Press Review - November 12, 2015

11.12.2015 By Gabriela Stan

Romania Consumer Prices Inch Up in October, Annual Rate At -1.6%

Romanian consumer prices inched up by 0.28% in October compared with September, taking the annual inflation rate to -1.6%, data from the country's statistics institute showed Wednesday.

Romanians paid 0.5% more for food items in October compared with September, 0.13% more for non-food items, and 0.27 more for services. Compared with October 2014, consumer prices were 1.64% lower, with a 6.5% drop in food prices, largely due to cut in value-added tax on food to 9% from 24% starting June.

Romania's central bank sees annual inflation at -0.7% and expects the rate to remain in negative territory until May 2016 and return to positive territory by the end of 2016, when it is seen below 1.5%. (Romania Libera)

Erste: New Government Might Come Up With Measures To Offset Damage Caused By Fiscal Easing

The significant fiscal easing adopted by the previous government will not be reversed given the broad political consensus in passing the decisions, but the new government might come up with a set of measures aimed at containing the damage produced by the excessive measures, according to an Erste Group report.

Erste analysts say that the fiscal easing measures announced by the previous government remain a risk for 2016.

Under the new tax code, Romania will cut its value added tax rate from the current level of 24% to 20% as of January next year and further to 19% as of 2017. It also eliminates a tax on special constructions and an extra charge on fuel excises as of 2017. The value-added tax on food was also cut to 9% from 24% starting June. (Puterea)

PNL Wants Impact Study On Public Sector Wage Hikes

PNL co-chair Alina Gorghiu stated Wednesday that she is expecting the new government to carry out an impact study following the 10% raise to all public sector employees.

"We have reached the conclusion that the vote on this draft law is essential. (...) We are subsequently expecting an impact study to show (…) to what extent this measure is applicable,” Gorghiu stated.

PNL added that the situation was uncertain at the debates in the commissions, as the Finance Ministry did not support the draft law.

Romania's lower house of Parliament Wednesday adopted a government emergency decree raising wages in the public health care sector by 25%, along with an amendment to give a 10% raise to all public sector employees. (Puterea)

Daniel Constantin: Ciolos Government Most Likely To Get Parliament’s Vote Of Confidence

ALDE co-president Daniel Constantin said that Ciolos government will most likely get the vote of confidence in the Parliament, but a major test to be passed by the new government would be related to the 2016 state budget law.

"This government will most likely get the necessary number of votes, but we will have to see what happens next, and the first major test that the new government will have to pass will be related to the budget law, when it has to get a political majority," Constantin said.

ALDE co-president said that the party’s option will be presented after Ciolos comes up with the governing program and the structure of his cabinet, adding he has no objection related to Klaus Iohannis’ nomination. (Evenimentul Zilei)

Public Sector Wage Hikes To Further Weaken Romania’s Public Finances

The 10% wage raise to all public sector employees, adopted Wednesday by the Parliament, will further weaken the country’s public finances and will push the budget deficit over the threshold of 3% of GDP, placing Romania under excessive deficit procedure, according to economists.

Such a move would bring Romania under a strict monitoring of the European Commission that will ask for cutting expenditure or boosting collection. At the same time, Romania will be much more vulnerable to a future financial crisis, as it is repeating the mistakes of 2005-2008.

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