Thursday, November 13, 2008

Romania’s centrists have bought time, but not a solution

BUCHAREST (Reuters) – Romania’s minority centrist government may have won some time ahead of November 30 elections with a compromise pay offer for teachers, but the move could feed investor concern over loose budgetary policies.

After weeks of talks with trade unions threatening to go on nationwide strikes, Prime Minister Calin Tariceanu offered on Monday to raise teachers’ salaries by up to 28 percent next year, about half the amount demanded by the opposition.

In reaction, some trade unions postponed strikes planned for this month until January but economists warned any large pay increases at a time of global financial instability could damage the Romanian economy.

“It was a compromise. But regardless of the scale, this kind of increase is not what the economy needs at this point,” commented Lucy Bethell of the Royal Bank of Scotland in London.

Earlier this week, Tariceanu failed to persuade parliament to delay an opposition plan to increase teachers’ pay by 50 percent, which had been widely slammed by international economists as potentially disastrous for the economy.

Higher wages for teachers has become a key policy issue in the election campaign at a time when a global economic slowdown threatens to sap state revenues and, potentially, derail Romania’s cash-dependent economy. “He tries to buy time, negotiate, avoid strikes,” said Sorin Ionita from the Romanian Academic Society. “This is partly a delay tactic and partly a compromise. But 28 percent is still unsustainable.”

Public opinion polls show salaries and pensions are the biggest concern for voters, nearly two years after Romania joined the European Union.

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