Boc announces salary, pensions cut, road revamping; zero economic increase this year

With the International Monetary Fund (IMF) review mission in Romania having ended, the Romanian authorities have officially announced the measures the government will take. A first step has been made by president Traian Basescu's announcement of budget salaries and pension cuts last week. Prime minister Emil Boc (in picture) warned about the country's public debt increase from under 30 percent of the GDP to a whooping 62 percent in 2012, if the government doesn't cut salaries and pensions, he said at the end of the IMF discussions. The sums saved after the cut will be used to revamp 900 kilometers of roads and to continue several infrastructure works, like the Transilvania highway, the Bucharest – Ploiesti and Arad – Timisoara segments. The govt had to take these unpopular measures after the salary and pension increases in 2007 and 2008, which were well above the level of productivity in the country, said Boc. The choice was between the VAT increase to 24 percent and the flat tax increase to 20 percent, on one hand, and the drop in salary expenses, and we chose the smaller evil, the PM also said. The government and the IMF have agreed over a new target for budget deficit for this year, of 6.8 percent, higher than the last target of 5.9 percent. The expected economic increase this year is 0 (zero), after the previous prognosis has been lowered from 1.3 percent to 0.8 percent. The new loan installment from the IMF is pending on the measures announced by the Romanian government.