Trade unions propose anti-crisis measures

Romania’s national trade union confederations are apprehensive about the possible effects that the current economic crisis may have on employment opportunities and the purchasing power of employees’ earnings. Before the consultations between the new government and the national trade union confederations, the National Trade Union Confederation ‘Cartel Alfa’ sent an open letter to the government on 11 December 2008 proposing a plan of emergency measures.

Background

Romania’s recently elected government – which took office after the parliamentary elections of 30 November 2008 – is now struggling to cope with the economic developments that are markedly different from the atmosphere of optimism and generous promises that prevailed during the 2008 election campaigns.

The economic crisis has been compounded by a budget deficit that grew suddenly from November to December 2008 – from 2% to over 5.2% of gross domestic product (GDP). This generated tensions between the social partners over the promises made during the elections, or over rights acknowledged by law.

Unions propose measures to overcome economic crisis

While the presidential administration and the political parties that won the elections were busy with the negotiations for the appointment of the new government, the trade unions signalled their concerns regarding the likelihood that some employers might reduce part of their workforce. The unions feared that employers would do this by temporarily suspending work, thus resulting in technical unemployment, offering early annual leave or announcing collective redundancy due to decreasing demand and difficulties encountered in receiving and making payments for their products and services.

Under these circumstances, as early as 11 December 2008, the National Trade Union Confederation ‘Cartel Alfa’ (Confederaţia Naţională Sindicală ‘Cartel Alfa’, Cartel Alfa) addressed a letter containing proposals for emergency measures to the political parties entitled to form the government, along with the other parliamentary parties, the president’s administration, as well as the national trade union confederations and national employer organisations. The letter contained proposals seeking to prevent a deterioration in employment conditions and to ensure Romania’s economic development throughout the current economic crisis.

The measures envisaged are planned for two lines of action: to maintain and create jobs (22 proposals) and to support corporate business (24 proposals).

Content of trade union proposals

Among the first group of proposals are the following:

  • enforcing a tripartite agreement on the minimum wage, applicable from July 2008 (RO0808019I);
  • placing a ban on the re- employment of retirees and the dual payment of both pensions and salaries in public institutions that are not affected by a shortage of labour;
  • providing personalised career development schemes for unemployed persons;
  • carrying out a tripartite analysis on how to generate employment opportunities in the domestic labour market for Romanians working abroad who are affected by the economic crisis in their present host countries and willing to return to Romania;
  • granting tax concessions for investment projects serving local public interests.

Furthermore, the letter contained 14 proposals relating to legislation, which recommended the following:

  • ratifying, as a matter of urgency, a number of the 18 conventions of the International Labour Organization (ILO);
  • increasing the term of eligibility for unemployment benefits and raising the amount of such benefits;
  • providing financial support for continuous professional training programmes;
  • increasing severance pay for persons made redundant;
  • amending the law governing the Economic and Social Council (Consiliul Economic şi Social, CES) to the effect of expanding its operations through subsidiaries in all Romanian counties, not just at central level.

The measures seeking to maintain existing companies vary according to the size of such companies. For example, the business carried out by large corporations is critical for the horizontal economy and for small and medium-sized enterprises (SMEs). Among the trade union proposals are the application of profit tax and value-added tax (VAT) by brackets of revenues, the reduction of interest rates, as well as the stimulation of research and development with regard to new products.

The letter ends with a motion for the signing of a social pact to be endorsed by parliament and included in the ruling platform.

Social partner plan

On 12 January 2009, after a month of talks during which new proposals were made by the other national trade union confederations, the Ministry of Public Finance (Ministerul Finanţelor Publice, MFP) hosted a meeting of employers, government officials, trade unions and bank representatives, all of which agreed to form three working groups charged with drafting a plan of action.

