New regulation on social security contributions
President Basescu signs bill reducing employers social security contributions, but has doubts about its sustainability.
Mihai Pelin, 19.09.2014, 13:54
A controversial bill on a 5% cut in the amount of social security contribution paid by employers has been signed into law by president Traian Basescu. The bill was first passed by Parliament in July and sent to the president for final approval, but the latter sent it back to Parliament for re-examination, saying the measure was good, but unsustainable. The Chamber of Deputies last week rejected the president’s request and again passed the bill in its original version. The president was thus forced to sign it into law, but warned that the budget deficit would grow significantly next year as a result. He doubted whether the government has the resources to compensate for the lower returns:
Traian Basescu: “15 billion lei is 3.2 billion euros out of the state budget, which I think is difficult to cover otherwise. I expect the government has worked out a few solutions to implement by the end of the year. One very probable move is to cancel the cut immediately after the presidential elections, another to raise taxes.”
The president criticised the government for not making use of the European funds available for the construction of motorways, the modernisation of the railway network and environmental projects, which could generate more jobs. Prime minister Victor Ponta rejected the criticism and said the private sector will be able to generate more jobs as a result of the cut in social security contributions:
Victor Ponta: “The state itself does not create jobs, other than hiring public servants. The state is only responsible for public services. In the private sector, the state creates favourable conditions for private companies to create jobs. I don’t think the president’s criticism is fair.”
Welcomed by the business community, the law on the cut in social security contributions received, however, a negative opinion from the Fiscal Council, the body overseeing the government’s fiscal policies. The Council warns that implementing it without sustainable back-up measures will unbalance the fiscal and budget policy, especially in 2015.
On the other hand, the fact that the measure takes effect on October 1st, with the start of the presidential election campaign, may point to possible electoral considerations behind it, says the right-leaning opposition in Romania, which argues that while the measure is good, it comes at a bad time.
