President announces budget salaries and pensions cut to avoid VAT and flat tax increase

After a heated round of discussions with the International Monetary Fund, whose representatives are still in Bucharest to review the stand-by agreement, and after rumors spilled in the media pointing to VAT and flat tax increase, Romanian president Traian Basescu announced budget-fueled salaries would be cut by 25 percent and pensions, by 15 percent. He also said the next IMF loan installment should be released in July instead of June. The next installment is pending on Romania taking the announced measures to avoid going deeper into crisis. The VAT and flat tax increase was also discussed by the Romanian state representatives with the IMF, but this was a solution which pointed to mistrust in Romania. The presented solution was the “trust” option, said Basescu. The employers' associations say this is a correct measure to be taken, but it should be implemented carefully so that it won't trigger street protests, as it happened in Greece. The IMF review mission, which was extended by two days, will leave Romania on Sunday. The IMF, the European Commission, and World Bank have offered Romania a EUR 20 billion loan package last year. The money received by the country so far went to the Romanian Central Bank reserves and to the state budget.