Isarescu: Restoring public wages has limited impact if deficit target is observed

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The restoration of the public wages will have a limited impact if the Government’s deficit target provided for in the arrangement with the International Monetary Fund (IMF) is observed, and this process would rather lead to a gradual recovery of domestic demand, Governor of the National Bank of Romania (BNR) Mugur Isarescu told a news conference on Thursday.

‘I have understood from the Government’s statements and its explanations that this restoration of public wages, taking into account that fact that the Constitutional Court agreed on the wage cuts only as a temporary measure, will be performed in keeping with the objectives and budgetary targets agreed upon with the IMF. If this happens, the impact will be limited,’ said Isarescu.

The deficit target set by the Romanian Government for 2012 is 1.9 percent of the Gross Domestic Product, the cash methodology, and 3 percent by the ESA methodology of the European Union. After the first two months of 2012, the aggregate national budget recorded a deficit of RON 2.7 billion, or 0.44 percent of the GDP.

Public wages were cut by 25 percent in mid-2010 as part of austerity measures to restore the balance in the national budget. A 15-percent restoration occurred in early 2011. Given the values against which the increase was performed, the base pay of public employees is now 13.75 percent smaller than in summer 2010.

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