Salary hikes for teachers could amount to 0.75% of GDP in 2009, IMF warns
The International Monetary Fund (IMF) said Romania could have to reconsider the decision to increase the teachers' wages with 50 percent after the fund's estimates show the hike would impact the state budget with more than 0.75 percent of the gross domestic product (GDP) in 2009, an IMF release.
IMF also estimates a generalized 50 percent rise in salaries for the entire public sector would mean a 4 percent slice of the GDP.
If the salary hike enters into force, it would send a bad signal to financial markets, in the context of fewer public and private financing sources, of a national currency under pressure, of rocketing interest rates on the local market and of risk premiums for Romania's sovereign loans at record high values, the fund warns.
The IMF representatives also stressed that the average salary in the public sector is already higher than in the private sector. An additional increase of such proportions could only lead to similar requests regarding remuneration from the private side, which would result in a jump in inflation and would affect the country's competitiveness.
The Standard & Poor's decision to lower Romania’s long- and short-term foreign currency sovereign credit ratings to BB+ from BBB with a negative outlook further reduced the trust in the country's economy, the institution considers.
In this context, realistic fiscal and wage policies are needed to send a clear signal to the markets.
Romania's Economy and Finance Minister Varujan Vosganian warned at the beginning of October that a hike in the salaries from the public sector would either mean an elimination of the planned investments from the state budget, or a budget gap of 7 percent of the GDP in 2009.
Such a budget deficit would be a breach of the EU accession treaty, the Maastricht Treaty and the convergence program and would question Romania's EU membership, added Vosganian.
Romanian President Traian Basescu passed on October 24 the law allowing a 50 percent wage increase for professors. Other labor unions representing employees from the public sector warn with protests if they do not receive similar wage hikes.
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IMF also estimates a generalized 50 percent rise in salaries for the entire public sector would mean a 4 percent slice of the GDP.
If the salary hike enters into force, it would send a bad signal to financial markets, in the context of fewer public and private financing sources, of a national currency under pressure, of rocketing interest rates on the local market and of risk premiums for Romania's sovereign loans at record high values, the fund warns.
The IMF representatives also stressed that the average salary in the public sector is already higher than in the private sector. An additional increase of such proportions could only lead to similar requests regarding remuneration from the private side, which would result in a jump in inflation and would affect the country's competitiveness.
The Standard & Poor's decision to lower Romania’s long- and short-term foreign currency sovereign credit ratings to BB+ from BBB with a negative outlook further reduced the trust in the country's economy, the institution considers.
In this context, realistic fiscal and wage policies are needed to send a clear signal to the markets.
Romania's Economy and Finance Minister Varujan Vosganian warned at the beginning of October that a hike in the salaries from the public sector would either mean an elimination of the planned investments from the state budget, or a budget gap of 7 percent of the GDP in 2009.
Such a budget deficit would be a breach of the EU accession treaty, the Maastricht Treaty and the convergence program and would question Romania's EU membership, added Vosganian.
Romanian President Traian Basescu passed on October 24 the law allowing a 50 percent wage increase for professors. Other labor unions representing employees from the public sector warn with protests if they do not receive similar wage hikes.
NewsIn
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