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The chief economist of the National Bank of Romania (BNR), Valentin Lazea, said on Thursday that cutting budget salaries by 20% and reducing working hours to four days a week in the public system are solutions to reduce the budget deficit in 2021.
Also read: The Orban government increases Romania’s debt to 47% of GDP. Budgeted salaries can be frozen at 50%
“The reduction of expenses would be necessary only because in the future other non-salary expenses should be increased, expenses with the provision of hospitals, with the provision of schools, with infrastructure, etc. So, even assuming that a government takes on the political act of freezing salaries and pensions, it will still not be enough to increase other non-salary expenses. The latest legislated expenses come, which have not yet been manifested this year: expenses with children’s allowances, with teachers, etc. ”, Specified the chief economist of the NBR.
In his opinion, unemployment, as a consequence of the pandemic, will increase a lot in the private sector.
“Will the state be allowed to lay off the budget and add the state sector unemployed to the already high unemployment in the private sector? It is a big question whether it will allow it. This does not mean that the state is tied hand and foot.” One can imagine solutions for public employees, because it is not normal for the average salary in the budget to be higher than in the private sector ”, added Lazea.
It comes with an example solution, namely the four-day work week for civil servants, with a reduction of one-fifth in their salary.
“A solution could be, for example, a four-day workweek for civil servants, with a reduction of one fifth in salary. At least that would lead to a near balance between budget salaries and private salaries. Once again , a solution would be to go back to being an entry into the budget sector in seven exits, as has been applied in the past and can still be imagined. In general, from the spending cuts I don’t see how I could in the next four years get more than 1.5-2% maximum adjustment, or we need to adjust from 9% of GDP to 2% of GDP in 2024. We need 7 points – and then, of the 7 points from which we subtract 2 points plus spending cuts. 5 percentage points of GDP in revenue growth. And here they call me best collection. Okay, best collection. They call me best collection for more than 20 years. That means that from day zero after winning the elections., The Government must launch lici tions for ANAF IT teams, among electronic cash registers, our auctions are contested, they are re-organized, they last … ”, Lazea stressed.
At the same time, he stressed that there are “so many tax loopholes, so many exemptions, so many facilities that have been given for non-payment of taxes for so many categories that there is nothing left of the single quota.”
“And here I speak to those who supported the one-time fee in 2005 and in all the years since then, this attitude of openly saying that there is nothing left of the one-time fee and at least going back to the principles of the one-time fee because it is normal for a small part of companies pay 16% income tax and the vast majority 1% of turnover, it is not correct that VAT is not 19%, is 19%, 9% or 5% or zero , dividends must be taxed at 5%, and not as other capital gains at 16%, etc., and certain categories (builders, computer scientists) must not pay certain taxes, at least those that back the single share must have a point of sight, “he said.
According to Lazea, from a deficit of more than 9% this year on unchanged policies next year it will move to a probable deficit of more than 8%, which would probably single us out in the negative sense.
“The Czech Republic proposes a budget deficit of – 4.9% for next year, which they consider very relaxed, Bulgaria proposes a deficit of – 2.9% next year. So, in this context, to appear with a deficit of more than 8%, even if the Commission cannot penalize it and close its eyes for another year, the markets have every chance to penalize it, and something needs to be done to reduce the deficit below 7% by the end of the year, as promised by the Minister of Finance, without saying specifically through what measures, but in other interventions he said that he will only do this deficit reduction through better revenue collection, at least to get there by below 7% next year, but even if to achieve this it remains to be seen how it will be possible to reduce it to below 3% in the horizon of 2024, which, beware, is an electoral year and we know what happens in Romania in electoral years ”, Valentin Lazea drew attention.
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