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Update - President Iohannis: The so-called tax revolution will turn into tax turmoil. Nothing good for the people
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President Klaus Iohannis asks for PM Dancila’s resignation again, says PSD is unable to keep public finances in place

President Klaus Iohannis lashed out again against the ruling party, Government and PM Viorica Dancila, while demanding the latter’s resignation. In a press conference held at Cotroceni Palace on Monday evening, the head of state made an x-ray of the current situation of the Romanian economy, arguing the Social Democrat Party is not able to manage the situation, that it cannot explain where all the money for the pay rises come from, that tax revenues are below expectations and EU funds absorption is a total failure.

Claiming ‘a totally unsatisfying evolution of the finances’, the President asked for PM Dancila’s resignation ‘to make room for responsible and competent people’.

We’ll talk about the Romanians’ money today. Data showing the budget execution for the first quarter have been released today, with delay. Before, I would like to reiterate that the PSD ruling programme has been on the wrong way of any elementary economic logics from the beginning. PSD has proposed the decrease of taxes and fees, and on the other hand, a strong increase of the budget expenses for salaries, pensions, roads, highways, they said. This approach has stirred surprise among economists. PSD has proposed some kind of economic magic, an equation that can be hardly concluded. We have to see how much the illusion created by PSD will last,” Klaus Iohannis said at the beginning of the conference.

As for the public pay rises, the President said that the Social Democrat rulers had managed a rare counter-performance, for “even those who had their wages increased are discontent’.

By an accounting engineering, the social securities expenses have been transferred from employer to employee and thus the increase has been annulled. After almost one year and a half of ruling, with this extremely questionable pay rise, we still don’t see roads, schools, or hospitals, anything… People wonder where all the money for these rises comes from. The sad story is that PSD is actually pawning the country’s future. It increases salaries and pensions while neglecting important investments needed for the country’s development,” the head of state said, stressing the budget is under huge pressure.

Against the rise of total expenses by over 22 percent, this pressure must be dampened by a consistent effort to rise revenues. Or, it didn’t happen that way. The budget execution shows that revenues haven’t reached the ruling programme’s level at any chapter. So, they have failed to meet their own programme,” Iohannis stated.

In his view, PSD is unable to keep the public finances in place.

After three premiers and three ANAF heads, the most visible effect is incertitude. The PSD ruling doesn’t manage to turn the economic growth into growing revenues. We had a growth of over 7 percent in 2017. The revenues haven’t increased in proportion to the economy, on the contrary, they have been RON 3 billion lower than PSD’s own programme. The total revenues have increased nominally on the first quarter of 2018, bu the total sum is almost 4.5% below the quarter budget programme, below the values estimated by the government,” Iohannis pointed out.

According to the President, the first bad news come up.

“Tax revenues should have increased, but they haven’t reached the scheduled share, so the target by 5% has failed, they are lower than on the first quarter of 2017. The revenues from the corporate tax have decreased as against the first quarter of last year. It’s the reflection that indeed the economy is quaking, but the expenses are the only ones to quake at the state budget, revenues not. The VAT revenues, which is the main pillar, reported a failure of 9% as against the programme (PSD pledged there will be 16%),” Iohannis added, underlining that he had warned that ‘the budget is not realistic, that it is based on a groundless optimism.’

The duties revenues reflect the most the mess in the public finances, says the head of state, arguing that “despite the price hike, the gov’t has re-introduced the fuel excise and yet, the tax collection by ANAF is below 12%”.

Although Romanians are paying more for almost everything, the state doesn’t collect the due revenues.”

President Iohannis also slammed the EU funds absorption. “European funds are a new failure of PSD. We are by almost 37% below the scheduled rate, and by 43% below on expenses. It’s inadmissible that EU funds should not be among the government’s priorities. But why wonder about it? PSD has other priorities: the fight with BNR, with multinational companies….” Iohannis said.

The head of state stated in the end of his speech that Romania is under procedure of significant deficit deviation and is still under EU procedure and urged for the prime minsiter’s resignation. “If this thing is not revised, it will worsen, only that I see no intention for correction. I invite the PSD rulers to get over. Overall, there is a totally unsatisfying evolution of the finances. Mrs. Dancila’s resignation is imperative, to make room for responsible, competent people,” the President concluded.

 

About Alina Grigoras Butu