Government "takes into account the incomes increase "

Government aims to increase population’s income, but funding limits allow this measure in future years and keeping the deficit target for this year of 1.9% of GDP, so that any surplus will depend on economic growth –the Minister of Finance said on Friday, Bogdan Drăgoi.

"This increase in population’s incomes is possible only in conditions of economic growth. We do not want to repeat what happened in 2008.

"So, in an electoral year, were increased social spending, wages and pensions by 50%, given that these increases have been decoupled from economic productivity," said Minister Bogdan Drăgoi.

The wholeness of budgetary salaries at the level of 2010, in June this year, would have a budgetary impact in 2012 of two billion lei, while reducing the share of social security by five percentage points would require a fiscal effort in the last seven months of 2.3 billion lei – also said Bogdan Drăgoi , quoted by Radio Romaânia Actualități reporter, Liza Diaconu.

Economy could contract in the first quarter compared with last quarter of 2011, which would mean the entry of the country into technical recession, due to weather, but from the first quarter of last year, GDP will grow by 1.5 - 2% - Minister of Finance said.

"We could get back into the technical recession. Weather caused. Not that the economy has stopped or that there is no demand for products, they could not deliver those products. And returning, depending on revenue growth and incomes , we talk about returning scenarios.

"We must look at the ability of the economy throughout 2012 to ensure this growth. Capacity there is Overall, throughout the year, we estimate an increase of 1.5 to 2%", said Bogdan Drăgoi.

After cutting salaries by 25% in July 2010, state employees received last year a salary hike by 15% and in order to complete recovery of initial income ,
supposed to benefit from an increase of almost 16%.

President Traian Băsescu said on Wednesday in Parliament, that the power has the duty to find solutions that on or about June 1 to wholeness budgetary salaries.

Fitch points out the increase in public spending

Fitch ratings agency warned on Thursday that increasing public expenditure in Romania would have the effect of budget deficit and increasing the risk of adverse indirect effects by reducing market confidence.

Fitch will continue to take into account fiscal and economic performance of Romania in assessing the country rating because so far our country has complied with the external program, established with the International Monetary Fund( FMI) and the European Union(UE), says the rating agency.

Fitch analyst, Gergely Kiss, states that a slippage from the fiscal targets, especially if caused by permanent measures that increase the risk of a departure from the medium-term objectives, would be a negative development.

Gergely Kiss also said that an increase in nominal wages that exceed productivity growth will ultimately lead to inflation, thus jeopardizing the success of disinflation trend observed in recent quarters.

Translated by Denisse-Meda Bucura
MTTLC, Bucharest University