The budget of state bankruptcy. Miners Dragnea and Teodorovici are giving the private sector the pick hammer treatment
Promises made to captive voters and projects earmarked for political clients brought PSD face to face with reality: the government has no money for the 2019 budget. In their desperate rush for money, Dragnea, Vâlcov and Teodorovici have invented new taxes and increased existing ones. The three liars, who, for two years, have been trumpeting tax decreases, have found a copy of the Soviet Communist and KGB textbooks: Western capitalist swines are bleeding our country dry, so they deserve punishment.
I wrote last week that Teodorovici is under huge pressure to find an impossible solution: how to cover pension increases (8.4 billion lei, according to the draft pension law), salary increases for the public sector (about 17 billion lei, according to the unitary wage law) and the new 10-billion Euro fund announced by Dragnea / 10 – billion lei in the Dăncilă version. I guessed there would be a series of new taxes and charges acoming, but I did not expect they would come packaged with a defiance of market rules.
This is how the „greed tax” was born. This idiom perfectly describes the binary thinking characteristic of PSD leadership and the government. They have now become aware of leading the country to bankruptcy, through a combination of widespread wage increases in the state apparatus, pension increases, the invention of new special pensions, unlimited state employment, and the weakening of institutions through politicization. They needed an ideological narrative and tried to copy Viktor Orban’s ultranationalist, anti-Western discourse. The latter himself found inspiration in a Kremlin propaganda manual.
Certainly, banks in Romania, like all banks, are profit maximizers, and are satisfied with lending to the state to the detriment of the private sector. But there are other tools to regulate the state-to-bank relationship, tools that can be used intelligently and without provoking a breach between the population and the banking system. Trust between the state, taxpayers and banks is an essential ingredient in a functioning state. Dragnea and his stooges are trying to destroy it.
To those aware of the promoters of the „greed tax” and other measures imposed as punishment to the private sector, this slogan carries no credibility. Liviu Dragnea was convicted in the upper courts for the 2012 referendum fraud, is convicted in the lower courts for a corruption case and is the moral author of the economic destruction of an entire county. Darius Vâlcov is sentenced in the lower courts to eight years in prison for corruption and left Slatina after two mayoral mandates. And Teodorovici, the man who has spent his entire life as an employee of the state, has not started a business in his entire life, has not led any firm, has not managed any private initiative.
At a societal level, however, the concept invented by Dragnea & co is extremely dangerous. It induces a terrible moral hazard by turning banks into the class enemy that needs to be hunted and punished. This is typical Bolshevik behavior – „who is not with us is against us”. It does not matter this is invented by PSD’s foreign consultants or the PSD leader himself. Society’s reaction is important, however. It must promptly punish these ideological slip-ups, as it did with other abuses committed by the same party.
In short, on Tuesday evening, Finance Minister Eugen Teodorovici announced, a series of radical changes to the Fiscal Code, with major impact on entire industries, just two weeks before they come into force. The most serious changes are:
– Tax on the turnover of banks (disguised as asset tax) that dare to use a higher ROBOR index than is artificially established by the government as acceptable (the average interest rate borrowed between banks and according to which interest on credits in RON is calculated). ROBOR is not an artificially established index, but is establishd according to market demand and supply. In other words, sanctioning (by charging) banks that do not comply with an arbitrarily established index from an office is a clear anti-free market measure
– turnover tax on telecom companies (3%, disguised as a fee paid annually by operators to the market arbitrator, ANCOM, from where the money can be quickly brought to the state coffers)
– turnover tax on companies in the field of electric and thermal energy (3%, masked as a fee paid annually to the arbitrator, ANRE, from where they can be quickly recovered to the state coffers)
– moving money gathered through the “vice tax” for hospital building and finalizing chronic disease control programs to the state budget to cover salary increases and baron sponsored projects
– capping the price of natural gas for producers at the arbitrary threshold of 68 lei / megawatt hour. A brutal intervention in the free market, as Romania has a price below the region’s average. Romgaz (state-owned) and Petrom (controlled by OMV, minority shareholder) will be hard hit.
– Pension Pillar 2 is de facto transformed into an optional one. Contributors can withdraw after five years of contributing. What will follow, I am convinced, is a furious media campaign against Pillar 2, in order to cause massive withdrawals.
Teodorovici did not stop here and announced that the Minister of Finance also works on other taxes. A livid Theodorovici, speaking with a dry mouth, no trace of the irresponsible expansion he has accustomed us with in recent years. A minister who, despite the blatant adherence to the economic irresponsibility of Dragnea and Vâlcov, realizes perfectly that he has crossed several red lines: violation of free market rules, the destruction of dozens of businesses by imposing new taxes (besides the giants of the energy market and telecoms there are hundreds of small businesses that will disappear from the market), the unprecedented gameplay of the private environment.
In the same way as the judiciary, the economy can be throttled by brutal political intervention in its operating mechanisms. Without a solid response from society at large, the PSD will understand that it has a blank cheque for its actions.
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