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Latvian parliament approves 2016 budget
Question: Thanks for this article. What is the magnitude of tax increases? Is it correct that the minimum wage is being hiked from 260 to 370 EUR / month? Over what period will this increase occur?
Answers: Thank you for your question. Latvia's new budget will increase excise taxes on alcohol, tobacco, fuels, as well as gambling in 2016. A new tax on high earners - so-called "solidarity tax" will also take effect next year. In the case of alcohol, the excise tax rate on 100 liters of beer will increase from €3.8 to €4.2 in 2016 (10.5%), while the tax rate on 100 liters of wine will grow from €70 to €74 (5.7%). The same increase of 5.7% will take place for products with alcohol content of up to 15%, while for products with higher alcohol content the excise tax increase will be from the current rate of €110 to €120 (about 9%). Further increases are planned for 2017 and 2018. For tobacco, the excise tax rate will be increased on smoking tobacco and tobacco leaves to the level of €60 per kilogram. The current rate is €55.49 per kilogram, so the increase is of just over 8%. Further increases are planned for 2017 and 2018. For fuels, the excise tax for 1,000 liters of unleaded gasoline will be raised from €411.21 to €436 (6%). The tax rate on 1,000 liters of diesel fuel will expand from the current €332.95 to €341 (2.4%). The increase in the excise tax for LPG - calculated per each 1,000 kilograms - will be most substantial, from €161 to €206 (nearly 28%). The gambling tax will go up 10%. The new tax on high earners will be levied on incomes of €48,600 a year or higher. The rate will total 34.09%, where 23.59% will be paid by the employer and 10.5% by the employee. Finally, there was a writing error (corrected now in the article) with regard to the increase in the minimum wage. The hike will be from €360 to €370 a month.
Show Full AnswerUPDATED: Macedonia’s State Election Commission rejects opposition’s veto on €100mn domestic debt auction
Question: Hi, Thank you for this very interesting article. According to Bloomberg data, the auction appears to have happened today. Did Naumov retract his veto? My understanding is that the State Election Commission doesn't have the authority to overrule a veto.
Answers: Thank you for the question. The deputy minister Naumov has the right of veto “in all legal, financial and personnel matters related to the organisation of the elections.” This is according to the July agreement, an official summary of which is available here: http://ec.europa.eu/commission/2014-2019/hahn/announcements/agreement-skopje-overcome-political-crisis_en Naumov imposed the veto as opposition SDSM said that it considers any additional borrowing as an attempt for financing various forms of electoral fraud and corruption. However, the veto was appealed before the State Election Commission, which said that the domestic debt issue does not meet the definition of “legal, financial and personnel matter related to the organisation of the elections”, which meant the veto is not valid.
Show Full AnswerBelarus and IMF "almost ready" to sign $3bn credit deal
Question: Is it possible to facilitate a quick phone chat to talk about Belarus and potential external financing (whether by the IMF or Russia)? Id be interested to hear your thoughts about the direction of the economy next year as well.
Answers: Yes - happy to facilate this call.
Show Full AnswerRussian ex-minister's Swiss accounts blocked over money-laundering case
Question: Do you see cooperation between Swiss and Russian authorities increasing as Russia seeks to repatriate capital and, to some extent, tackle corruption issues through overseas asset tracing?
Answers: The simple answer appears to be yes, but naturally less so when it concerns high-ranking officials. Swiss prosecutors are stepping up their efforts against money laundering independently of Russia, and to a certain extent out of concerns over developments in Russia, as well as the fallout from the Ukraine revolution. Thus Swiss prosecutors also opened an investigation into CHF30mn paid to the Swiss bank account of the head of Ukraine's parliamentary energy committee Mykola Martynenko, allegedly paid by Czech firm Skoda JS, which is part owned by the Russian state nuclear power corporation Rosatom, for the award of a contract to supply Ukraine's state nuclear power company. Meaningful cooperation between Russian and Swiss authorities can, however, be undermined by Russian perceptions that Swiss prosecutors are merely doing the politically motivated bidding of US authorities. This was highlighted in May when Moscow vehemently condemned the arrests of Fifa officials in Switzerland as a conspiracy to deprive Russia of the 2018 World Cup.
