Romania’s new government may cut 20 percent of jobs in the public sector and hike VAT and other taxes, likely to cause a backlash.
The moves could see 167,000 jobs go and higher value-added tax on basics and the introduction on a new tax on gambling.
Romania’s budget deficit stood at 9.3 percent at the end of 2024, the highest in the European Union. Failure to reduces it would see the country’s credit rating downgraded which would increase borrowing costs.
A four-party coalition led by liberal Prime Minister Ilie Bolojan was sworn in on June 23 after weeks of difficult negotiations prolonging a political crisis which began when Romania canceled presidential elections in December 2024 over alleged Russian meddling.
Civil servants and union workers have protested plans to cut bonuses and other benefits.
The European Commission has called on Romania to reduce its deficit to 2.8 percent of GDP by 2030, which will be discussed next week at a meeting of economy and finance ministers.
The new government has plans to hike the tax on profits and dividends to 16 percent from 10 percent, and to raise the VAT rate on firewood and other energy products to 9 percent from 5 percent.
“We have to convince Romanians, international financiers and the Commission to come together in this effort to avoid a (sovereign rating) downgrade that would trigger a more complicated and more painful situation for Romania,” Finance Minister Alexandru Nazare told reporters.
The European Commission reported that the gap between total potential VAT revenues and what the Romanian tax authorities collected in 2022 was €8.5 billion, less than one-third of the total that could be collected,
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