Would-be ruling coalition in Romania agrees over 1%-of-GDP social package

The leaders of the three parties of the emerging ruling coalition - The Liberal, Social Democratic and ethnic Hungarian parties, agreed on Friday (November 19) on several sections of the ruling strategy, including a social package including higher pensions, child allowances and minimum statutory wages.

The impact of the measures in the social package amounts to RON 13.6 bln (EUR 2.7 bln, over 1% of GDP), according to General Nicolae Ciuca, who is assumed to be the first rotating prime minister of the new coalition, quoted by Cursdeguvernare.ro.

President Klaus Iohannis announced new political consultations on Monday, and the three parties of the new coalition are expected together at noon.

The measures announced on Friday by Nicolae Ciucă include no tax increases in 2022 (a condition imposed by the Liberal party) and the no change of the so-called “flat tax” principle. Also, no luxury tax will be introduced. At least 7% of GDP must be allocated to (public) investment (Liberal Party demand).

The pensions will be hiked by 10% as of January (this is close to Social Democrats’ request for 11%). The minimum pension will increase from RON 800 to RON 1,000 (the budgetary impact is estimated at RON 800 mln). Recipients of pensions of up to RON 1,600 (EUR 320) will receive in January a one-off subsidy of RON 1,200 (EUR 240) to help them withstand the increases in utility prices. The recipients of pensions over RON 4,000 (EUR 800) will pay health contributions (10% of income).

The allowances for children over two years old will increase to RON 243 (EUR 48, from RON 214 ), as the Liberal Party insisted, not to RON 300, as promised by Social Democrats during the first days of negotiations. The 13th allowance will be disbursed to those with disabilities.

The minimum statutory gross wage will be RON 2,550 and will be granted for a maximum of 24 months to the same employer. After 24 months, the employer must decide either a salary increase (of a size not yet specified) or the termination of the employment contract. It is not known whether the regulation will contain a minimum amount of salary increase.

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