Show Full AnswerRomania’s PM resignation is rating-neutral – S&P
Question: Hi, can you confirm the current number of MPs in the total parliament and the group distribution please? thank you
Answers: Hello, yes, the number of MPs and their political affiliation is compiled based on official data from the Chamber of Deputies and Senate [www.parlament.ro] as of November 4 2015. Data is consistent with the breakdown as reported by local media, as well. Detailed structure of the Romanian Parliament is described in another story, published the same day: http://www.intellinews.com/romania-1019/romanian-president-invites-parties-to-talk-after-pm-ponta-resigns-83022/ Party Party President Deputies Senators Total % PSD group, o/w 179 81 260 47.5% PSD Social Democratic Party Liviu Dragnea 137 61 198 36.2% UNPR National Union for Romania's Progress Gabriel Oprea 42 20 62 11.3% PNL National Liberal Party Alina Gorghiu / Vasile Blaga 117 59 176 32.2% ALDE Alliance of Liberals and Democrats for Europe Popescu Tariceanu 25 12 37 6.8% UDMR Democratic Union of Hungarians from Romania Kelemen Hunor 17 8 25 4.6% PND National Democratic Party Daniel Fenechiu 12 12 2.2% Minorities 17 17 3.1% Independent 15 5 20 3.7% Total 382 165 547 100.0% Source: Parliament of Romania
Show Full AnswerTurkey’s Borusan Mannesmann-led consortium receives $80mn additional order for TANAP project
Question: About the TANAP project, is there any update referring to the stage of the project? There have been the expropriations and environment approvals, but since the elections process, no news about it. Will the project be completed on time or should there be some delays? Alex, romanian industrial company.
Answers: The last official comment regarding the process came from Turkish President Erdogan in the beginning of last month. (Please check the link for our story regarding Erdogan's comments: http://www.intellinews.com/turkey-1001/turkey-azerbaijan-to-accelerate-tanap-construction-80164/?search_url=http%3A%2F%2Fwww.intellinews.com%2Fsearch%2F%3Fsearch_by%3Dtanap%26search_type%3D2) TANAP's importance for Turkey increased after Russia's Turkish Stream project was put in the fridge as a result of the escalating tension between Turkey and Russia following Russia's active military involvement in Syria. The firs post-election comment regarding TANAP came from Turkish state-run news agency Anadolu on November 2. (Please check the link for Anadolu's article: http://www.aa.com.tr/en/turkey/mega-projects-gain-momentum-after-ak-party-victory-turkey/461472) We didn't cover Anadolu Agency's latest story since there were no official sources rather than an analyst from a pro-government think-thank, however, it seems TANAP is still targeted to become operational by 2018. There are no signs for a possible delay, but rather there are signs of acceleration.
Show Full AnswerMacedonia extends deadline of tender for natural gas distribution in 63 municipalities
Question: Hi, Do you know how the tenders for Skopje and the 63 municipalities went? Are the gas pipeline networks currently under construction? Currently, gas in Macedonia is primarily consumed at an industrial park near Skopje or has the network been expanded into other areas/homes by this point?
Answers: Thank you for the question. For Skopje, two companies participated in the tender, one gave up, whereas the selected bidder asked for an extension of the evaluation deadline. For the remaining municipalities, the tender failed because only one bidder showed up. The ministry of transport is to form a new working group that will conduct a new tender. There has been some recent progress in using natural gas, in particular in schools and churches, in Kumanovo and Skopje.
