Harsh reforms announced by Prime Minister Ilie Bolojan: spending cuts, tax increases and cutting of syndicates

Prime Minister Ilie Bolojan declared, after Friday's government meeting, that Romania is in a delicate budgetary situation, determined by chronic deficits accumulated in recent years, the largest of which was recorded last year. "We have among the lowest incomes in Europe as a share of GDP and higher expenses than we can afford. The loans we take out are at high interest rates," warned the head of government, emphasizing that in the coming period it will be inevitable to contract other loans.

In this context, Ilie Bolojan explained that it is essential for Romania to intervene quickly and decisively to balance its budget. "It is urgent to attack two problems - the deficit, in order to balance it, and the access to European funds," said the Prime Minister, pointing out that the effort must be divided between increasing revenues and reducing expenses, through measures applied in both the short and long term: "We must attack structural revenues and expenses that will allow us to reduce our deficit year after year." He mentioned that, on the side of reducing expenses, the Government has already begun to eliminate parasitic structures in the administration. "We are taking stock of everything that means committees, commissions, synecdoches, and in every government meeting we will attack this area. Today we started with a structure that belonged to the government - a committee made up of 17 people with an income of 4,000 euros net per month. We have transformed it into a committee of 5 people with an income of 1,000 euros net per month," Bolojan detailed. In parallel, he also announced a review of the system of bonuses, which are often abusively applied. "We have a large number of legally permitted increases, some of which have been abused. We have increases on top of each other. The increases will be reevaluated and must be linked to performance," said the head of government.

Education is another area where the Bolojan Cabinet recognizes that budgetary pressure has become unsustainable. Referring to the explosive evolution of the budget for school scholarships, Ilie Bolojan said: "We developed a package of student scholarships that started from a budget of 187 million lei for the whole country and reached 4.7 billion lei in three years. Any kind of scholarships are good, but we pay a billion just on student scholarships." He added that the analysis of grades after the introduction of this system indicates an artificial increase in performance and that the entire mechanism "must be reconfigured."

In parallel, work is being done to increase budget revenues, especially by combating tax evasion and improving collection. However, fiscal adjustments will also be needed, which will be announced next week, as the head of government stated. Ilie Bolojan pointed out: "VAT will very likely be reset to two thresholds, today we have three. We have the possibility to collect amounts quickly and it is very likely that we will propose an increase in excise duties related to alcohol or fuel".

The Prime Minister also said that the expansion of the health taxpayer base is being analyzed: "We have very few contributors to the Health Fund, but we have over 16 million beneficiaries. We have many exceptions and we are analyzing the application of the contribution to higher pensions". At the same time, capital gains are also targeted, especially from banks and gambling.

Regarding the measures that will come into force next year, Ilie Bolojan explained that these will be announced in advance in order to send a clear signal to the markets. "Romania knows what its problems are and we are taking the necessary measures to be able to stabilize things macroeconomically and not degenerate into an economic crisis," said the Prime Minister. Among the fiscal measures that will be taken are a realignment of property taxes, very likely an increase, as well as a reform of local public administration. The Head of Government also said that "the capital tax will very likely be increased, for example the dividend tax."

Special attention is being paid to investments, especially those financed from European funds. "It is important to work on the investment component, and for beneficiaries to put pressure on builders to expedite the works. Let's realign the projects so that in July we can submit our realigned program to the European Commission," said Ilie Bolojan.

In order to prioritize investments, the Government decided on a six-month moratorium on procurement procedures financed from the state budget. "We will suspend the launch of new tender procedures or the interruption of those that have been launched but have not submitted bids and have not been awarded the winners," said the prime minister, specifying that this measure does not apply to European projects, which must be accelerated.

Asked about the union reactions and protests by employees in the public system, including the Government, the prime minister replied: "No citizen can be calm when things are announced that affect their incomes and the job security. In these years, in many areas, people have jumped the gun by inventing bonuses, but also by expanding the number of employees. It has been proven that you can work just as well with fewer people." The Head of Government stressed that a correct calculation of the personnel requirements is needed, accompanied by clear performance criteria. "I don't think the Prime Minister should have 16 advisors, he can have 9-10-11. A dignitary should not have a full cabinet, he can have a smaller one, that shows respect for the people," concluded Ilie Bolojan.