Anti-crisis measures agreed by social partners
Measures to support the Romanian economy were to come into effect in January 2009; however, the new government decided to agree the anti-crisis programme with the social partners first. Although the government thus brought the budget and anti-crisis measures to public knowledge as having been agreed with the social partners, the latter promptly voiced their dissatisfaction at how the programme reflects their own proposals.
Background to anti-crisis measures
In the first nine months of 2008, Romania’s economic growth reached unprecedented heights and the then Prime Minister, Călin Popescu-Tăriceanu, remarked with satisfaction that the economy was going at ‘full steam’. During the election campaign of October–November 2008, there was no talk of a national crisis – only of promises and assurances from the government and other political candidates that Romania would not suffer from the global economic crisis.
Nevertheless, after the European Commission expressed concern regarding the need for anti-crisis measures, Prime Minister Popescu-Tăriceanu asked his ministers on 17 November 2008 to start thinking about measures to support the national economy and to have them ready by the following cabinet meeting; the prime minister never mentioned the word ‘crisis’.
The proposed plan of measures was going to inject some €10 billion into the economy, including tax incentives, such as a 10 percentage point cut in social security contributions, tax exemptions for reinvested dividends and a 5% tax bonus for the timely payment of taxes.
New government finds budget deficit
However, as soon as it was appointed in December 2008, the new government found that the budget deficit for the 2008 financial year was in excess of 5%, as a result of overdue payments accumulated by the previous government. In response to the concerns and proposals put forward by the social partners (RO0901029I), the government invited them to a meeting at the Ministry of Public Finance (Ministerul Finanţelor Publice, MFP) on 12 January 2009.
The parties to these discussions agreed to appoint joint working groups representing the trade unions, employer organisations, the government and the financial services sector; these working groups were given the task of drafting an anti-crisis programme by 22 January 2009.
Summary of social partner proposals
MFP’s Department for relations with parliament, trade unions and employer organisations collected and sorted the proposals put forward by the social partners. Altogether, the list contained about 270 proposals, of which:
- 141 proposals were designed to support economic growth;
- 25 recommendations sought the reduction of budget expenditure, an increase in budget revenues and more secure financial resources for economic growth;
- 65 proposals considered wage policies, pensions, social welfare, social dialogue and the requisite legislative measures to sustain them;
- 39 recommendations were specific to the financial services sector.
Ranking foremost with regard to the number of proposals put forward were, on the employer side, the Alliance of Employers’ Confederations of Romania (Alianţa Confederaţiilor Patronale din România, ACPR) and the Employer Confederation of Romanian Industry (Confederaţia Patronală din Industria României, CONPIROM). On the trade union side, the main contributors were the National Trade Union Bloc (Blocul Naţional Sindical, BNS) and the National Trade Union Confederation ‘Cartel Alfa’ (Confederaţia Naţională Sindicală ‘Cartel Alfa’, Cartel Alfa).
Anti-crisis measures announced by government
After the 5 February 2009 cabinet meeting, the new Prime Minister, Emil Boc, stated that the anti-crisis measures attached to the draft budget act and forwarded to parliament for debate included:
- investments worth €10.2 billion – or 20% of all budget spending and 7% of gross domestic product (GDP) – for infrastructure works, and the allocation of an extra €2 billion to pay for the outstanding debts of the previous government;
- tax exemptions for reinvested profits, effective from the second quarter of 2009 – following a motion by the social partners;
- support for small and medium-sized enterprises (SMEs) through a guarantee fund for the loans granted to SMEs and through the capitalisation of two banks – following a motion by the social partners;
- improved mechanisms for absorbing European funds, accelerated fund drawing procedures, the promotion of public-private partnerships and the elimination of bureaucracy – following a motion by the social partners;
- an extension of the unemployment benefit period by three months, as well as an exemption from taxes and charges for technical unemployment benefit – that is, when employers temporarily suspend workers;
- co-funding of 50% towards continuing vocational training for unemployed people and employees;
- legislation regarding the minimum welfare pension;
- consultation, after 15 April 2009, with the social partners on matters related to pay increases and the law regarding standard principles of wage formation for public servants;
- a moratorium for 2009 on the salaries of high-ranking civil servants and public officers, affecting about 7,000 persons.
Reaction of social partners
Although Prime Minister Boc claimed that the budget and anti-crisis measures had been agreed with the social partners, the latter promptly voiced their dissatisfaction at how the plan reflects their own proposals.
BNS, for example, contends that – in spite of its request for more lenient tax policies – the increase by three percentage points in social security contributions ‘renders futile any debate on taxation as an instrument to stimulate economic growth’. In its view, the budget, as approved, ‘dooms to failure the anti-crisis measures negotiated for a month with the social partners’. BNS explains that the above outcome is due to the assumption by the government of the following two principles: a budget deficit of 2% and the provision of co-finance for the European projects.
On the employer side, the National Union of Romanian Employers (Uniunea Naţională a Patronatului Român, UNPR) criticised the government’s decision ‘to drastically limit the budget deficit and, with it, economic growth’. It argues that, in 2008, the 8% economic growth was sustained by a deficit of over 5%, and that the proposed deficit of 2% and the growth rate of 2.5% are serious mistakes.
Constantin Ciutacu, Institute of National Economy, Romanian Academy