Economic Measures

The Senate passed a law slashing social insurance contributions paid by employers by 5%.

Valentin Țigău, 25.06.2014, 13:45

The Romanian Senate passed by a wide margin a bill cutting 5% off of social insurance payments by employers. If the draft law passes the lower chamber, it goes into a special plenary meeting in early July, to come into effect on October 1st. The government, which introduced the bill, said it is meant as an incentive for employers to create jobs. In a rare occurrence in Romania, both the parties in power and the opposition supported the move, but trade unions claimed that the economy cannot cope with it. Dumitru Costin, head of the National Trade Union Bloc, said that the social insurance budget would take a heavy hit:

Dumitru Costin: “The present economic model in Romania cannot support this five percent slash in social insurance revenue, as the Romanian government plans, and the measure will not motivate employers and employees to come out of the informal economy. We should have a huge number of officially employed people, something like eight million, in order to make this work. I cannot believe that over two million more jobs would emerge overnight in the Romanian economy.”

The IMF also expressed skepticism in relation to the move. Spokesperson Gerry Rice said that there would be an impact on the 2015 budget, which should be calculated. The vice-chairman of the European Investment Bank, Mihai Tanasescu, said that the move has to be accompanied by restructuring:

Mihai Tanasescu: “Such a measure has to be accompanied by large-scale restructuring of the Fiscal Administration, in order to improve collection and priorities, so that the volume of investments may rise.”