Emil Boc: Solution proposed by IMF for Romania to increase taxes would have compromised hope of economic revival

The solution proposed my the International Monetary Fund (IMF) for Romania to increase taxes during the economic crisis would have compromised the little hope of revival in the business environment, Premier Emil Boc said in the opening of the National Forum of Small and Medium-sized Enterprises taking place in Bucharest, also underlying that the IMF proposed an increase in VAT by 24 pct, a flat tax of 20 pct and a cut in salaries by 20 percent.

The measures to cut salaries and pensions, the unemployment benefit and other benefits are only temporary, Emil Boc also specified. He reaffirmed that the austerity measures will stay valid until December 31, the date by which the restructuring process of the budget apparatus should be completed.

„At the current pace, without carrying out the reforms announced on Wednesday, the public debt would have surged up to 62 percent in 2012, compared with 31 percent now,” said Emil Boc, who reminded that Romania would have damaged in that case his external credibility, giving up the programme with the IMF, World Bank and the European Commission, and he also reminded that Spain did not managed to attract loans on capital markets, at its latest attempt to issue bonds.

If it had not taken these measures to restructure the budget sector, the state would have ended in taking all liquidities from the banks, at high interests rates on short-term, lacking thus the private sector of the possibility to give credits and revive the economy.
Through the mechanism of inflation, raising taxes would have affected the population revenues and would have dropped the purchase power, with the exchange rate going surely down, and some of us still remember when in our recent history the exchange rate doubled in a single day, the Prime Minister completed.

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