Romania to Move Forward with Spending Cuts

Romania’s government is set to enforce drastic cuts in pensions and wages in its state sector as of June, but the measures will not affect those in real need, the country’s Prime Minister Emil Boc said on Wednesday.

“Minimum wages and minimum social pensions will not be affected by the cost cutting measures. Furthermore, the government will adopt today the letter of intent to the loan agreement with the International Monetary
Fund and we will seek a confidence vote in parliament for the proposed measures,” Emil Boc said.

Earlier this month, the government announced that it will cut wages and pensions in the public sector later this year to achieve its 2010 deficit target and comply with an IMF-led rescue deal.

Starting from June 1, state sector wages will be cut by around 25 per cent and most salaries will be affected. Jobless benefits and pensions will be cut by 15 per cent.

The government also plans to index pensions to inflation, rather than to average wages as at present, raise the retirement age and eliminate special pensions given to certain public job categories.

Recession-hit Romania, which is relying on a €20 billion IMF-led loan, has pledged drastic public spending cuts to rein in its deficit, which this year stands at 6.8 per cent, and restart its economy, which continued to
contract in the first quarter.

The IMF recently cut its forecast for economic growth in Romania to 0.8 per cent for this year, as the emerging economy still reels from a painful 7.1 per cent contraction in 2009.

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