The hike in salaries will not exceed labor productivity in 2008, Romania's PM says

The government will not afford this year salary increases which will exceed labor productivity, Prime Minister Calin Popescu Tariceanu said.

The official met with the head of the Central Bank of Romania (BNR), Mugur Isarescu and with the Minister of Economy and Finance, Varujan Vosganian. Tariceanu noted Romania must continues its economic growth at a rate exceeding that of the other European countries.

The PM emphasized this is the only solution for the country to fill the gaps separating it from other European Union developed states. Tariceanu said the prices in the energy and agriculture field put pressure on the inflation.

The official explained the government cannot control the prices in the agriculture industry as they are set by the market economy rules. The same scenario applies to the prices in the energy industry, which are influenced by the evolution of the international prices in this field.

Tariceanu said this year the government will exert a firmer control over budgetary expenditures. In his turn, Isarescu pleaded for a coordination of the government's policies with those belonging to the central bank.

The BNR official said an increase in salaries over the productivity level will have a bad influence over the exchange rate. BNR formerly said the main reason for the high consumption level Romania is witnessing resides in the increase of salaries, which exceeds labor productivity.

The central bank explained the overall demand level it is not backed by Romania's offer for goods and services. This has two main effects: it affects the external balance of payments and stimulates inflation, which widened over BNR's 4 percent target.

NewsIn