Rudderless in bad weather

George Marinescu
English Section / 25 octombrie 2023

Rudderless in bad weather

Versiunea în limba română

The change of government at the end of the first semester of this year apparently did not bode well for Prime Minister Ciolacu's team, which found itself with a budget deficit that is increasingly difficult to control and manage, with the Voluntari asylum scandal that led to the replacement of the ministers Gabriela Firea and Marius Budai from the government, with the explosion in Crevedia where the corruption in the state showed its true face causing more victims, with the Russian drones that began to drop more and more often in the Delta Danube, with the scandal caused by the accidents caused by drug consumption and with the prospect of starting a new school year in the first month of autumn.

In an attempt to control the budget deficit and not risk the blocking of European funds, the PSD-PNL governing coalition had a heated summer in which it discussed several formulas for amending the Fiscal Code and reforming the local and central public administration, discussions that have been delayed the first budget rectification, which was pushed back in October. After several meetings between the leaders of the coalition and after debating all aspects, the Government managed to draw up a legislative project to amend the Fiscal Code, which it assumed in Parliament on September 26, despite the opposition expressed by the business environment, social partners, but also by a part of the political class.

At the same time, because the purchasing power of citizens has decreased due to inflation, the Government has decided, for 90 days, to limit the commercial addition to 14 basic foods, a limit that entered into force on August 1, 2023 and which will apparently be extended with another 90 days.

The only good news from a macroeconomic point of view came from the National Bank of Romania and the European Commission. The BNR kept the reference interest rate at 7% and predicted that inflation will reach 7.5% at the end of the year, while the European Commission approved the second payment request from the PNRR, transferring 2.76 billion to the Bucharest authorities euro.

In all of this context above, in September we also recorded the Three Seas Initiative Summit in Bucharest and the new autumn campaign of DNA which detained several officials accused of corruption, the most famous of whom is the social democrat Dumitru Buzatu, president of the Vaslui County Council.

July, heated by the asylum scandal in Voluntari

The month of his oven proved once again to be the hottest of the year, not only through the lens of the heat wave that affected agricultural crops, but also through the political events that practically led to the imposition of the resignation of two ministers of the Ciolacu Cabinet, just one month after taking over the mandates in the new Government. Gabriela Firea and Marius Budăi were indicated as the main ones responsible for the inactivity of the state institutions in the case of the bad treatment applied to the elderly in the three care centers for the elderly and not only located within the radius of the city of Voluntari, Ilfov county.

On July 4, DIICOT prosecutors descended on three social assistance homes - "Armonia", "Sfântul Gabriel cel Viteaz" and "Casa Cora" - in the town of Voluntari. Following the searches, 26 suspects were detained, who, according to DIICOT, had constituted a criminal network that had ill-treated and even tortured 98 people in the respective care centers. The DIICOT prosecutors also claim that, through forgery and the use of forgery, the respective organized crime network deprived several of the elderly in the care centers in Voluntari of the real estate they owned, but also of the sums the elderly had in different bank accounts. According to the prosecutors, the total damage was estimated at 5.2 million lei.

Following the discovery of these cases, the Government ordered controls at the national level which revealed 51 unauthorized centers and which led to the suspension of activity in 110 social assistance centers out of the 5,197 centers that provide social services in our country.

A day before the descent of the DIICOT prosecutors into Voluntari, Eduard Hellvig resigned from the position of general director of the SRI, without his resignation having anything to do with what had happened in Voluntari. After his resignation, the "honorary" resignations of Marius Budai and Gabriela Firea followed, from the positions of Minister of Labor and Minister of the Family, respectively.

The scandal regarding social assistance in our country overlapped with the one caused by the discussions within the governing coalition, which, faced with a growing budget deficit and the non-collection of revenues programmed by the state budget law, considered taking measures regarding the increase of VAT for more goods and services - including those offered by the HoReCa sector - and the reduction of tax benefits granted in recent years to employees from construction, from IT&C and from agriculture.

Against the background of the budgetary imbalance and the inflation that is felt in the increase in the prices of services and food products, the Board of Directors of the National Bank of Romania decided, on July 5, to maintain the monetary policy interest rate at 7%, and the Ministry of Finance launched, in mid-July, two new editions of Tezaur and Fidelis government bonds, in order to obtain the necessary revenues to cover budget expenses.

The above situation led the Ciolacu Government to postpone the first budget rectification, wanting first to adopt the package of measures necessary for a rebalancing of the state budget. However, although the representatives of the Executive announced that 200,000 vacant positions in the budget system will no longer be filled, during July the central administration started a series of contests to fill several positions within the General Secretariat of the Government, within more many agencies and public institutions, but also within the newly established Agency for Monitoring and Evaluation of the Performance of Public Enterprises (AMEPIP).

