Fiscal Policies Review, June 25 - July 2, 2018
June 28. FinMin held the first consulting session with business representatives over the Fiscal Codes updates. FinMin Teodorovici chaired the session & stated that authorities “are open to any pertinent proposal coming from the business environment.” Contrary to the initial statements (April 2018, June 6, 2018), the FinMin made it clear that the legislative change is just an update to the existing Codes, a “consolidated version” rather than re-written Codes, and that the Gov’t cannot prevent MPs from amending & adding to the Codes. During the discussion, Teodorovici announced that the adoption of GEO 79 was postpone for this autumn, and that this week MPs will operate changes to GEO 25. Following discussions related to BNR’s intention to cap lending, on June 26, BNR Governor Mugur Isărescu offered more insight into the matter. While denying speculations over BNR's alleged plans to put a cap on lending, Isărescu highlighted that the Central Bank is interested in "a healthy lending, balanced on all its components, sustainable, and I cannot stress it enough, sustainable." Over the course of this summer, the Central Bank plans to hold talks with the Romanian Banking Associations and with non-banking authorities “so that lending becomes the engine of sustainable economic growth.” Deficit could reach 3.5-3.6% by the end of the year (Fiscal Council). This week Chamber of Deputies The Committee for budget, July 3, is expected to issue a report for the draft bill on GEO 25/2018 (income tax, VAT and excises); as well as the report on the Draft Bill on offshore exploitation (Joint report with the Committee for Administration). Committee for Industries – report on Access Economy Bill. Senate The Senate’s Plenum, July 3, votes on the legislative proposal regarding the Court of Accounts and the draft bill approving GEO 46/2018 on the National Office on Centralized Procurement. Gov’t Sitting GEO on NEETs (RON 2,250 paid to employers)  In Statements Ionuț Mișa, ANAF president, June 28, “Employer must give up on bonuses and increase gross wages, the social contributions bill will be promulgated”. Ionuț Dumitru, Fiscal Council president, June 29, “The budgetary deficit could reach 3.5% - 3.6% by year-end”. President Klaus Iohannis, June 28, “A Euro-zone budget is not a problem as long as it does not create a new fissure between Euro-zone countries and non-Euro ones”. Mugur Isărescu, June 29, “We had an economic growth which was among the top in the post-crisis period, almost 7%”. Mugur Isărescu, June 29, “The gold kept by BNR into the Bank of England account (…) remains our gold. (…) It did not even cross our minds to gamble our gold at the slots machines, as a character (i.e. Lucian Isar) suggested.” Overview   June 28. Gov’t Sitting, PM Viorica Dăncilă announced that the pension point increases by 10% starting July 1. June 28, the FinMin published the budgetary execution for the first five months of 2018. June 28. Gov’t approves Memorandum on Romania’s economic study. June 29, the Ministry of Economy published the 2017 report on the public companies which fall under the authority of the Ministry. June 25. ANAF published the June 18 – 22 legislative updates. ARRIVED   ANAF put up for debate the Draft Order on social and health contributions, Draft order on sponsorship forms, and the Draft order on income tax for individuals. FinMin put up for debate the Resolution on State Aid and the Draft Bills on the execution of the general budget & social insurance budget for 2017 (June 27); Draft Resolution on Centralized Procurement (June 26). DEPARTURES ANAF Order No. 1612/2018 approving the List of fiscal obligations paid in the single account was published in the Official Gazette. Draft bill on corporate governance was adopted by the Senate. The Chamber of Deputies is the decision making body Draft bill on the 2040 Strategy was adopted by the Senate. The Chamber of Deputies is the decision making body.


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Progress Report on the Priorities of the European Commission, June 20 - 27, 2018
The motion of no confidence initiated by PNL, USR and PMP against the Government led by PM Viorica Dăncilă failed at the vote held on 27th of June with 166 votes in favor and 4 against. A total of 233 votes was necessary for the motion to pass, yet the odds were more than unfavorable. Even PNL President Ludovic Orban maintained some reservations concerning its outcome, despite negotiations having taken place, while UDMR President Kelemen Hunor claimed that there is no chance for the motion to pass, even with the endorsement of national minorities. UDMR decided not to take part in the final vote, but attended the debate. On the day of the motion, a crowd of 4,000 protesters gathered in front of the Parliament building demanding the resignation of PM Dăncilă.


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Fiscal Policies Review - June 18 - 25, 2018
            Following Central Bank’s Macroprudential Committee’s proposal for capping the degree of indebtedness, FinMin opposed the measure and asks for impact studies behind this type of decision. While the FinMin asks for a relaxation of lending conditions, the Central Bank had talks with the banks over capping the indebtedness level, similar to the model Romania had before joining the EU in 2007. Pundit Lucian Isar noted that BNR Governor Mugur Isărescu "is breaking down the economy as he did in 2008" in reference with ongoing rumors about capping the level of indebtedness.  FinMin Teodorovici concluded on June 17 that "BNR does not plan to limit lending". A slightly different approach was presented by BNR’s Adrian Vasilescu on June 25. According to him, the Central Bank does not plan to “cap lending” but to avoid “over-indebtedness.”              A press release issued by the European Commission on June 22, calls on Romania to correct significant budgetary deviations. The EC recommends that Romania take measures to ensure that the nominal growth of net primary government expenditure does not exceed 3.3% in 2018 and 5.1% in 2019, representing an annual structural adjustment of 0.8% of GDP in both years. Deadline set for report on action taken is October 15, 2018.


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Progress Report on the Priorities of the European Commission, June 13 - 20, 2018
On June 20, Minister of Foreign Affairs, Teodor Meleșcanu stated that the report concerning the potential relocation of the Romanian Embassy to Israel from Tel Aviv to Jerusalem is to be finalised in two weeks' time. This comes after the statement of President Klaus Iohannis a day earlier in which he reiterated that even though a report is being conducted on the matter, ultimately the decision does not rest with the Government. He also stressed that "such a decision would automatically invalidate any chance of Romania gaining a seat as a UN Security Council non-permanent member".


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Fiscal Policies Review June 11 - 18, 2018
Following mixed messages regarding the privately administered pensions, on June 13, President Klaus Iohannis argued that a pension system largely administered by the state in a country with a low birthrate in not sustainable. “Any attempt to continue the administration of pensions under the current circumstances is nothing but illusion and sacrifice of future pensioners’ wellbeing”, Iohannis highlighted.             On June 13, PM Viorica Dăncilă stated that the recent data published by the INS is proof that the measures taken by the Government, and the ones they will continue to take, brought more money into Romanians’ pockets. The Prime Minister added that the numbers prove that alarming messages from various critics have no fundament for their claims.             On June 15, PNL Senator Florin Cîțu argued on Facebook that there are certain contradictions between the data published by the Ministry of Finances and the data released by the European Commission regarding the 2017 structural deficit. According to Senator Cîțu, Romanian authorities claim that the deficit was kept within the established threshold, at 2.9%, while the EC puts it at 3.3%. Cîțu added that he will address an official inquiry to the Ministry of Finances to clear the issue.             Central Bank proposes capping the degree of indebtedness. FinMin opposes the measure and asks for impact study.


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