Pogea admits gloomiest scenario: 8% economic downturn

Public finance minister Gheorghe Pogea has recently admitted this year “may see” the economy contract by 8%, namely the worst scenario taken into account, while Romanian President Traian Basescu said he did not understand why the government was delaying a 20% cut in the number of public employees. Recent estimates by the Finance minister had pointed to a somewhat more moderate economic decline, ranging between 6.5% and 7%. The agreement reached with the IMF in spring included a budgetary gap of 4.6% in GDP in the event of a 4.1% economic contraction. Now, a gap of almost 8% in GDP is being discussed, in the context where the Finance Ministry is collecting less tax money, amid the economic collapse. Consequently, President Basescu feels that making “a high number” of public employees redundant, 20% of the total, who are “useless”, is urgently needed and would allow for an adjustment on the side of budgetary expenses as well. ZF recently estimated cutting public employees’ wages by 20% would bring savings of around 2bn euros, accounting for around 1.7% of GDP.