Romanian President: Increasing VAT was one of Romania's major political errors

Romanian President Traian Basescu (in picture) has recently said that the VAT increase from 19 to 24 percent was a political error, that delayed Romania’s exit from recession with at least six months. According to the Romanian president, who attended a conference organized by Ziarul Financiar business newspaper in Romania, increasing the VAT was a decision sustained by the entire ruling coalition, at that time. Traian Basescu has also said that he agreed with the decrease of pensions by 10 percent, as a temporary measure, but the Constitutional Court rejected an ordinance issued in this regard. He added that the pension tax could have been eliminated quickly, possibly in two stages, until January 1, 2012, while reducing VAT requires years. The President has also criticized the ruling coalition at that time, saying that all its representatives have rejected lower pensions, threatening to leave the Government. Romania raised the VAT level to 24 percent from 19 percent in July, 2010. The VAT hike was part of the Government’s austerity pack aimed at boosting revenue and reducing the budget deficit. According to Basescu, Romania could see an economic increase of over 2 percent if more EU funds are absorbed and investments in infrastructure and accelerated. "The Government has managed to take the country out of recession. I hope to also take it out of the crisis, because it is not yet out of it, as neither Europe is," Basescu has said. Romania's economy grew by 0.6 percent in the first quarter of the year, mainly fueled by exports. "The crisis has showed us that it is no longer possible for the population to increase their standard of living through loans. Loans have become risky and unsure and we can see what happens around us. This is why it is of the essence to increase the population's standard of living through an increase in competitiveness," Basescu has also said during the conference. Irina Popescu, irina.popescu@romania-insider.com, editing by Corina Saceanu, corina@romania-insider.com