Show Full AnswerJunior partner in Moldova’s pro-European coalition wants PM Strelet replaced
Question: Hi, this question is actually referring to the article "Moldovan PM Strelet loses no-confidence vote" but an error on the website is preventing me from submitting the question under that article. Anyways, my question is, isn't there a provision in the constitution which prevents early elections 6 months or less before a presidential election? Considering that presidential elections are in March 2016, doesn't this preclude early elections and simply require a new govt to be formed? Of course, I would imagine that this could also lead to a constitutional crisis once parliament is actually tasked with electing a president with a supermajority in March. Thanks, Kurt
Answers: Your point is correct and actually very relevant. Under Article 85 of Moldovan Constitution para (1) and (2), President can dissolve the parliament within three months, in case lawmakers fail to form a new government [and 45 days in case they reject two nominations]. It is not imperative. And indeed, under 4th paragraph of the same Article 85, dissolving the parliament 6 months before the presidential elections is forbidden. The only solution for Moldova is therefore to survive with an interim government untill parliament elects a new president -- or, more likely, until it fails to elect a new president thus trigerring early elections. President has to dissolve parliament [imperative] if lawmakers fail to appoint a new president after two attempts. The procedures for the election of the president are set by law [and not by Constitution]. Under law 1234/2000, the presidential elections can be organised 45 days before the end of the term of the incumbent president [no more than 45 days]. Repeated elections are organised no more than 30 days after the first attempt. So in case the parties are visibly slow in forming a new government, the lawmakers can at least speed up a bit the presidential elections -- to the limit of 45 days before the end of the term -- the term expires on March 23, 2016. By the time the term expires on March 23, they could vote two times, reach no agreeemnt and have president dissolve the parliament -- of have an agreement and a president able to dissolve the parliament. This whole procedure looks like a huge political crisis, but at least it is not a deadlock.
Show Full AnswerRomania considers gradual enforcement of Public Wage bill to prevent fiscal shocks
Question: Hello, I am assuming that your article does not rule out the wage hikes for healthcare workers and for teachers that were v much talked about in the last few weeks? Is it now official what is the increase in wages of the public sector overall? Thanks! Raffaella
Answers: Hello, The answer is the Public Wage bill does not rule out the wage hikes already enacted by the government for those employed in public health and education systems [not only medical doctors and teachers, but all staff]. These hikes were already enacted and will not be cancelled - since this would be politically impossible and would not make sense. The finance ministry said that the wage hikes in the first year [2016] under Public Wage bill will be decided concomitantly with the budget planning. From past statements, the hikes will be differentiate among sectors and positions. The Public Wage bill will be approved by Parliament later, probably in November-December and involves a longer-term process of incremental rises, differentiate among sectors/positions, aimed at bringing not only the general level of the wages in the public sector at a decent level -- but also at setting the wages as levels proportionate with the repsonsibility and [hopefully] performance -- i.e. the ratios of the wages among different positions in the public system should be fair [whatever this might mean].
Show Full AnswerMacedonia’s ruling VMRO-DPMNE maintains strong lead in latest poll
Question: Hi, who is Brima Gallup? They do not appear to be affiliated with the actual Gallup. Are they a real polling organization? Do they have ties to any of the political parties?
Answers: Thank you for the question. The website of this agency is: http://www.brima.com.mk/eng/index.html It says it is Macedonian member of GALLUP INTERNATIONAL and associate member of TNS (Taylor Nelson Sofres).
Show Full AnswerBulgaria's labour minister drops plan to support tobacco industry with lower social security charges
Question: My impression up to this point had been that ABV and Kalyfin were relatively clean. Which oligarchs appear to be backing ABV? Are there oligarchical backers of GERB or Reformist Bloc as well?
Answers:
Show Full AnswerMacedonia to borrow €90mn from Deutsche Bank, Erste for natural gas pipelines
Question: Hi, Has parliament approved this loan deal? Is this in the budget?
Answers: Thank you for the question. On the website of the Macedonian parliament, the bill sits in the section “second reading” which means that it has not been adopted yet. Notably, there is a possibility for using part of the loan proceeds for budget support in exceptional cases. I searched for this project in the revised 2015 budget and in the 2016 budget bill, but it was not there. On the other hand, there will be a separate new law for the planned loan and it stipulates that the debt will be serviced by Macedonia’s budget.
Show Full AnswerRomania’s major power generator CE Oltenia objects to tax authority’s actions
Question: Hi, What do you mean by "forced execution"?
Answers: Thank you for question, here there are some clarifications: the term [forced execution] is sometimes used [and very often in Romania's legal system] for the "enforcement of a writ of execution [or an execution]". A writ of execution (also known as an execution) is a court order granted to put in force a judgment of possession obtained by a plaintiff from a court. In our case, the tax collection agency ANAF thus announced that it has a writ of execution against CE Oltenia. Possibly it was issued at the end of June [as specified by the tax collection agency]. But the ANAF officers have not checked in October whether the debtor [still a vey important company] had paid its dues in the meantime. This a supposition though, there was no official explanation of the awkward situatiion.
