Romania: Who is to gain from weak recovery?

3 August 2011
România libera

România libera, 3 August 2011

On 3 August, the Romanian Minister for Finance will have to take "the weightiest political decision of the year." As the România liberă headline points out, he will have to decide "whether to sacrifice civil service or private sector workers.” At a time when the Romanian economy is showing weak signs of recovery, the government has the option of either raising civil service salaries, which were cut by 25% in 2010, or reducing payroll taxes, which were increased in 2009 in the wake of agreement signed with the International Monetary Fund. The stakes are both "economic and political," explains the Bucharest daily: "cutting taxes would boost employment and kick-start consumption. But [the government] may be tempted to make a concession for civil servants," in the run-up to general elections in 2012.