Mission Impossible: where will Dancila’s government find the money for all the pension and salary increases, plus billions for barons
With the budget for 2019 left hanging in the air, the debacle created by the PSD in the central administration has reached new heights. Populism went off the scale at the National Committee (CEX) meeting on December 10 when Dragnea pulled out of his hat a proposal by which he hopes to keep the barons on his side: a 10 billion euros fund for small-scale local investment projects. From that moment on, the already hard to keep under control budget project has completely fallen apart.
In short, the finance minister, Eugen Teodorovici, is under immense pressure to find a solution to an equation that is impossible to solve: cover the pension increases (8.4 bn. lei according to the draft law on pensions), the salary increase for public sector employees (about 17 bn. lei according to the unitary wage law) and the new 10 bn. euros fund announced by Dragnea (10 bn. lei in the version floated by Dancila).
All, amid an expected economic growth of 5.5%, which most analysts consider as exaggerated.
Practically, under pressure from Dragnea and Valcov – the political artisans of this gimmick that is the investment fund of 10B euros – Teodorovici must come up with a solution to build this economic perpetuum mobile. This fund will basically duplicate the existing National Program for Local Development (PNDL), the program by which local barons are being fed through the Ministry of Development, still led by the dissident Paul Stanescu.
What is Dragnea’s end-game with this trickery? Teodorovici has unintentionally revealed the answer: he said that the Ministry of Finance and the Prognosis Commission would manage the fund, not the Ministry of Development. In other words, it’s Dragnea’s way to win back the local barons by taking money away from Paul Stanescu, the embattled Minister of Development. I would not be at all surprised if in the future budget the allocations for the PNDL would be close to zero, with all the money going to this new fund.
· As a short note: no one–neither Dragnea, nor Dancila, nor Teodorovici– has yet managed to explain why this fund is needed or where the money is going to come from. The reason is simple: there is no logical need, other than Dragnea’s need to politically control the party. As for where the money is going to come from, no one has yet identified the source. That’s what the Finance Minister is looking for right now. Calin Popescu Tariceanu too has attempted a half-baked explanation: these would be loans taken by local communities from the National Development Fund (which, in turn, will be funded with money from major privatizations). But if that would be the case, the baron’s appetite for this fund will decrease dramatically, because loans will have to be repaid and granted on only on meeting certain conditions.
Teodorovici has been signaling from early on this week that he is not at all comfortable with the three constraints. He knows that it will be impossible for him to make a budget that will appease the pensioners, the public sector employees, and the local barons. The simple fact is that Romania does not produce so much money, no matter how generous the flexible Ghizdeanu, the head of the National Commission for Prognosis, is with the economic growth forecast. And Teodorovici knows all-too-well that he cannot rely on the performance of the revenue agency lead by Ionut Misa. The increasingly politicized and weakened agency cannot keep up with the growing needs of a governing coalition that bases its survival on populist measures.
Even premier Viorica Dancila has given out today hints of mistrust for the budget ordered by the party. Asked when the budget for 2019 will be adopted, Dancila was extremely elusive, leaving open the possibility for Romania to enter the next year without an essential law. But the moment of stupefaction came when Dancila spoke of a fund of 10 billion lei, not of euros, as Liviu Dragnea had said two days earlier. It is the sign of a decision not yet assumed by the premier, a decision that is still looked at with extreme caution by the technical staff at the at the Ministry of Finance and at the Government.
Add to this impossible equation the arithmetic of the vote in Parliament, where the PSD has lost the majority in the Chamber of deputies and now finds itself in difficult negotiations with the UDMR. And there is also the resistance from President Iohannis, who has deferred for December 19th the meeting in the CSAT that could issue an opinion on the draft budget.
All these make for an eerie picture. With the justice system almost brought to its knees by a figure whose only purpose is to save his own skin, Romania is about to enter without a budget in the year it will hold the presidency of the EU Council. And that’s because the same figure, Liviu Dragnea, is in need of billions of lei to keep captive the aristocracy of the PSD, the only force that could oust him from the functions he currently occupies.
We don’t know where they could get the money needed for the promises for the election years 2019 and 2020. Neither do the finance people at the PSD, who keep turning their pockets inside out. After the party choked public investments over the last six years to waste the money on barons and to fatten the bureaucracy, it is no wonder that the economy is not producing enough. And if they build the budget based on overestimated forecasts and with all the big expenditures included, we’re in for a crash-landing. In a year or two, Romania will be footing the bill for this budgetary feast.
Traducerea: Ovidiu Harfas
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