Applying the 20% salary cut to the entire public sector could help the state budget save approximately 2 billion euros, and reduce the budgetary deficit put at 4.6% by about two percent.
Premier Emil Boc will voluntarily take a 20% pay cut, as will the other ministers. The announcement comes as a preamble to the first assessment by the IMF as part of the stand-by agreement, after which spending adjustments can be requested. The Prime Minister says that the high-ranking officials of the state want to give an example to the society with this move and "a sign of solidarity" with all those whose life is more difficult in Romania in these troubled times.
Considering the 1.6 million budget-paid employees and taking into account a gross salary of 700 euros, this could help save about 2 billion euros in one year.
The Premier's decision, which analysts see as a positive yet insufficient signal, given the severe personnel and salary adjustments in the private sector, seems to somewhat contradict the message of President Traian Basescu. The President on Thursday said he was not a supporter of the budgetary spending cuts for the time being, though this would be the easiest solution economically speaking. He added this option had to be avoided as long as there were other solutions to deal with the crisis, such as infrastructure investments and pointed out that Hungary, which was doing much better, was the one to have massively cut salaries and pensions.
On the other hand, the Premier explained that the adjustment step was a sign that what had been started in terms of streamlining public spending, starting from high-ranking officials, would continue.
"The government does not have an endless source of money. Especially in a time of crisis, financial hardships are even greater. To that end, I asked every authority to make sure personnel spending is properly sized, so as to be in line with the budget resources available," Boc said.
Public administration salaries have doubled in the last four years. In addition, each year the average net salary in public administration was at least 40% higher than the average salary of the rest of the economy.
"The 20% cut of the government members' salaries does not balance the budget. Yet it can "do good". The decision can be seen as a symbol for public servants. When you want to cut employees' salaries, they look at their bosses to see if theirs' are adjusted, too. Which is why it is welcome," commented Florin Pogonaru, chairman of the Association of Businesspeople in Romania (AOAR).
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