Romania's EU Convergence Program Considers Higher Retirement Age, Limited Wages, Recession

Romania's convergence program to be sent to the European Commission sets, among others, to increase retirement age, grant limited wage hikes and halt new hiring in the public sector in 2010-2011 and considers the risk of recession after nine years of economic growth.

The document, presented Friday by MEDIAFAX, was approved by the government and includes economic forecasts for 2008-2011:

-Romania's economy will increase an average 4.2% in 2009-2011, below its potential of 6%, due to internal and external risk.

-real gross domestic product growth for 2010 and 2011 is forecast at 4.5% and 5.5%, respectively.

-the Government is also considering the risk of recession for the first time in nine years, in case the effects of the global crisis worsen, bad weather conditions for agriculture such as drought or floods and unfavorable evolutions in international prices for oil, gas or food.

-retirement age will be increased and possibilities of early retirement will be reduced.

-wages in the public sector will be increased, in 2010-2011, in ratio to the inflation rate, below labor productivity, and hiring in the public sector will be blocked, as this year, and the Government is determined to continue its policy to cut costs.

-foreign direct investments in Romania will be reduced to half this year, to EUR4.7 billion from over EUR9 billion in 2008 because of the global financial crisis, but will increase to EUR5.4 billion in 2010, in accordance with the forecast economic relaunch.

the Government will introduce, with the new Fiscal Code, a taxation system for economic activities insufficiently taxed, while maintaining the principles of the flat tax, and will apply a budget strategy entailing more austere and efficient public spending.

Mediafax