BUCHAREST, Nov 10 (Reuters) - The Romanian Senate rejected a government plan on Monday to delay a 50 percent increase in teachers' salaries as the country's main political parties battle over fiscal policy plans ahead of a Nov. 30 election.
The hike has become a key policy issue in the parliamentary election campaign, raising concerns about state spending at a time when many say Romania should curb expenditure to insulate its economy from the global financial crisis.
Notably, the International Monetary Fund has slammed plans for the salary increase, championed by centrist and left-wing opposition groups in parliament but opposed by the government of Prime Minister Calin Tariceanu.
The delay to the pay hike plan still has to be voted on by the lower house, but even then, Tariceanu has said he would fight deputies' efforts to overturn it.
Senators voted 79 to 12 to maintain the hike in teachers' salaries.
'We will continue to implement our reform plan designed for economic growth. I would expect that union leaders understand alarm bells coming from abroad,' Tariceanu said.
Some 170,000 teachers held a two-hour warning strike throughout Romania on Monday and dozens picketed the parliament building in Bucharest, demanding higher salaries.
Meanwhile, Tariceanu has held marathon talks with public sector trade unions in the last two weeks, as thousands of civil servants demand to go on strike later this month if their salaries are not raised by 50 percent.
Public opinion polls show salaries and pensions are the biggest concern for voters, nearly two years since Romania joined the European Union and became its second-poorest member after Bulgaria.
In response, all political groups are promising giveaways, including higher pay, subsidies for students and children and sales tax cuts.
But economists warn the parties' bidding war has hurt the country's response to the global financial crisis and threatens to destabilise the economy, which is highly dependent on foreign cash to finance domestic consumption.
Earlier on Monday, Fitch became the second rating agency after Standard & Poor's to cut Romania's status to below investment grade, citing concerns over economic policies. The downgrades mean it is the only EU member at 'junk' level.
Opinion polls show Tariceanu's Liberal Party trailing the opposition in third place with some 17-18 percent of support. The Democrat-Liberal Party (PD-L) of President Traian Basescu is the frontrunner with some 32-37 percent and the ex-communist PSD has the backing of 30-32 percent of voters.