The resulting plan of action comprised the following provisions:

  • ‘measures to support economic growth’ by boosting business through incentives and attractive conditions for investment by corporations, assistance to SMEs, and steps encouraging the relaunch of agricultural and rural development – the measures would be designed by a group coordinated by the Ministry of Economy (Ministerul Economiei, ME);
  • ‘measures that will aim to secure the requisite financial resources for economic development’, including measures aimed at absorbing European Union funds, financing programmes and projects under public-private partnerships, developing infrastructure, reducing expenditure and increasing budget revenues – the measures would be designed by a group under the responsibility of MFP;
  • ‘measures covering wages, pensions and welfare’, including measures seeking to introduce equitable salaries and pensions, maintain existing workplaces and create new ones – the measures would be drafted by the group under the supervision of the Ministry of Labour, Family and Social Protection (Ministerul Muncii, Familiei şi Protecţiei Sociale, MMFPS).

Government talks

Initially, the only concrete measures made public at the same time as the draft state budget law for the current year were the 20% reduction in the number of employees in central public administration and the package of anti-crisis policies adopted during the cabinet meeting on 29 January 2009.

On 23 January, Romania’s Prime Minister, Emil Boc, and the Minister of Public Finance, Gheorghe Pogea, met with the social partners for a first round of talks on the draft budget. Discussions continued until all sides reached a common position on the growth rates for salaries and pensions.

Prime Minister Boc believes that the budget and the anti-crisis plan should be centred on the following two pillars:

  • development of the economy and supportive measures for the business environment – for this purpose, 20% of the budget will be earmarked for investment in transport and environmental, health and agricultural infrastructure;
  • elimination of ‘deadlocks caused to the economy by outstanding payments associated with the former government’.

Budget details

Prior to the cabinet meeting on 29 January – the date by which the government had promised to decide on and publicise the key figures of the new budget – the reaction of the civil servants’ trade union seems to have prompted the government to reconsider the cuts in public administration.

After joining in the traditional dialogue between the government and the social partners, the Romanian President, Traian Băsescu, emphasised in a statement made on 27 January and on public radio that he would not disapprove if the government and the trade unions reached an agreement on a six-month moratorium on salaries and pensions.

On 28 January, the trade union leaders met with the president and asked him ‘to refrain from interfering in the negotiations between the government and the social partners’.

After the government meeting of 29 January, Prime Minister Boc announced a central budget of €51 billion in revenue, calculated on the basis of an inflation rate of 5% and providing for the allocation of 20% for investment purposes.

In 2009, public servants’ salaries are to be increased by a total of 5%, but in two phases – by 3% in April and by 2% in September.

The prime minister also announced that, in 2009, no bonuses would be paid to state employees, and that overtime would be compensated by days off instead of extra pay. These measures should help the government to reduce personnel expenditure by 20%.

The government has also decided to establish the minimal guaranteed social security pension of RON 300 (about €70 as at 16 February 2009) with effect from July and of RON 350 (€82) from October.

Commentary

The appointment of the tripartite working groups is a positive step forward in the current difficult economic context.

Many of the measures proposed by the social partners are not new and were subject to debates and negotiations over the past few years before the economic crisis. However, other measures may only be expected to have medium or long-term effects.

Neither the trade unions nor the employer organisations are fully satisfied with the manner in which their proposals have been reflected in the anti-crisis action plan. In fact, the entire anti-crisis plan will incur costs of some €6.9 billion, which is 4.6% of GDP.

The short-term measures – which account for some 3.8% of GDP, the balance of 4.6% being assigned to long-term measures – will be more effective in the medium term, as they are designed to prevent matters from deteriorating.

As the future economic outlook remains uncertain, the revenues expected from the various budgets are difficult to forecast. Visible differences are evident between the estimates of the National Forecast Commission (Comisia Naţională de Prognoză, CNP) and of the European Commission with regard to the growth rates of GDP and the budget deficit.

A careful analysis of the proposals accepted for the budget and reflected in its content, and of the anti-crisis steps, reveals that of the 5% set aside for wage increases, and an inflation rate of the same amount, a large proportion will come from the increased contributions of employers and employees to the social security fund. This means that the net and real salary growth will be rather negative.

As for the controversial law regarding the increase in teachers’ salaries (RO0811019I), Prime Minister Boc stated that the teachers ‘might get, in addition to the 5% rise granted to all public servants, some extra pay, commensurate to personal professional performance and closely linked to the progress of the educational reform’.

Constantin Ciutacu, Institute of National Economy, Romanian Academy

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