Head of the Fiscal Council: Increasing the pensions would be catastrophic, the effort will reach RON 23bn per year

The wage increase approved on Monday in Parliament, supported by PSD, ALDE and UDMR have no legal basis, no economic support, the Chairman of the Fiscal Council, Ionut Dumitru, has said in an interview for digi24.ro. He also explains that to the threat posed by wage increases in the Health and Education systems, there might add an even greater one, “a catastrophic one” – the increase of the pension point, which would mean some RON 23 billion per year spending on pensions and a possible deficit of 7% of GDP. “This is unimaginable,” Ionut Dumitru has concluded.

Main statements:

• For me it’s pretty clear nothing was taken into account when the decisions were made. Some state institutions had opposite opinions to the parliament, but this did not matter, it did not matter the legal framework in force. (…) Firstly, we are talking about a decision with huge financial impact that the parliament did not consider, did not properly estimate and did not reveal financial measures. Furthermore, in the Law no. 69/2010 there is a clear ban to approve bills referring to wage increases six months before the government term ends.
• Currently, we have two positions. The first one – this wage increase is illegal, it contradicts the legal framework in force. The second one – it is unsustainable as long as we envisage permanent budget expenditures, with illusory funding out of an economic growth which is, most probable, unsustainable itself. We have an economic growth of 5.2% in H1 fuelled by a 10% growth in consumption – let me say I don’t believe in this growth’s sustainability.
• The risks are very high. Besides the legal issues there is the economic issue, we intend to increase the wages more than we can afford. The claimed economic growth is of 5.2%, whereas the increases approved by parliament reach 15-20%, and are in fact following previous increases.
• The financial effort to increase the pension point by 40% as of January 1, 2017 and to 45% by mid next year is huge, I’d say it is catastrophic, I say this without using tough words. Practically, we are talking about a budgetary deficit, as calculated by us, of some RON 23 billion per year.