News from Roumania
de Radu Rizea HotNews.ro
Marţi, 16 decembrie 2008, 17:04 English | Business
A weak Prime Minister, designated in a hurry after the withdrawal of Theodor Stolojan, and promises difficult to keep: analysts question the capacity of the future Government to deal with the challenges brought by the crisis, AFP comments. Observers note the "contradictory" character of the governing program, which multiplies public expenditure, but still promises to reduce the budgetary deficit to 2.5%.
"This program includes a long list of social measures, but doesn't mention any financing source", says former banker Bogdan Baltazar. The increase of the minimum wage on January 1, 2009, will increase subsidies for agriculture and double allocations for children - "if all these targets are reached, the budget will soon be emptied", says Baltazar.
The new government intends to maintain the 16% flat tax, reduce the VAT level to 5% for basic commodities, issue compensation and deduction for low income employees and increase the VAT for luxury products to 25%. "It reminds me of one of the Communist era programmes, full of generous ideas. We assure people that all will be well, but we don't say where the money comes from or who's going to pay", says Cristian Parvan, president of the National Employers Confederation.
de Radu Rizea HotNews.ro
Marţi, 16 decembrie 2008, 13:24 English | Politics
The sudden withdrawal of the nominated PM, Theodor Stolojan, is another fact supporting rumours of political instability in Romania. Democrat-Liberal (PDL) leader Emil Boc, nominated to replace Stolojan in forming a centrist - leftist government, will have to deal with the differences between the political views of his own party and those of the Social Democrats (PSD). Boc will also have to decide on drastic expense cuts, in order to make sure that Romania rises above the economic crisis.
Economy analysts say that any new government must move quickly, to convince financial markets of their determination in fiscal discipline, thus reducing the risk of recession. Boc intends to form the Government by December 22.
Specialists say that Boc has better management skills than Stolojan, despite lacking his economic expertise. Boc also has more influence among the politicians that will have to support his less popular decisions.
Financial markets remained cautious after Boc's nomination, but the national currency, RON, has dropped to the lowest level over the past two months, given the concern of the future governmental policies.
Reuters also comments that Stolojan's withdrawal is a sign of possible future political instability. The economic reforms may also influence future anti-graft actions, PSD having a history of corruption scandals, the agency also notes. The German media commonly described Stolojan's withdrawal as a "political prank", a sign of instability, claiming that Stolojan was a rather "balanced choice", while Boc is "a spokesman for president Basescu".