VAT will thus increase from 19 to 24 and from July 1

Emil Boc did not lose time. Forced to sharply reduce its budget deficit, the Romanian Premier did not 24 hours to respond to the decision of the Constitutional Court prohibiting the one of the headlights of his austerity plan measures. Since the High Court felt, Friday, that it was contrary to the laws of the country to reduce by 15 the level of pensions paid to pensioners, the Government has decided to increase the intake. VAT will thus increase from 19 to 24, and from July 1.

Such responsiveness gives the measure of urgency in which lies the Romanian team. Violently heckled by the financial crisis, the Romania obtained in March 2009, assistance of the European Union, the World Bank and the international monetary Fund (IMF). On a global envelope of EUR 20 billion, the IMF must contribute to $ 12.9 billion, making him the supervisor of this device support. And therefore, the principal interlocutor of Bucharest on financial reforms.

Out of the rut

The Fund requires to lend to the Romania, the country's finances are cleaned. For this year, the express condition that Bucharest can touch a new tranche of its partners was to keep the public deficit below the 6.8 of the gross domestic product (GDP). A figure which was already, in itself, a concession, as it was, initially, not to exceed 5.9 of GDP. After years of fiscal laxity, who made the Romania a country to the enlarged public service - a third of the employees working in the public sector - Emil Boc had therefore opted for the hard method, simultaneously announcing a reduction of 15 of the amount of pensions and social benefits, and a decline of salaries of civil servants of... 25! The demonstrations had not been him back, and he left victorious of the motion of censure that the opposition had filed against his Government. But the Constitutional Court has obliged him to find, emergency, a "plan B". As the IMF, as soon as the judges verdict announced, had postponed the payment of its new tranche of funding, amounting to approximately EUR 900 million.

To severe budget cuts that had provided the Government, the increase of VAT has the advantage of not require parliamentary approval. Decided by Decree, it must enter into force as early as Thursday, which should enable the IMF, if all goes as planned, to unblock his payment as early as Friday. However, this option to act on the level of indirect taxes is far from optimal, and Government all had, until now, to avoid it. Economists are concerned about the negative consequences that could have if abrupt increases in VAT on consumption, and therefore on the evolution of the GDP. In addition, imagine not be without effect on inflation.

Finally, the Government seems clearly weakened, and the assumption of a new censure motion is now mentioned. Although Bucharest has found a way out of the rut, the markets are concerned. Yesterday, the Romanian currency, the leu, has reached its lowest historical, to 4.32 lei for 1 euro, prices announced by the Central Bank of Romania (BNR).