Romania’s emerging ruling coalition at threat over disagreement on tax rate hikes

Representatives of the reformist Save Romania Union (USR), after another round of talks on December 16, hinted they would pull out of the negotiations for a broad ruling coalition because the incumbent alliance partners came up with plans to hike the tax rates instead of cutting public spending.

Realistically speaking, the weak budget revenues in Romania are partly due to the low effective tax rates (including due to multiple preferential regimes). While cutting unnecessary spending is urgently needed (including for reasons of equity), higher taxation is part of a sustainable strategy of fiscal consolidation combined with public services modernisation.

USR would agree to be a part of the coalition only after the 2025 budget planning is drafted, and there is no clarity in this regard so far, USR representatives Cristian Ghinea and Claudiu Nasui stated, quoted by Economedia.ro.

“In general, the mood is that we are not making any kind of reform until the presidential elections,” Cristian Ghinea said.

However, the presidential elections were not scheduled yet, and it is the new cabinet that is supposed to schedule the ballot.

The major disagreement regards planned tax rate hikes seen by the USR as “unacceptable.”

Incumbent Social Democrat prime minister Marcel Ciolacu insisted the coalition should be agreed over first, and then the budget planning would be drafted.

The incumbent government, formed by Social Democrats (PDS) and Liberals (PNL), came up with a bill envisaging 8.85%-of-GDP public deficit this year, USR’s Cristian Ghinea announced, accusing the Social Democrats and Liberals of planning tax rate hikes, possibly higher VAT rates.

“USR joins any government that makes reforms, but those reforms cannot mean tax increases. The spending cuts were also on the table, and we agree with them. The problem is that they are too anemic and too timid,” Ghinea said.

The democratic parties planning to form a broad coalition after the December 1 parliamentary elections held another round of negotiations on December 16.

(Photo source: Facebook/USR)