understanding with the International Monetary Fund, according to information offered by the finances ministry.

Romania has posted 14.38 billion lei in deficit; this compares to 14.5 billion lei agreed with the IMF. However, there are sceptics who argue that payments have been put off toward the mid-year so that Romania can meet the pledges made to the IMF.

Nevertheless, such moves have a limited effect only and the international lender, which cannot be easily fooled, has already cautioned Romania that its public spending is way too high, the Ziua says in an item headlined ‘The state budget stands on its edge’.

As much as 77.27 billion lei was collected to the state budget in the first half-year, by 5.1 percent less on the same period a year ago.
At the same time, expenditure was up 5.6 percent, show figures made public by the finances ministry, which are carried by the Evenimentul zilei in an article headlined ‘The results of a crisis half-year: low revenues don’t cover spending’.

The significant contraction of the national economy will prompt the National Bank of Romania to cut the key interest to 8.5 percent at its Tuesday meeting, with such cut being also backed by the disinflation trend and the leu’s stability over the recent period, believe the analysts, who also bet the minimum compulsory reserves will be kept.

The National Bank should keep adopting a prudential policy and avoid aggressive interest rate cuts at a time when the fiscal policy raises some questions. ‘Analysts believe the key rate will be cut to 8.5 percent amid the economic contraction and disinflation’, headlines the Gardianul.

‘The megalomaniac plans for motorway building cannot be achieved under the current economic circumstances’, says Alexandru Dobre, an infrastructure expert at the Romanian Construction Entrepreneurs Association (ARACO).

According to the Ziarul financiar, the constructors say the plans to build 3,144 kilometres of motorways at costs of 31.44 billion euros in the next 25 years have not been updated in line to the current economic circumstances.

ARACO argues Romania should build single-carriageway motorways that have no grade-separation and no side-emergency lane and to build expressways where traffic is not very heavy.

The investment for a single-carriageway motorway stands at 6 million euros a km, while building a three-lane expressway costs 2 million euros a km, says ARACO, that represents the interests of 1,300 companies conducting more than 1.5 billion euros in businesses.

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