Romania’s Govt to Push For Economic Reforms

Victor Ponta’s government aims to better relations with the IMF and improving economic climate.Romania’s new government, led by 40-years-old Victor Ponta, has won a landslide approval in the parliament and is aiming now to push through the 2013 budget and start negotiations with the IMF for the new international precautionary credit.

Lawmakers voted 402 to 120 late on Friday to approve the Cabinet, which is backed by the centre-left coalition of Social Democrats and Liberals, with the support of the minority parties.

The ruling coalition USL has won around 65 percent of seats in the December 9 parliamentary elections.

“Romania needs stability and continuity. Beside goods relations with they country’s lender, the Romanian government wants to show that social injustice can be remedied. I want to tell the pensioners, unemployed and the poor that the fight against poverty is the priority for the government,” Ponta said speaking in the Parliament before the vote.

Furthermore, Ponta pledged to create jobs, support foreign and domestic investors and respect the judiciary and the rule of law.

The Prime Minister also said he would continue with the 5 billion-euro precautionary accord with the International Monetary Fund and the European Union and work on signing a new deal next year, once the current agreement expires at the end of March.

The government also plans to cut the budget deficit to 2.2 percent of gross domestic product this year and to 1.7 percent in 2013.

The governing program for the next four years includes a number of fiscal changes, with lower VAT (down to 19 per cent from the current 24 per cent) as well as measures for better revenue collection and the reduction of tax avoidance.

The 16 per cent tax on income will remain, but the scalable income tax (8, 12 or 16 per cent) is to be applied sometime during the next four-year term.

Ponta’s cabinet will also seek to cut by 5 percent some social contributions paid by employers.

The previous government of rightist Emil Boc increased the VAT in 2010 and cut state-workers’ wages to lower the budget gap and meet pledges to international lenders.

Romania depends on a 20 billion euro rescue package from the IMF, the European Union and the World Bank. It obtained the loan in May 2009 in exchange for agreeing to push through austerity measures aimed at taming the country’s yawning deficit.

An IMF mission is to come next month to Bucharest to hold discussions on the next review of the programme.