Tax Council: Cut social invoice

Massive hiring in the public sector and the unsustainable raises granted to employees thereof during the economic boom has driven the budget into a critical condition.

During its first public outing, the representatives of the Tax Council yesterday urged a cut in the public salary fund, explaining that without fiscal consolidation, Romania cannot have sustainable economic growth.
“The social invoice needs to be cut by reducing the salary fund in the budget-paid sector, and by conducting the reform of the pension and welfare system. The reduction will free up fiscal space for higher capital expenditures,” said Ionuț Dumitru, Tax Council chairman.
The Council believes the risks for the macroeconomic stability largely come from the public finance area.
Personnel expenditures rose very fast while the Tăriceanu Cabinet was in office, because of both the increase in the number of public employees, and the fast-paced increase in their salaries, which amounted to 150% from 2004 through 2008.
Whereas personnel expenses stood at 5 billion euros in 2004 and accounted for 8.1% of the GDP, in 2008 they reached 14 billion euros (10% of GDP).
The explanation provided by the representatives of the government back then was that salaries and personnel increased when the economy was going well and they could afford such steps.
Yet, even in the crisis year 2009, when it was obvious money for public sector salaries no longer in sync with the economic reality and for oversized personnel count had run out, the Boc Cabinet only pretended to take restructuring steps.