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FinMin Citu : the previous Govt. used two budgets, “like Al Capone”
Romania’s real budget deficit today is over 4% of GDP, new finance minister Florin Citu said in his first press conference on Thursday, November 14. He added that the situation of the country's finances, which he took over from the Social Democrat Government of Viorica Dancila, is much worse than expected and that the previous Government hid this situation by using two budgets, like notorious gangster Al Capone, one unveiled to Parliament and another for funding local barons.
"Almost everything I found here went beyond the most pessimistic expectations. Moreover, I found out that the real situation was neither known, nor anticipated by our international partners. So the information that was circulating was not the real one. The conclusion is that for the last three years Romania's economy was run against two budgets, and I can say very responsibly that there was a budget unveiled to Parliament that neither the prime minister nor the finance minister took up, and a second budget, with all the real information, a budget used to fund the local barons and so on. That's exactly the method, and I found no other comparison, of Al Capone: he would have two books, one for the tax administration and one for him," said Citu.
He said he looked into the real data and discussed the situation with representatives of the European Commission and international financial bodies.
“Almost everything I found here exceeded the most pessimistic expectations,” said the finance minister. “The real situation was not known or anticipated by international partners,” he stressed. Citu said he would notify the competent institution about this situation.
“Everything was premeditated. In the last three years, the fundamentals of the Romanian economy have been affected,” he said. He also explained how the Social Democratic Party (PSD) used the state budget in its own interest by budget amendments.
At the beginning of the year, the budget seemed ok. The budget amendments directed the money to the party,” the finance minister said, adding that former PSD leader Liviu Dragnea and former finance minister Eugen Teodorovici both knew, at the beginning of the year, that there wouldn’t be enough money for investments.
Unless corrective measures are taken the public deficit will exceed 4% of GDP this year, finance minister Florin Citu also said in his press conference. The deficit reached 2.84% of GDP at the end of October, as the budget revenues are some RON 21 billion (EUR 4.4 bln) under plan, but the Government also has significant unpaid bills.
There are some RON 11 billion (EUR 2.3 bln, some 1% of GDP) in unpaid taxes and, maybe, part of it can be collected quickly, while the remaining RON 10 billion (EUR 2.1 bln) are EU funds that haven’t been drawn and PSD never planned to draw them, he said.
Of the uncollected taxes, RON 2 bln (EUR 420 mln) accounts for the social security contributions not disbursed by companies on the behalf of the employees, as provisioned under the revised income taxation regulations. Meanwhile, the deficit of the public pension system reached RON 2.9 bln (EUR 610 mln) in January - October, the finance minister also informed, accusing former Government of targeting unrealistic surplus for the whole year.
On the expenses side, the Government has postponed some payments. The state has to repay RON 4 billion (EUR 840 million) worth of VAT to companies. The National Health Insurance House – CNAS also has to disburse RON 1.8 billion (EUR 378 mln) to companies for medical leaves, but the CNAS director is on a sick leave himself. The Government also has to pay bills to the companies that have worked on projects under the National Program for Local Development (PNDL).
“It is not the fault of private companies that we had a Government that stole public money. There is no problem, if the invoices are OK, we will pay the bills,” the finance minister stressed.
În turn, the Social Democratic Party (PSD)'s Executive President Eugen Teodorovici on Thursday expressed "deep disappointment and sorrow" over the fact that Minister of Finance Florin Citu "does not know how to read a budget".
In his opinion, Florin Citu held "an attempt of press conference, instead of presenting a situation ten days after taking office".
"I would have expected that what we are discussing today to be closely linked to a situation that Minister of Finance, Mr. Citu, will present after the first ten days in office. (...) Firstly, if we were to believe Mr. Citu's allegations, I should introduce myself to you as Eugen Teodorovici, alias Al Capone. But I am Al Capone just as Mr. Citu is the head of the FBI. Joke aside, a serious discussion on Romania's economic situation should take into account the data that the Ministry of Finance has to publicly present today. I express my deep disappointment and sorrow with the fact that Mr Citu does not know how to read a budget and especially how he understood today to present himself as the Minister of Finance. I wish that, until the first official discussions with our international partners, he will show wisdom and understanding, in the sense that he represents the interests of this country above all," Teodorovici told a press conference held at the PSD headquarters.
In context, Eugen Teodorovici called on Florin Citu to say who are the international partners who were sorry for him, and what else he promised them, "to the friends who have to finance us" respectively.
"Since 4 November, Mr. Citu has borrowed more than 2.5 billion lei. Today a new issue took place in this respect, we are going to get data from the Ministry of Finance. (...) He has already announced a negative rectification, not having the execution at 10 months. I would very much like for this rectification, which he anticipates as negative, not to include measures of cuts, layoffs in the public sector, austerity measures.We have strong signals that within the ministries, especially in the Finance one, they are working on a package of measures including the increase in VAT, the taxation of dividends, layoffs in the public sector and other austerity measures. (...) The data should have been presented after the execution officially existed (...)," said the Social Democrat.