Cabinet prepares massive public sector layoffs

The IMF team negotiates with government over making redundant some 100,000 - 150,000 civil servants by the end of next year, and freezing the pensions - except for minimum social benefits - in 2009 and 2010 and the salaries in the public sector until the moment when the Law on Salaries will come into effect, government sources announced. "Currently, discussions refer to laying off 100,000 - 150,000 employees from the central administration, local administrations and decentralized authorities. This would save the equivalent of 0.35 pc of the GDP at the budget next year. Additionally, (the government) will suspend the 2 pc increase of retirement benefits scheduled for October and will freeze pensions for 2010, except for minimum social ones," governmental sources told Mediafax.

During the talks, the sides agreed that all public servants - from both local and central authorities - will go on unpaid leave for 2-3 weeks, during September - November this year, a measure that would save another 0.3 pc of the GDP to the budget. PSD requested to give up the idea of laying off 150,000 persons from the state sector, sources from the party declared yesterday for Mediafax, stressing that the negotiations will continue today. According to the quoted sources, the Social Democrats want the layoffs to be the last variant considered in order to cut the budgetary expenditures. PSD vice president Constantin Nita, minister in charge with SMEs, trade and business circles, declared yesterday in a press conference that the party that he represents does not rule out the variant of freezing the salaries and pensions in 2009 and 2010, considering the economic crisis from Romania, Agerpres informs. On another hand, the minister said that his institution headed by him is willing to take over the Romanian Agency for Foreign Investments (ARIS).

Government is discussing with the IMF over a reduction of planned budget expenses to the amount of 0.9 pc of the GDP, mainly through a more careful monitoring and limiting of the sums used by local administrations and large state corporations, official sources announced. The IMF accepted an increase of budget deficit from 4.6 pc to 7-7.2 pc, as the economic contraction this year will reach 8-8.5 pc, far worse than the 4 pc estimated initially. In these conditions, the Gross Domestic Product (GDP) will be slightly above RON 500 bln, compared to the previous forecast of RON 531 bln. Government and the IMF agree this year's incomes will be lower than planned by RON 17 bln, equivalent to 3.3 - 3.4 pc of the GDP.

Second budget rectification in August

Government will operate the second budget rectification this year in August, and on this occasion it will also allocate the overdue sums for the construction of houses in Ocnele Mari town that were destroyed by the collapse of a salt mine, Premier Emil Boc recently announced, quoted by Mediafax. "During the budget rectification to be operated by Government now, in August, we'll allocate the overdue sums for rebuilding the houses," Boc told the population of Ocnele Mari, Valcea County. Early in July, the premier said the Government will analyze the possibility of a new budget rectification, after the analysis of the first half-year.

Eur 420 m, pre-financing for agriculture

Government will grant EUR 420 M to secure the pre-financing for agriculture in the programs with European financing, while another RON 600 M are scheduled for autumn crops, PM Emil Boc announced last Saturday, after a Cabinet meeting, quoted by Agerpres. "We decided to support agriculture by RON 600 M for autumn crops and by EUR 420 M as pre-financing for agricultural programs, under the form of Treasury loan, given the fact that agricultural work cannot be interrupted and financial resources must be secured, while the money will be recouped from the European Union," the premier explained. PM Boc said he asked the Agriculture Ministry to draft, by August 26, the regulations that will lay the basis of decentralization in the agricultural sector.

Government envisages exempting reinvested profit from taxation

The Government takes into consideration exempting reinvested profit from taxation and limiting the area of operation of the lump-sum tax, as measures to support the business environment, Premier Emil Boc announced, quoted by Agerpres. "To support the business environment at times of crisis, we are analyzing the introduction of the tax exemption for the reinvested profit and securing the financial resources for infrastructure, from roads to education and environment, as well as the limiting of the lump-sum tax, but here we must find a way to compensate the effects upon the state budget," the premier declared while he was presenting the new VAT refund system. According to the PM, the lump-sum tax already reached its goal - that of forcing the owners of ghost-firms to close them down - and the next step is to limit this kind of tax on activities where tax evasion can be best fought through the taxation system, such as restaurants.

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