Friday, September 25, 2009

Romania gov't wins parliament support for reforms

By Luiza Ilie
BUCHAREST, Sept 24 (Reuters) - Romania's centre-left government survived a no-confidence vote in parliament on Thursday, thereby getting approval for tough spending cuts required by the International Monetary Fund in return for aid.

A parliamentary vote to scuttle the package of reform measures failed, with 137 deputies voting against and 112 deputies voting for it.

Many ruling party deputies boycotted the vote in order to show their displeasure with the opposition's tactics.

Under Romanian parliamentary procedure, the reform package now becomes law automatically.
The vote had been seen as a key test of the nine-month-old cabinet's ability to agree on painful policies ahead of a Nov. 22 presidential election and to meet terms for a 20 billion euro ($29.45 billion) package it secured in March to help it ride out a deep recession.

"After 20 years, Romania cannot afford to wait anymore," Prime Minister Emil Boc told parliament in reference to stop-and-go economic reforms during post-communist years.
"If these reforms are not made, all we will accomplish is to deepen the crisis and keep privileges in the wage system."

Designed to slash public sector costs and streamline a bloated administration, the reforms should ease the financial burden on state coffers and free up cash for investment.

"Clearly this is a good step forward ... Romania badly needs these reforms," said Nicolaie Alexandru-Chidesciuc of ING Bank.

But the plan has sparked mounting social tensions in the new European Union member, hit by recession and rising unemployment. It also has put strains on the uneasy two-party governing coalition which controls 70 percent of the assembly seats.

Analysts say social protection and state wages are likely to dominate a hotly-contested campaign for the presidential ballot which pits incumbent president Traian Basescu against Mircea Geoana, leader of the leftist Social Democrat coalition partner.

Basescu welcomed Thursday's vote but said further restraint was needed. He called a national referendum for the same day as the election to gauge popular support for his plan to streamline parliament by trimming it to a single house from two now and cutting seats by one third.

REFORM UNDER WAY
Romania was the EU's fastest-growing economy early last year but with domestic lending frozen and low foreign demand hurting exports, it was forced to seek foreign aid and implement unpopular wage freezes to prevent a financing crisis.

The reform package includes three bills to restructure the public sector by cutting the number of state-controlled agencies, impose a new wage scheme for state employees and reform the outdated education system.

The government said the wage bill would be further improved by September, 2010 and also appease some IMF concerns regarding its transparency and ease of implementation.
Boc has said no wages would be cut but top salaries would be frozen in the coming years until a 12/1 ratio between the highest and the lowest wage in the economy is reached.

Many trade unions say the law discriminates against certain occupations. A general strike to oppose the bill is scheduled for Oct. 5 and it is expected to bring public institutions to a near-standstill for the day.

As part of the plan the government will also halve the number of state agencies to 112, axing around 9,500 jobs.

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