Bucharest Romanian Parliament

Thursday, July 1st in Romania the sales tax jumped from 19 percent to 24 percent, just 1 percentage point below Sweden, Denmark and Hungary. Determined to curb the country’s budget deficit, the center-right government introduced also new taxes for people who own more than one property.

Until 2008, Romania used to be considered the ‘economic tiger’ in East Europe, but these announcements pushed the leu to a level of 4.35 per euro. Romania get to this position after the Prim Minister Emil Boc fought so much to avoid it, but the Constitutional Court rejected the initial pension cuts plan, deciding that it is unconstitutional.

However Romania will cut over 53,000 public jobs as part of a package of austerity measures in order to receive a new portion of the €20 billion bailout led by the International Monetary Fund. Romania has in 2010 about 5.5 million retirees and only about 4.3 million employees, out of a population of about 21 million. About 31 percent of the employees are public sector workers.

Meanwhile, the not so popular measures incited protests in the country and the opposition considers that Romania’s problems are systemic rather than caused by the global crisis or the taxation level. Its economy contracted by 7.1 percent in 2009 and the IMF board will meet Friday to discuss the loan disbursement.

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