Show Full AnswerSlovenia’s government supports plan to bring pipeline company Plinovodi under state control
Question: Were there any statements that would indicate that the state is taking over Plinovodi because it is somehow "strategic" or does the SSH think that future buyers of the company would only want a 100% stake (ie cleaning up the ownership situation so it is easier to sell later)?
Answers: Plinovodi was included in the government’s Asset Management Strategy, which is an addition to the main principles of Slovenia Sovereign Holding. The government describes the strategy as “a fundamental document of the State which represents the basic tool for an active state ownership with which the State communicates its goals to the state assets manager, to shareholders, the broader capital markets and the general public”. It was adopted in July 2015, by the National Assembly.The takeover of Plinovodi is mentioned in the Strategy which states:“The strategic interest of the Republic of Slovenia in the subsidiary Plinovodi may be optionally possible if the company is carved out for the direct ownership of Geoplin members. In this manner, the Republic of Slovenia and related persons in Plinovodi would directly acquire a 42.54% ownership stake. In order to obtain a higher than 50% stake in Plinovodi, the ownership of the Republic of Slovenia in Geoplin shall be exchanged for the stakes in Plinovodi with all the interested shareholders. if the carve-out of Plinovodi and the exchange of shareholdings in Geoplin for shareholdings in Plinovodi would not be feasible from an economic aspect (for example, due to an unfavourable exchange rate or owing to the lack of willingness on the part of shareholders to carry out the exchange), the strategic objective of the Republic of Slovenia is that the Republic of Slovenia and related entities acquire and maintain the majority stake (higher than 50%) in Geoplin. After Plinovodi is carved out, the capital assets of the Republic of Slovenia in Geoplin shall be considered as important, while the assets in Plinovodi as strategic, since Plinovodi renders services of general economic interest as the transmission system operator (TSO). If the carve out of Plinovodi was not possible or feasible, the assets in Geoplin shall be considered as strategic.” The document also states: “In the case of a decision for reducing state assets in the company, the position of Geoplin should be arranged. Geoplin, as a matter of fact, has ownership stake in Plinovodi (31.98%). In order to obtain a higher than 50% stake in Plinovodi, the ownership of the Republic of Slovenia in Geoplin shall be exchanged for the stakes in Plinovodi with all the interested shareholders. There is also an option to exchange the remaining equity interest of the Republic of Slovenia in Geoplin for the shareholding held by Petrol in the oil depot Instalacija d.o.o. in Sermin, in the amount which is needed for the provision of storage and mandatory oil product reserves within the scope of the service of general economic interest rendered by the Agency of the Republic of Slovenia for Commodity Reserves…” The government’s Asset Management Strategy can be found at the link:http://www.mf.gov.si/fileadmin/mf.gov.si/pageuploads/mediji/2015/State_Assets_Management_Strategy.pdf Concerning a possible future privatisation, this is not expected in the foreseeable future as the government does not plan to tackle energy sector privatisation at present. There is strong public resistance to privatisation of energy companies, in particular to foreign buyers which typically raises fears of a “profit drain” from the country.One interesting detail about Plinovodi is that it was a 50% owner of the Slovenian-Russian joint venture Juzni tok Slovnija, d.o.o. (incorporated on 5 September 2012) for the construction and management of the Slovenian part of the South Stream pipeline, which was scrapped in December 2014.
Show Full AnswerRomania wants flexible arrangement with IMF, no fiscal constraints
Question: Have you seen any recent opinion poll or could you recommend a reasonably good source for surveys in Romania?
