Romania’s new government gets Parliamentary vote of confidence to proceed

Romania’s government headed by Liberal Democrat Emil Boc received on 22nd of December 2008 the Parliament’s vote of confidence with 324 votes in favor, out of 454 ballots and will start implementing its program.

The newly-approved prime minister assured voters that he is a responsible man ready to tackle all the issues people are confronted with, at the helm of a trustworthy team.

“The hope inside the Romanians’ heart is our main focus,” Boc said, adding voters will not be let down by the new Cabinet.

The recently set-up government pledged to trim all public spending next year to a 4 percent deficit of the gross domestic product, still above the 3 percent threshold imposed by the European Union under the Maastricht criteria.

The new government, made up of right-centrist Liberal Democrat Party (PD-L) and leftist Social Democrat Party (PSD) plus the Conservative Party (PC) also plans to implement fiscal changes such as differentiated value added tax (VAT).

Therefore, staple food will have a 5 percent VAT while for luxury goods the tax will stand at 25 percent, from the current 19 percent level for all products.

Moreover, taxes on buildings, cars and boats will be raised. A unitary tax on gains made on the capital market will also be introduced. The outgoing government, headed by Liberal leader Calin Popescu Tariceanu, whose party was the third runner in at the November 30 ballots and will most likely form the opposition, decided to suspend such taxes for 2009 to prop up the Romanian capital market affected by the global credit crunch.

Another measure of the new Executive arm is to stimulate saving and temporarily eliminate taxes on incomes from bank deposits, including those of non residents. Also, companies spending profits on technological progress will be exempted from tax on profit.

A risky bet on the financial crisis

The new government has a tough mission ahead, amid worries of rising unemployment and with the financial crisis already taking its toll in Romania.

In the past two months, large companies such as carmaker Dacia, controlled by France’s Renault, food processor Kraft Romania and steel maker Arcelor Mittal Romania fired people and announced cutbacks owing to the shrinking demand.

With more and more Romanians returning home from Spain and Italy, countries hardly hit by the credit crunch, the rate of unemployment could surge to 1.5 million next year, in the most pessimistic scenario drew this fall by union leaders.

The new government agreed on carrying some social protection measures, such as increasing wages and pensions but also stimulate companies.

Yet, the governing plan sketched by PSD and PD-L says nothing about the fate of a recently created 10-billion euro stimulus of the outgoing government, to help save the country’s economy which has been growing at a record pace this year, above 8 percent.

Source: NewsIn