Civil Society, Development & Aid, Economy & Trade, Europe, Eye on the IFIs, Financial Crisis, Global Governance, Headlines

ROMANIA: Trade Unions Warn Against Unjustified Pay Cuts

Claudia Ciobanu

BUCHAREST, May 23 2010 (IPS) - Romania’s trade unions have warned that a series of protests against drastic cuts in pensions and salaries would turn into full-fledged general strikes by month-end unless the government heeded to the needs of ordinary people.

Ion Albu, executive director of Meridian Trade Union, which represents industry and railway workers, told IPS: “For the moment, we are using protests to alert the government to our needs. But if our proposals are not taken into consideration, we will go on general strike.”

Four other major unions in the country have issued warnings of a general strike beginning May 31.

Ever since the May 6 announcement that pensions and social benefits would be cut by 15 percent and salaries by 25 percent, starting June, professionals, pensioners and mothers with babies have mounted daily protests in Romanian cities.

The biggest of these protests, organised by the trade unions on May 19, brought over 30,000 people to the government building in Bucharest. This is a large number for a country where the public has been politically apathetic after the early 1990s.

The first to take to the streets were the pensioners, who came in the hundreds in front of municipality buildings all over the country May 12. With a population of 22 million, Romania has 5.5 million pensioners, four million of whom have monthly incomes below 300 euro (377 US dollars).

“After 37 years of work, I have a pension of RON 900 (282 dollars),” said Cristina Stoian, a pensioner at the May 19 protest in Bucharest. “I barely manage with the expenses of the house. If they cut 15 percent, the first thing I will have to give up is medication, on which I spend 200 RON (62 dollars) every month.”

Mothers brought their babies out and waved dirty diapers in front of the ministry of labour on May 17. Mothers receive 85 percent of their pre-maternity average pay for two years after childbirth. This amount would decrease by 25 percent.

The cuts could have a long-term negative impact on Romania’s already vulnerable health and education systems.

Vasile Astarastoaie, president of the National College of Doctors, announced this month that 10 percent of Romanian medics have left or are in the process of leaving the country this year. A young doctor makes on average 250 euro (314 dollars) per month and a family doctor about 350 euro (439 dollars). The national medical system is already chronically understaffed.

Education has already been affected by measures to limit the budget deficit. 15,000 teaching jobs are being cut this year. Teachers are among the lowest paid in Romania.

Maria Ghinu, a primary school teacher with 17 years of experience, attending the May 19 rally, said she makes 700 RON (276 dollars) monthly. “I can only buy food with this money,” she explained. “If they cut 25 percent more, there is no point in my going to work.”

When President Traian Basescu announced the measures on May 6, it sparked nationwide shock as none of the cuts had been mentioned before.

The government was conspicuously silent following the announcement. Romania is a semi-presidential republic (government and president share executive functions), but neither the prime minister nor the minister of finance explained the measures to the public until May 17.

The measures were not to be debated by the parliament, but passed through a procedure which allows the government to assume responsibility for them in front of the legislative.

The major opposition parties disagree with the measures and even the leader of the Democratic Union of Hungarians in Romania – allied with Basescu’s centre-right Liberal-Democrats in government – has spoken against the pension cuts.

The President said the cuts would help maintain a budget deficit of 6.8 percent of GDP this year, as opposed to 9.1 percent without them. Two-thirds of state revenues go on salaries, pensions and social spending.

Without strict measures to reduce the deficit, added Basescu, Romania would risk losing the upcoming June payment from the International Monetary Fund (IMF), having then to borrow from the financial markets at higher rates. Romania’s indebtedness will reach 36 percent of GDP at the end of 2010. Without the measures, the President said, the country’s debt would go over 60 percent of GDP in 2013.

Last year, Romania took a loan of 20 billion euro (25 billion dollars) from the IMF and European institutions, primarily to stabilise the currency and the banking system. The IMF delegation, present in Romania in early May, pushed for measures to reduce the deficit but did not insist on such severe cuts.

“Several options were discussed with the Romanian government, including measures that would affect both budget incomes and expenses,” said Jeffrey Franks, the head of the IMF mission in Romania. “It was the government’s decision to rely exclusively on cuts in public spending.”

In what seems to be a public relations effort to make sure the responsibility for the cuts does not fall on the IMF, the body’s head, Dominique Strauss-Kahn, and IMF director for external relations, Caroline Atkinson, issued statements saying the IMF was reluctant about the cuts.

Strauss-Kahn told TV channel France 2: “The government told us they would cut 25 percent. We said no. If you want to save, raise taxes, especially for the rich. But the government replied no, we are the ones to decide.”

Basescu explained that an increase in value added tax and other taxes combined with smaller cuts would not be a good solution as tax hikes would affect the private sector, on which economic growth in the country depends. Romania is expected to have zero economic growth this year.

But even some business leaders disagree with the new measures. “If measures to stimulate the economy are not taken in addition to the cuts, the cuts alone will harm the economic situation in the country, as they will diminish consumption,” said Cezar Corici, president of the General Union of Industry Leaders UGIR 1903. Business leaders fear that tax increases will happen anyway this fall, once the cuts prove insufficient.

The trade unions’ counter-proposal includes freezing pensions, progressive taxation and enlarging the pool of those paying income tax.

Basescu said the cuts would be accompanied by a “modernisation of the state” to reduce unnecessary and corrupted state spending and by measures to combat tax evasion and smuggling. But many are wondering why such measures have not been taken so far.

“The government should have taken measures to reduce the deficit since January 2009 [when the global crisis started affecting Romania],” said Lucian Croitoru, advisor at the Romanian National Bank. “This inactivity has now forced the executive into cuts of 25 percent. One year and five months in which nothing was done passed.”

“If the measures promoted by the government involve merely cuts, this will not stimulate the economy and we will be much worse off next year,” union leader Albu said.