Bucharest on the brink of bankruptcy as City Hall scrambles to find ways to avoid disruption to public services

Paul Barbu 10/06/2019 | 14:31

The city of Bucharest finds itself on the brink of bankruptcy because of faulty management of financial resources, but also due to the fact that the municipality has more than 45,000 employees – more than any other local institution in Europe.

Now that the city’s financial situation seems to be almost irreversible, mayor Gabriela Firea and the mayors of Bucharest’s six districts are blaming Liviu Dragnea, the former PSD leader, who was jailed two weeks ago in a corruption case.

Dragnea and a few of his close allies, some of whom are still in key positions in the Dancila government while others were ousted after his imprisonment, were the ones who passed the country’s 2019 budget bill with a three-month delay. Mayors have been claiming that the budget bill hit local administrations across the country, as the government decided to make them responsible for some categories of social spending without providing enough resources, while public sector wages also increased. Therefore, many local administrations have been struggling to pay their employees and ensure the continuity of some public services.

The only viable solution not to affect the population would be laying off some of the local administration’s employees, but the seven mayors in Bucharest do not want to take that into consideration. They seem to think raising taxes in order to be able to support this huge public apparatus would be a better solution.

The mayor of Bucharest’s District 3, Robert Negoita, a PSD member and a known opponent of Liviu Dragnea’s, blames the former PSD president for the fact that Bucharest is now on the brink of bankruptcy.

“Liviu Dragnea promised to provide municipalities with bigger budgets, but instead he stole our money for the first three months. One of the objectives of our visit to the government is to get back the money that he stole from us in the first three months of the year. They promised to give us 60 percent of a small income tax. This is an issue that we take very seriously, because there are many mayors who can not pay their bills, let alone do investments,” Negoita said.

The story of “undeclared bankruptcy”

Bucharest mayor Gabriela Firea stated over the weekend that the City Hall was in a state of “undeclared bankruptcy”, along with the district municipalities. Later, Firea demanded RON 1 billion from the government to secure the municipality’s activity.

“I am much more concerned about the fact that both the Bucharest City Hall and the district city halls, as well as many other municipalities in the country, have a much lower budget than what was promised. We are now in an undeclared bankruptcy,” said Firea.

Today, the general mayor says that without the extra money from the government, the City Hall may no longer be able to grant subsidies for public transport or heating, two crucial systems in Bucharest.

Opposition calls out mayor’s incompetence

Caught up in populist measures, ruling party mayors have become increasingly irresponsible in the past two years, raising both their own and their employees’ salaries.

MP Nicusor Dan, who ran against Gabriela Firea in the local election in 2016, says it is absurd for a municipality with a budget of EUR 1 billion to go bankrupt despite the lower amounts allocated by the government, and warned that the total revenues of RON 6.7 billion claimed by the Bucharest City Hall for this year were grossly overestimated and urged the institution to drastically cut its spending in order to stay afloat.

Although he agreed that the government allocation for Bucharest was RON 500 million lower than in 2018, Nicusor Dan also pointed out that the budget that was approved by the General Council also included RON 3 billion more in own revenues compared to the previous year, an amount about ten times larger than the own revenues levels of the past few years. Therefore, he claims this sum did not actually exist and was only included in the budget on paper in order to avoid bankruptcy.

Local councilwoman Ana Ciceala also wrote on Monday that PM Viorica Dancila was planning to pass an emergency ordinance to change the Administrative Code on Tuesday, which allegedly has the purpose of helping local administrations financially, and the Bucharest City Hall in particular.

“For Bucharest, it means 600 million euros directed to bankrupt, illegally established companies, in a city whose current administration is bankrupt. How will Firea get exactly what she wants from the PM? It’s simple: In the new Administrative Code, the two-thirds majority currently required to pass patrimony-related projects will be eliminated. This means that the 20 companies declared illegal by the court could be legalized as early as next week thorugh a new vote in the General Council of Bucharest,” said Ciceala, who notes that the PSD and ALDE parties have enough members in the Council to make up a simple 50 percent +1 majority.

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