Answers: Despite the opposition's attempt to improve its support among voters, amid the favourable circumstances of the indictement of PM Victor Ponta, the voters' preferences have changes only marginally over the past year -- since Klaus Iohannis won the presidential elections. No independnet party [meaning other than the two main parties] managed to capitalise on the disappointment of voters who have voted against PSD/Victor Ponta in November 2014. PNL has "inherited" the credibility given "in advance" to President Klaus Iohannis, by voters. But the credibility of the President himself is slightly decreasing and soon the Liberals will have to gain voters' confidence by other means, if they want to preserve/consolidate their leading position in polls. you can see a summarisation of INSCOP polls [see below link to independnet news portal dcnews.ro], on a monthly basis until September 2015. there are no major changes: the opposition Liberal Party PNL leads by a couple of points versus the Social Democratic PSD (at rule) [42-45% versus 35-39%]. UNPR is PSD's ruling partner and is evaluated independently only in the latest poll [September]. Among the parties, only UDMR -- ethnic Hungarians' party, meets the 5% threshold for Parliament. ALDE is the Liberal Democrat Alliance of Calin Popescu Tariceanu (it absorbed the Conservative Party PC of Dan Voiculescu). PMP is the new party of former president Traian Basescu (Miscarea Populara), M10 is the movement of former justice minister Monica Macovei and PRM is the nationalist party Romania Mare of Vadim Tudor [died recently]. PSRO is the party of former PSD leader, ambassador to US and presidential candidate Mircea Geoana. http://www.dcnews.ro/sondaj-inscop-psd-intr-o-u-oara-scadere-pnl-ramane-in-top-unpr-prinde-teren_485189.html other source for polls is csci polling firm's site http://infopolitic.ro/category/sondaje and a chart, from their site, showing more or less the same thing as INSCOP http://infopolitic.ro/wp-content/uploads/2015/08/Evolu%C8%9Bii-%C3%AEn-sondajele-CSCI-iunie-2015.pdf
Show Full AnswerSerbia’s telcos to bid for additional 4G licences
Question: Any idea how much revenue the license sales are expected to bring in?
Answers: The three local mobile operators – Telekom Srbije, Telenor and VIP Mobile – have already paid €7mn each to the government for licences for using 4G in the first auction in February. According to Serbia’s deputy prime minister and Minister of Trade, Tourism and Telecommunications, Rasim Ljajic, revenue from the current auction is expected to be at least €75mn.
Show Full AnswerHungary’s central bank maintains deficit forecast at 2.4% of GDP
Question: Have you heard anything about a possible change in vat rates to be included in next year's budget plans?
Answers: According to next year’s budget, passed by the parliament in June, VAT on unprocessed meat will be cut from 27% to 5%. The move is expected to save taxpayers HUF25bn, according to government estimates. Government commissioner Tamas Deutsch said earlier this week he will propose lowering VAT on internet subscription from 27% to 18% as of next year. The concrete proposal will be tabled for government discussion by the middle of November. Otherwise a number of tax changes were approved for next year, among them a 1pp cut in the personal income tax to 15 as well as a reduction in the special levy on banks. Overall, the tax package will lower budget revenue by HUF230bn, Economy Minister Mihaly Varga has said.
Show Full AnswerRomania’s government to apply for new arrangement with the IMF
Question: Have you heard anything about a dispute between the government and the banks on restructuring the chf loans?