Another important element to note in the first month of the third quarter is the inauguration, on July 6, of the road bridge over the Danube, which connects Brăila and Tulcea counties. Called the "Golden Gate of Romania" by locals and politicians, the suspension bridge has a total length of 1,974.30 meters, a central span of 1,120 meters and two lateral spans of 489.65 and 364.65 meters. The vertical gauge of the bridge is 38 meters from the maximum flood level, thus meeting the criteria for navigation on the Danube. The total width of the Brăila suspension bridge is 31.70 meters. The taxiway on the bridge is 22 meters long and consists of 4 traffic lanes. The bridge was built by Webuild partners (Italy) - IHI Infrastructure Systems Co.Ltd. (Japan), and the entire work cost almost 2 billion lei without VAT, most of the financing being provided by European funds.

In addition to the domestic situation, the month of July brought the war in Ukraine closer to our eastern border after, on July 24, following the termination of the agreement on the transport corridors for Ukrainian grains in the Black Sea, the Russian Federation bombed with drones the grain warehouses and infrastructure in the Ukrainian ports of Reni and Izmail, located a few kilometers from Galati and Tulcea. Regarding national defense, our country received the necessary assurances following the NATO summit that took place in Vilnius on July 11 and 12, when the members of the Alliance decided to establish a rapid intervention force that can be sent at any time, in any area of the Eastern Flank, in case a member state is attacked by the Russian Federation.

The Crevedia explosion brought us an August in flames

The explosion at an illegally operating LPG station in the town of Crevedia, a disaster that left six people dead and 52 injured, revealed in August the corruption within the Romanian state and the inefficiency of the work of some public institutions that must to deal with the control and supervision of companies operating in certain economic sectors.

On Saturday, August 26, there was an explosion at an LPG station that had been operating illegally since 2020 in that locality. The explosion occurred while two employees were transferring gas from one tank to another. It was followed by two other strong deflagrations, which initially led to the destruction of ten nearby houses, the death of two people (husband and wife) and 58 injuries, 12 of which were very serious, some of them being transferred to hospitals in Belgium, Germany, Norway, Austria and Italy. Later, four more seriously injured people were added to the list of deaths, who were intubated in the intensive care units of Bucharest hospitals. Of the total number of injured people, 43 are employees of the Ministry of Internal Affairs - 39 firefighters, two policemen and two gendarmes.

After the Crevedia tragedy, Prime Minister Marcel Ciolacu ordered the verification of all LPG stations in the country by mixed teams made up of employees of the IGSU, ITM, Police, ISCIR, ANAF and other authorities with control powers.

Following the checks carried out, more than 2,000 deficiencies were discovered and fines of more than 1.3 million euros were applied in total.

We can also talk about the inefficiency of the civil servants' activity in the case of the cancellation of the procurement procedure for the four marine corvettes that were intended for the Romanian Naval Forces. The announcement regarding the cancellation of the procedure due to the non-conclusion of the contract by the association designated as the winner was made by the officials of the Ministry of National Defense on August 7, a week before the day of the Romanian Navy.

The employees of the Inspectorate proved to be equally inefficient in their activities of the Constanţa Police District, who allowed that, in certain resorts on the coast, some people in a state of intoxication or under the influence of psychotropic substances drive the cars provided, a fact that resulted in the tragedy in the town of 2 Mai, where a young drugged drove his car into a group of eight people on the side of the road, killing two and injuring the other six. Before the accident, which took place at around 5:00 a.m., on the night of August 18 to 19, the respective young man was stopped in traffic twice by the employees of the Traffic Police, who, although they ascertained the condition in which he was , they did not withhold his license and let him continue to travel with the vehicle provided. Following the tragedy, the Minister of the Interior Cătălin Predoiu ordered the dismissal of the deputy head of IPJ Constanţa, Chief Commissioner Marin Dincă, the head of the Constanţa Road Police Service, Chief Commissioner Stoian Constantin, the Chief of Mangalia Police, Chief Commissioner Dragoş Cristea and the Chief of Police Vama Veche, chief commissioner Radu Vachente. Before their dismissal, the head of IPJ Constanta, Adrian Constantin Glugă, resigned from his position.

At the same time, in August, the publication of the budget execution for the first seven months of 2023 showed us that we are facing a budget deficit of 2.43% of GDP, which puts us off track to reach, at the end of the year, the target deficit of 4.4% of GDP previously agreed with the European Commission. In order not to endanger the European funds allocated to our country, the members of the Government thought of a set of fiscal measures and a reform of the public system, which they discussed at the end of last month in Brussels with European Commission officials, following in September to move on to the implementation of these measures.

The draft emergency ordinance on the reform of the public system caused controversy, and ANAF employees and local public administration officials protested in front of the Government headquarters, requesting that the situation be analyzed in each authority and each public institution before the cancellation of some vacancies and merger of some institutions.

Also during August, the official visit of Ukrainian Prime Minister Dennis Smyhal took place, who established with Prime Minister Marcel Ciolacu the doubling of the amount of Ukrainian grain that is transited through our country, from 24 million tons to 48 million tons.

September - start of the school year with a quiver full of new taxes

The beginning of the school year brought us the prospect for the first autumn month of the Government's approval of new fees and taxes. The perspective proved real after the Government assumed in Parliament a package of fiscal changes aimed at reducing the budget deficit. Threatened by the European Commission with the cut of allocations from EU funds, the Ciolacu government had to, after inheriting the draft law on new fees and taxes throughout the summer season, go with it to the Parliament, hoping that it would be approved at the Ecofin Council meeting the new budget deficit target that is more than one percent higher than the one agreed in March 2020 with Brussels officials.

