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Daianu:Fiscal consolidation process will be painful, it is desirable to be carried out fairly
Fiscal consolidation will be a painful process and it is desirable to conduct it fairly, said on Tuesday the chairman of the Fiscal Council, Daniel Daianu, who warned that the "bulk" of the adjustment cannot be achieved on the expenditure side.
"Let's not delude ourselves with the anecdotal: there are 15 workers at a town hall, in fact there should be only four... That's anecdotal. Of course, municipalities can do something in the local environment, schemes can be greatly reduced. .... I'd like people to have this patience, to read where these expenses go, how much goes into education, health, the military. Sure, we can talk about indecent special pensions. And I think that many of the special pensions are indecent. Perfect, but we will not solve this equation of budget consolidation, even if we abolish special pensions, although I doubt that you can do anything in the Army. And here you have to keep your head on your shoulders," Daianu said at Evenimentul Profit.ro - "Investment vs Deficit: Challenges and risks in the economy under the impact of increasing debt and public deficits".
"There is a distributional war going on in Romanian society, because someone has to pay: either we all pay, or one part pays, or another part pays. And I hope we don't end up paying all, but not equally. (...) To pay by inflation, tax by inflation is an extreme measure. If you end up going to VAT again, increase VAT, hit those most in need. Those who have a lot of money don't bother, they don't worry. But those who have little money, modest incomes, they feel it on the shelf, because one is food inflation versus inflation as it is calculated, which contains everything for everyone. Ordinary people, who live only on salary, for them that food inflation matters. So that's the big problem. There is a war and it will be a distributional war, because everyone would like to see their income untouched. Everyone feels special and shouldn't have to pay. Yes, but Romanian society has to pay. So far, the markets are patient with Romania and will be patient. These structural reforms are known to be painful and require time. That is why there is also money allocated to Romania to carry out these reforms," the head of the Fiscal Council said.
"Romania has a reasonable public debt. Romania's problem is that it has a primary deficit, so outside debt service, very high. (...) We have to deal with this deficit (...) You said we have representatives of the business environment, because they pay. Ladies and gentlemen, all citizens pay and feed the public budget. I also make you a public reproach. You say that only companies feed the budget. No, sir, all citizens (...) These are myths and false leads. All citizens pay, except those who dodge the payment, because we have people who have very high incomes and pay nothing. And ANAF (National Tax Administration Agency, ed. n.) has to deal with those people. So, you see, I said I was reproaching you. Why is that?! Because you maintain these myths. Some talk about the fact that we have a lot of public investment, it doesn't matter the deficits. It matters. Some say we have European funds, we are insured. European funds can be those from the PNRR (Recovery and Resilience Plan, ed. n.). In a few years they won't be. But who pays taxes? All of the citizens pay taxes," Daniel Daianu explained.
He reiterated that Romania has a deficit of around 6% and must reach not 3%, but 1.52%, because fiscal space is needed to cushion other costs, which means a correction of 4%.
"A correction is made, you have to do it not in 10 years... Markets may not have the patience until 2030. So the big debate is how to make this correction. On the expense side, you can't make this adjustment. You can't do it. You cannot take out 3% of GDP on the expenditure side," Daianu pointed out.