New Fiscal and Banking Measures

The Romanian Government’s intention to pass an emergency ordinance under which people who loaned money from banks but whose incomes do not exceed approximately 360 Euros per month would get to pay half the monthly installment for a period of two years, under an agreement with the bank, has triggered fierce debates in Bucharest.

Corina Cristea, 13.02.2014, 15:04

The Romanian Government’s intention to pass an emergency ordinance under which people who loaned money from banks but whose incomes do not exceed approximately 360 Euros per month would get to pay half the monthly installment for a period of two years, under an agreement with the bank, has triggered fierce debates in Bucharest.

Set forth as a measure aimed at supporting people with low incomes who are nonetheless good debt payers, the proposal was termed by the opposition and by President Traian Basescu as discriminatory, and the finger was pointed, among others, at the National Bank of Romania, accused of electoral bias. According to Traian Basescu, at the end of the day the beneficiaries of this measure would get to pay even more, if we think of interest rates and the extended reimbursement deadline.

Traian Basescu: “I could not believe that the Central Bank was involved in the preparation of such a program, because this is just a false aid, a trick affecting both those who will benefit it and the rest of the population. I’ve checked and indeed the idea started from within the National Bank. I want the National Bank to immediately leave this direction, in which it would be controlled by a corrupt government.”

In turn, the Central Bank has stated it has not taken any monetary policy or banking measure regarding the rescheduling of debt payments by people with incomes below the average net salary. The Bank has said it was only consulted about the project before and during the negotiations between authorities and the IMF, the European Commission and the World Bank.

Prime Minister Ponta too was quick to respond to President Basescu’s accusations: “The National Bank is one of the very few institutions in Romania that have earned respect for their professionalism, lack of bias and dedication for the public and national interest. We congratulate the National Bank, and we wish them good luck in their efforts towards ensuring Romania’s stability, irrespective of political changes.”

Decision makers in Romania would also like to replace the 16% flat tax with a progressive income tax, in three stages, a measure included in the Government’s fiscal and budgetary strategy for the 2014-2016 timeframe. Lower salaries would be taxed by 8 or 12 %. For the rest, the 16% tax would be maintained. Business people say that at a first glance this differentiation could have positive effects, because it would trigger an increase in consumption among the poor population.