Home / BUSINESS / FINANCIAL / SMEs Council says new draft bill on pensions is ‘a time bomb’. Inflation rate, trade deficit, convergence criteria – in danger

SMEs Council says new draft bill on pensions is ‘a time bomb’. Inflation rate, trade deficit, convergence criteria – in danger

The pensions increase by 61% in 2020 is “an electoral present which will lead to economic imbalances, it is a time bomb,” the Honorary President of the National Council of Small and Medium Sized Private Enterprises in Romania (CNIPMMR), Ovidiu Nicolescu, has said on Monday.

“In 2020, as general elections are scheduled, and the votes of more than 4 million pensioners are aimed, an electoral present will be made, impossible to correlate with economic realities – in terms of production, productivity, imports, monetary policy and will turn the national economy upside down,” Nicolescu said during a press conference.

“If this new bill is enforced, in 2020 we will register an inflation of at least 15%, the balance of payments deficit will increase by about EUR 5 billion, the convergence criteria will deteriorate and we would not be able to join the Eurozone – for many years to come, until we recover, if we recover, whereas the macroeconomic correlations would not be met,” he added.

Ovidiu Nicolescu said also that “the bill undermines the stability of Romanian economy” as the “increase by 61% in one year (up to RON 1,777) against the pension point on July 1, 2018 (RON 1,100) is not sustainable.”

He argues that the massive increase in only one year will lead to four deteriorations of the economy. “Inflation will rise, we will witness major inflation. I believe it will reach at least 15%, an inflation Romania had more than ten years ago,” Nicolescu said.

The trade deficit will increase, tens of billions worth of products will be consumed in Romania, for which the country does not have enough production.

“Romania is the largest foodstuff importer in the EU. In that year, we will have double foreign trade deficit, higher by at least EUR 4-5 billion against the previous years, these elements will deteriorate economic stability, which will drive away Romania from the Eurozone,” he stressed.

He pointed to some calculations reading that in 2012 the deficit of the pension budget will reach RON 30 billion, i.e. EUR 7 billion. Where from will Romania get this money?

The new draft bill on pensions is on public debate from the Labour Ministry and is to reach the Parliamentary procedures. The draft provides an amendment to Pension Pillar II – the Pension House will collect a 0.5% commission out of the transfer fee collected by the companies managing the system. The draft provides the calculus for the minimum pension according to seniority. Hence, pensioners will at least 15 years of work will get 45% of the gross minimum wage, whereas the pensioners will seniority of 10 to 15 years will get 40% of the gross minimum wage.

 

About Victor Lupu