Thursday, January 29, 2009

Romania's government may delay budget in wage row

Wed, Jan 28 2009, 12:39 GMT

By Radu Marinas

BUCHAREST, Jan 28 (Reuters) - Romania's government may delay approving this year's budget bill due to disagreements between centre-left coalition partners over plans to freeze public sector wages, officials said on Wednesday.

The budget is seen as a test for the month-old cabinet as economists and markets are waiting for convincing signs the government will conduct prudent fiscal policies, after loose spending by the previous cabinet sparked ratings downgrades.

On Tuesday, President Traian Basescu, linked with the centrist Democrat-Liberal Party (PD-L), said he would back an idea to freeze wages for six months to rein in spending and help Romania attain this year's 2 percent of GDP budget gap goal.

The former government's lavish spending triggered a big shortfall of over 5 percent last year and spurred the new cabinet into a drive to cut public expenditure drastically, to limit the impact of the world financial crisis on the economy.

But the leftist coalition partners, the Social Democrats, labelled the wage freeze plan as unrealistic, saying it would hurt the impoverished population in times of crisis.

"Our opinion is that this idea cannot work in Romania given the population's hard situation," Constantin Nita, minister in charge with small and medium-sized firms told Reuters.

"The budget would have normally been adopted on Thursday ... From our point of view, we cannot hold negotiations on this proposal. This is not an anti-crisis measure aimed at defending the poor people from the leu's weakness."

A senior PD-L official said different views in the cabinet on the issue and trade unions' reluctance to give green light to such a freezing drive, may hamper plans to adopt the budget bill as pledged on Jan 29.

"We hope to have the budget this week ... but anything is possible," the official told Reuters.

Major trade unions, which garner support from around 1.5 million public sector workers, have also threatened to stage nationwide protests if the bill will include a measure to keep wages flat for the next months.

"Tomorrow we will be discussing the budget in government," said Prime Minister Emil Boc, without saying if the bill could be also approved.

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