Answers: Thank you for the question -- indeed not only the CHF loans but all the foreign currency loans have generated problems accross the region during the recession and after the fall of the real estate market. The CHF strengthening this January has only aggravated the problem. There is currently no special law enacted, or close to be enacted, in Romania for the conversion of the CHF loans. Customers are not happy about this -- and here is where tensions might occur. There are a couple of bills -- one drafted by the Finance Ministry and the other drafted by MP Ana Birchall, on the conversion. On September 16, MPs postponed for two weeks the debates on Birchall's bill, with a view of combining both of them . The Ministry's bill -- which have more chances to turn into law, says banks have to approve/agree the conversion requested by customer. So i don't see tensions from here. But there are some adjustments that the government is discussing with debtors. The discount banks will have to give is under discussion -- and indeed if the government accepts wide discountr in the bill, banks will predictably have to refuse all the conversion requests. There is, separately, a personal bankruptcy law already enacted, which will come into force on December 26 [6 months after publication]. It is not special for CHF loans though. The conversion process is meantime conducted by the banks themselves by oferring conversion programmes to customers: 65,000 at end-June as counted by authorities and 100,000 as counted by creditors association [by including the loans re-located to financial vehicles abroad]. Volksbank Romania -- the second bank in terms of CHF loans volume, after Bancpost, has convinced its customers to accept the conversion. Volksbank accepted a 22.5% reduction of the outstanding principal. But this was a special situation: Volksbank's shareholders have sold the Romanian subsidiary to Banca Transilvania at discount and Banca Transilvania priced in the terms of the deal the discount given to CHF loan customers. The other banks' ofers are less generous. GOVERNMENT'S BILL: The facility is for debtors that borrowed in currencies that have strengthened by more than 50% since the signing of the contract. The debtors want more amendments: to include higher income debtors, to increase the discount from 15% to 25% and to enlarge the volume of guarantees provided under the schema [debtors say current level of guarantees cover only 7,000 contracts]. In a letter sent by debtors' association to lawmakers, they have estimated a fair discount -- that would result in equal share of the losses between them and banks, at between 30%-48% depending on the year the loan was ocntracted -- the discount being applied to the loan converted at PRESENT EXCHANGE RATE. [full article in Bursa daily http://www.bursa.ro/?s=banci_asigurari&articol=279460 , in romanian] The government, through the national guarantee fund for small and medium enterprises (FNGCIMM) will insure half of the loan contracted from foreign currencies to local currency, after the bank applies a 15% discount to the value resulting from the conversion at the exchange rate AT THE DATE OF CONVERSION. The conversion is requested by the debtor and HAS TO BE APPROVED by the bank. The recipient of the state guarantee will have to pay a fee in exchange for the insurance extended by FNGCIMM. The bank is entitled to demand from the debtor the other 50% not covered by the state guarantees. Only debtors with incomes below a certain threshold – set under the draft at RON3,000 per month - can benefit from the guarantees extended by the state under the draft bill. Separately, debtors whose monthly instalments after the conversion of the loan from foreign to local currency does not exceed 25% of their monthly incomes cannot benefit of the state guarantees. Notably, the bill does not apply to loans that have been sold by local lenders to foreign entities. This is the case of some foreign financial groups that have sold portfolios of loans to entities within the group operating abroad. In some cases, the debtor is not even aware of the change.
Show Full AnswerRomania freezes registration of Euro 5 Volkswagen light vehicles.
Question: What is the car substitution program financed from the budget? How expenisve is this program?
Answers: Under the Romanian car substitution programme, the owners of cars older than 8 years [the limit was 10 years in the past] can receive a ticket [worth RON6,500, or €1,650] per wreck car. The ticket is used for the purchase of new cars from dealers registered in the programme. No more than two tickets can be used for the purchase of a new cvar. There are some supplementary bonuses for buying new green cars -- such as CO2 emissions below 100g/km or hybrid cars, or electrici cars -- but very few such units are sold actually]. The bonus is paid by the state -- from a special fund of the environment ministry. Under the current annual programme 2015-2016 [they are endorsed on an annual basis by the government] , the government has earmarked in April RON200mn [€45mn]. 20,000 tickets will be for natural persons and 5,000 for legal persons. Since 2005 to 2014, nearly half a million of wreck cars were registered in the programme and 236,000 new cars were purchased. The best year was 2010, when 190,000 old cars were given by owners in exchange of tickets and some 60,000 new cars were purchased. Counting this year, the governmen will have spent nearly €300mn in such tickets for car substitution programmes. 520,000 old cars will be given, including this year's programme.
Show Full AnswerRomania’s Fiscal Council warns government on excessive public wage hikes
Question: Hi, thanks for this story. Which wage hikes are in this bill? Which are not, but under discussion? I also understand that some wage hikes have already come into effect or are about to be implemented, which are these?
