Romania faces unrest over plan for 25% pay cuts in state sector

ROMANIAN OPPOSITION parties and unions have pledged to protest over government plans to slash public sector wages and benefits in a bid to cut the country’s budget deficit and revive its economy.

President Traian Basescu said officials had decided during talks with a visiting International Monetary Fund (IMF) delegation to reduce the pay of state employees by 25 per cent from next month and pensions and unemployment benefits by 15 per cent this year.

Mr Basescu said the cuts were essential if Romania was to keep its budget deficit under control and secure access to the next tranche of a €20 billion emergency loan from the IMF and other international lenders.

He said the cutbacks would also help reinvigorate an economy that is being crushed by a bloated and inefficient state sector, and allow Romania to avoid steep tax hikes that could hamper investment and destroy hopes of a swift recovery from recession.

“This plan was inevitable. The state sector is like a fat man of 200kg sitting on the back of a 50kg little man who is the real economy,” said Mr Basescu, who narrowly won re-election at the end of last year.

Referring to the debt crisis and violent protests gripping Greece, Mr Basescu said the austerity measures should help Romania “avoid an extremely difficult situation, generated not so much by what is going on in its own economy, as by developments in the region” and fuel a return to growth which might allow “wages to be restored to their present level in 2011”.

The centre-right government said the cutbacks would keep this year’s budget deficit below 7 per cent of gross domestic product, rather than a predicted 9 per cent if no changes were made.

The IMF is expected to agree to Romania missing a previous 2010 deficit target of 5.9 per cent of GDP.

Most analysts said the government had no alternative to the spending cuts.

Victor Ponta, the leader of the opposition Social Democrats, pledged to combat the reforms “with civil society, the trade unions, with anyone who wants a future for this country, to object to this social genocide . . . in parliament, in the street, or anywhere it will be necessary”.

Union bosses were meeting yesterday to discuss strike action.