September 25-29, 2023

Government takes responsibility for fiscal measure package

The ruling-coalition government in Romania on Tuesday took responsibility in Parliament over a comprehensive reform of taxation and budgeting, the most sophisticated of its kind in recent years. Among other things, the package provides for preserving a small added value tax for foodstuffs, medicine and firewood as well as for an increase in the national minimum wage to 660 EUR. At the same time, the law introduces additional taxes on the profits reported by banks or large corporations. All goods obtained from illicit activities will be seized, whereas sums that have no legal justification will be levied an additional 70% tax. According to the new measures, workers in the IT sector with salaries exceeding 2,000 EUR will pay taxes, while public sector employees with salaries above 1,600 EUR will no longer receive holiday vouchers or food stipends. A special tax will be levied on people owning properties whose market value exceeds 500 thousand EUR, provided they don't pay bank installments. The reform also introduces a minimum tax on turnovers, a reduction of management positions in the public sector or capping certain bonuses. The Economic and Social Committee has warned that introducing additional taxes in order to balance the budget deficit could result in adverse effects. USR and the Force of the Right in the opposition have decided to refer the law package to the Constitutional Court.

Senate Speaker Nicolae Ciucă in Ireland

Senate Speaker Nicolae Ciucă this week attended the European Conference of Presidents of Parliaments representing Council of Europe Member States, an event hosted by Dublin. In his address, the Romanian official said that, in the context of the war in neighboring Ukraine, the role of national parliaments in the reconstruction of Ukraine and the challenges to representative democracy in times of instability are topics of great interest for Romania as a member of both the EU and NATO. Romania will continue to support Ukraine's process of reconstruction, which should go hand in hand with reforms designed to strengthen civil rights and liberties, Nicolae Ciucă went on to say. The topics discussed included the fallout from Russia's war of aggression in Ukraine and the role of national parliaments in the reconstruction of Ukraine and the challenges to representative democracy in times of instability and equality and diversity in public representation.

Coordination amidst Russian attacks on the Danube

Romania, a country that shares 650 km of border with Ukraine, is in permanent contact with NATO allies, discussing developments on the border, after discovering several drone fragments, most likely Russian-made, close to the Ukrainian border in the Danube Delta. Such an incident occurred earlier this week in the village of Orlovka, where drone fragments landed close to a ferry transporting Romanian citizens to Isaccea. In the wake of this incident, the Romanian Defense Staff organized a videoconference with representatives of public authorities from the counties of Brăila, Constanţa, Galaţi and Tulcea. The agenda included an overview of security issues, the army's public communication processes, initiatives to prepare the local population, the economy and territory in case of attacks, as well as the legal responsibilities of various national defense institutions. On the other hand, the Ministry of Defense called on Parliament to approve the purchase of 32 F-35 fighter jets from the United States, that should help develop and maintain Romania's robust and resilient defense capabilities. The Romanian Army will have to pay 6.5 billion USD, which will be used to purchase aircraft, engines, logistic support as well as the training of pilots, auxiliary personnel and flight simulators. Last year, Romania decided to purchase 32 second-hand F-16 jets from Norway, which will be added to the 17 F-16s bought from Portugal in 2016. Romania has increased its defense spending from 2 to 2.5% of the GDP this year.

IMF experts, on a new mission to Romania

A team of IMF experts is in Bucharest until October 4 to conduct their annual assessment of Romanian economy. International experts will discuss economic policies and the latest developments in this sector with representatives of the Finance Ministry, the Central Bank and government agencies. On the other hand, the European Bank for Reconstruction and Development has downgraded its forecast on Romanian economy in its latest report. Therefore, Romania's GDP growth is expected to stand at 1.8% in 2023, down compared to the previous estimate of 2.5%. Economic growth is expected to stand at 3.2% in 2024. Budget deficit will reportedly stand at 7% of the GDP this year, higher than the original forecast of 4.4%, the report also shows. (VP)