According to the draft law adopted in Parliament on September 26, the taxation of banks is changed so that they will pay a tax of 2% on turnover in 2024 and 2025, double the initial provision of 1%. At the same time, large companies, with turnovers exceeding 50 million euros, will have to pay a tax of 1% on turnover, if the tax paid on profit, accumulated from the beginning of the fiscal year/fiscal year and modified until the end quarter/calculation year, is lower than the minimum turnover tax. Moreover, the normative act also modifies the taxation of micro-enterprises, the respective economic agents being forced to pay, from January 1, 2024, the following taxes on profit: 1%, for micro-enterprises with revenues that do not exceed 60,000 euros; 3%, for micro-enterprises that achieve revenues over 60,000 euros or carry out certain activities, main or secondary, corresponding to specific CAEN codes.

The government has decided to limit the application of the tax relief granted to employees in the IT&C sector until December 31, 2028 inclusive, as well as the tax relief granted to the construction, agricultural and food industry sectors, by introducing a ceiling up to which the exemption from paying income tax is granted, respectively up to the level of 10,000 lei inclusive. Moreover, employees in the respective sectors of activity will also pay CASS contributions.

As far as labor taxation is concerned, the law adopted by the Government Parliament establishes the 10% taxation - for CASS - of meal vouchers and holiday vouchers granted to employees. In addition to these measures, the normative act also provides for an increase in VAT for some goods and services. The new the fiscal measures were challenged by the business environment, which requested predictability in the fiscal field, and the parliamentary opposition - in the absence of the number of signatures required to submit a motion of censure - attacked the fiscal changes imposed by the Government at the Constitutional Court, especially since they had a negative opinion from the Economic and Social Council, but also a favorable opinion with a lot of observations from the Ministry of Justice, whose specialists say that many provisions are unconstitutional and present substantial defects.

Following the amendment of the Fiscal Code, the Government claims that we will end the 2023 budget year with a deficit of 5.5% in contrast to the 4.4% assumed in 2020 for the current year. However, the experts of the International Monetary Fund who paid a working visit to Bucharest at the end of last month declared, through the voice of Jan Kees Martijn, the head of the IMF mission in Romania, that if 2023 will be an ordinary year, without other events, the budget deficit will be 6%.

The only good news in the macroeconomic field in September was the decision of the European Commission which approved and transferred to the Romanian state, at the end of last month, the 2.76 billion euros, representing the amount requested by the Government through the second request for payment regarding the National Plan of Recovery and Resilience and the increase, on September 28, by the Government of the gross minimum wage per country, which, from October 1, rose to 3300 lei per month from 3000 lei per month previously. According to the Executive's data, almost 1.87 million employees will benefit from that measure.

The first week of the last month of the third quarter was marked by the babble of the Bucharest authorities regarding the Russian drones that fell near the Plauru locality in the Tulcean Ceatalchioi commune, a topic that was also debated at the Summit of the Three Seas Initiative that took place on 6 September in Bucharest and which finally led to the erection in the area by the Ministry of National Defense of some anti-aircraft shelters and to the establishment of a new alarm from the General Inspectorate for Emergency Situations for the residents of Galaţi and Tulcea counties regarding the fall from sky of the remains of Russian drones shot down by Ukrainian anti-aircraft forces.

September was also the month in which the National Anticorruption Directorate showed us that it returned from a prolonged vacation, after ordering the detention of Dumitru Buzatu, the president of the Vaslui County Council, for taking a bribe of 1,250,000 lei. The court ordered the preventive arrest for Dumitru Buzatu, and the PSD immediately decided, at the request of the president Marcel Ciolacu, to exclude Buzatu from the ranks of the social democrats and to suspend from membership his ex-wife, senator Gabriela Creţu. Moreover, the son of the former PSD leader from Vaslui submitted his resignation from the position held within the Ciolacu government.

On September 11, the bell rang for almost 3 million preschoolers and students, according to the declarations of the Deca League, the Minister of National Education, the new school year being divided into five modules that will take place in 36 weeks, but with two less for students from final years of high school and one less for eighth grade graduates, children who are going to take the Baccalaureate or National Assessment exams. Unfortunately, according to the data presented by the Minister of Education, this school year too, students from 189 educational units will have to defecate in the toilet in the school yard.

On a sporting level, we recorded a 2-2 draw for the men's national team against Israel, as well as a 2-0 victory against Kosovo, results that keep us in the race for qualifying for the European Championship in 2024, which will take place in Germany. In addition to the good news above, we have a negative record: the men's national rugby team recorded a negative record in the matches played in September at the World Cup in France: 8 points scored and 242 points conceded. The heaviest defeat in the history of the nine Rugby World Cup appearances was against Scotland 0-84, but 0-76 against South Africa and 8-82 against Ireland are not inferior either, showing that rugby Romanian has fallen into a pit from which he does not know how to get up.

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