FinMin Vladescu: Cutting 25pc off public wages pool will not generate needed savings

Publish date: 19-05-2010
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Cutting 25 percent off the public wages pool will not generate the savings Romania needs right now, and that is why cutting individual wages by 25 percent is needed, Finance Minister Sebastian Vladescu told a televised show.

'Cutting 25 percent off the public wages pool would fail to generate the savings we need now. We need savings of nearly 20 percent of the net wages pool. Such savings would require 25 percent of the gross wages pool, or else we lose revenues from the social security contributions attached to the pay cuts. Currently, there is no cut available that would mix staff cut with pay cuts because staff cuts now will not translate in savings. Under the current legislation, staff cuts entail diminishing wage spending, a rise in unemployment spending and a drop in social security revenues. We could consider a 40-percent staff cut, but that would be impossible as it would make many systems dysfunctional,' Vladescu explained.

He added that under the agreement with the International Monetary Fund (IMF), which he said is not an agreement for the next two or three months but one that takes into account Romania's need for a fiscal and budgetary strategy for the next three years, it is for the first time specified the wages pool for the next year and the maximum staff count that has to fit in the pool.

Vladescu pointed out that as far as he is concerned, the package of austerity measures unveiled by President Traian Basescu is the best path to follow, the best solution now.


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