Answers: The wage hikes that already came into effect are those in the public healthcare system [25%, as of October]. The wages of top public servants [lawmakers, PM, President] were increased as well in July by an emergency ordinance that was meantime sanctioned by lawmakers -- but this is not expected to have major impact on public payroll. A broader revision of the public wages [whole income policy] is envisaged by the government to be enforced as of January 2016. But it is running out of time. The draft of the bill, sketched in July, was not officially revealed yet, since it was not yet endorsed by government. But intermediary drafts have been circulated. Based on them, media speculated about the quality, or fairmess of the target structure of incomes [like one policeman earns two times more than a school teached, it's an imaginary example]. And the Fiscal Council speculated on the impact on the budget deficit. Possibly the Council wants, by its rhetoric, to convince government revise the bill -- as it was the case with the Fiscal Code. The principle for this Public Wage bill is to set a "target" structure of "fair wages" accross the whole budgetary sector. And rise the wages that are relatively lower, proportionally, such as to have the wage structure converging to the "target" structure. High wages will remain constant. In the first year, the government wants to achieve 60% convergence to the target structure -- which is, to rise lower wages by 60% of the amount they need in order to be in line with the higher wages [discounted by the target structure indices]. FOLLOW-UP QUESTION: When you write the government wants the lowest public sector wages to increase 60% of the way toward the target structure in the first year, how much of an actual percentage increase is this? 10%? 20%? What is the total increase goal? I will be closely following future developments of the wage issue. ANSWER: Hello, As a background, the Public Wage bill is a new and improved version of law 284/2010 that has been never enforced fully. Based on the estimates below, the wage hikes prompted by the Public Wage bill would be huge – some 25% on average, very roughly speaking. The impact on fiscal deficit is estimated by the Fiscal Council at 1.4% of GDP. This reminds me the efforts the government has carried under previous SBA’s to cut the public payroll [it was 7.5% of GDP in 2014]. The main factor behind the 25% rise in the average public wage, is the rise in the minimum statutory wage – which has doubled from RON600 in 2010 to RON1,200 scheduled as of January 2016 and RON1,300 as of July 2016. This minimum wage has been preferred by the government to be also set as the “reference value” for the wages in the public sector – which is the value that, compounded with the index for each position results in the actual “base wage” [bonuses can be added on the top of this]. The two - -minimum wage and reference value, do not necessarily have to be the same, by the law. But since there are positions where the index is 1.0, this would breach the minimum wage specifications. So the indices for each public position may have changed from those set in 284/2010 to the new ones set by the government [and they have, with the maximum index set at 13, against 15 under law 284/2010], but the main factor behind the expected wage hikes is the “reference value”. During 2011-2015, the government has not enforced law 284/2010, but it has increased the public wages by more than 33% [nominal terms] so that to offset the 25% cut operated part of the austerity package in June 2010. Supplementary, it reached agreements with different groups to rise their wages – such as thee health care system employees recently, but also with school teachers last year. These negotiated rises were however limited to the hypothetic wages that the employees would have received under law 284/2010. Notably, the Public Wage bill [2015 version] was not yet endorsed by government and if it is not enacted by the parliament, its massive impact cannot be reflected in the budget planning for next year – which has to be drafted by the end of October. So it is very likely that the government will delay the bill again – unless the Public Wage bill is endorsed quickly this month, and rely on discretionary wage hikes as it has done in recent years since 2011 – when the Unified Public Wage [284/2010] law was enacted for the first time. Really funny it was that the law 285/2010 – issued immediately after 284/2010, at Article 4, defers the effects of the aw 284/2010 for one year -2011. The public wage bills issued on an annual basis have done the same [deferring law 284/2010]. TECHNICAL NOTE [on impact of Public Wage bill] As the Fiscal Concil [FC] estimated based on the Public Wage bill [i found a draft on sanitary trade unions’ site, but it’s Romanian, here: http://www.solidaritatea-sanitara.ro/documente/Legea_unica_de_salarizare_a_personalului_bugetar.pdf ], the gross fiscal impact will be RON15.5bn and the net impact will be RON10bn next year. FC’s head Ionut Dumitru has not specified whether “gross” includes all taxes and social contributions on incomes – or only those paid by the employees. But data is consistent with the later [employee’s contributions only]. From budget execution data from finance ministry [http://www.mfinante.ro/execbug.html?pagina=bulletin ] the total public payroll this year will be around RON53bn up from RON50bn in 2014. So the Public Wage bill’s impact is huge not only as % of GDP [RON10bn would be some 1.4% of GDP] but also compared to current public payroll.
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