Tensions between Romania’s ruling parties on budget revision as government is running out of resources

The first budget revision of 2019 has aroused tensions between the main ruling parties in Romania, PSD and ALDE, as the government is running out of resources and needs to cut spending. The two members of the governing alliance are not agreeing on the areas where such spending cuts need to be made.

ALDE, the junior ruling party troubled by a severe defeat in this spring’s European elections, announced that it opposed the government’s plan to cut investments and spending in key areas such as infrastructure, education or health.

During a recent ruling coalition meeting, ALDE president Calin Popescu-Tariceanu discussed the draft of the first budget revision in 2019 with PM Viorica Dancila and Finance minister Eugen Teodorovici.

The budget revision was initially scheduled on July 31, but these disagreements have already delayed the key measure in a bad moment for the government, which is showing the first signs of running out of resources.

Romania’s general consolidated budget, which includes fiscal and social budgets of the government, registered a deficit of RON 14.7 billion in the first five months of this year, or 1.4 percent of estimated GDP, which was 80.6 percent higher than the deficit recorded at the same time last year, on the back of soaring public wage spending (+24.6 percent), according to data published by the Finance Ministry.

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The release of the 5-month budget deficit aroused a noisy political debate in Romania as the numbers appear worse than expected and opposition parties seized the opportunity to request the resignation of the Finance minister Eugen Orlando Teodorovici.

Teodorovici refused to resign but the budget numbers seem to worsen every month as the government tries to avoid painful spending cut following a severe defeat of the ruling parties in the European elections.

The Finance Ministry has delayed the release of the mid-year budget deficit scheduled to be published on July 25^th but some experts estimate a fiscal gap close to 2 percent of GDP – a very large deficit if compared to a full-year target of 2.75 percent of GDP.

Teodorovici claims that the budget revision draft will be released this week but he didn’t disclosed any reliable information on the revision numbers.

Pressure from local authorities

The government has another major problem to solve in a complicated electoral year: the requests of local authorities for higher budgets following two years of local budgets cuts decided by the government through various fiscal adjustments.

The general mayor of Bucharest, Gabriela Firea, said that the amount that her administration will receive from the government at the budget revision is limited, but will partly solve the problems of Romania’s Capital city.

Other mayors try to secure some amounts at the budget revision.

“The problem with this revision is the very small amount allocated by the Finance Ministry – RON 1.5 billion for all communes, cities, municipalities and counties. Some of us even think that we have to fight with each other to get something from this amount. The solution is to find a solution between this first sum announced by the Finance Ministry and the real needs (estimated at RON 4.5-5.0 billion)”, according to the deputy executive president of the Romanian Association of Cities, Ionel Chirita.

This year, the local authorities in Romania were severely hit by the 2019 budget bill that transferred to them most social spending without giving them the financial tools to support such a burden.