A realistic deadline for forming the new government is two weeks from now, Romania’s president Nicușor Dan said, speaking at a press conference in Vilnius on June 2. A fiscal consolidation plan agreed by the tentative ruling majority would be ready within several days, he added, according to G4media.ro.
Current scenarios for fiscal reform focus on reducing expenditures, with higher tax rates – including a potential VAT hike – retained as a (nearly unavoidable) last-resort measure. The June 5 deadline for the fiscal consolidation plan appears highly ambitious, as the complex structure of public spending makes it challenging to identify and eliminate excessive spending quickly while avoiding legal challenges.
Hiking the VAT rate remains the solution of last resort as long as employers’ associations seem in a position to prevent any increase in corporate taxation.
Separately, all the options are back on the table for the prime minister seat – which marks a shift from the prior baseline assumptions showing interim Liberal (PNL) leader Ilie Bolojan as the leading candidate for the post.
While PNL would accept a prime minister from the Social Democrats (PSD, the largest party by the number of MPs), PSD’s interim president Sorin Grindeanu can hardly be accepted as a valid candidate as it would seriously damage the credibility of the executive (due to his ties with the PSD’s hardliners). Not only does the reformist party Save Romania Union (USR) find it hard to cooperate with an unreformed PSD, but an unreformed PSD would make the ruling coalition vulnerable to isolationist opposition, claiming that no change in the country’s administration took place despite the electorate’s vote.
While a reformed PSD as the senior partner in the next ruling coalition would look like a reasonable and credible solution, able to secure Social Democrats’ support for the ruling coalition, this scenario may be undermined by the lack of reforms within the Social Democratic Party which remains unable to generate a credible prime minister candidate keeping the negotiations in limbo.
President Dan sets a calendar for government formation, striving to restore the country’s financial credibility.
President Nicușor Dan explained that the working group to reduce the deficit began its activity on May 29, and it is hoped that a conclusion agreed upon by the four parties plus the minorities, supposed to form the ruling majority in Parliament, regarding spending cuts, will be presented on June 5 at noon.
The European Commission is expected to decide on whether to cut the funds for Romania on June 4 – but finance minister Tanczos Barna hopes the Commission would give the country “days or weeks” to complete the task.
“In parallel, a political agreement is being discussed to stand behind the government,” and the appointment of the prime minister will be made when “I know that there will be support in parliament. We are not in a situation where we can afford to play games,” the president said.
The Liberal Party (PNL) seems particularly flexible and does not insist on the prime minister seat.
Speaking in Bucharest, interim president of the National Liberal Party Ilie Bolojan, backed by president Dan for the prime minister seat during his electoral campaign and after that, said on June 2 that his party will unconditionally support and will be part of a pro-EU ruling majority.
The unconditional support is a sign of admitting the party’s responsibility in the past government that generated the fiscal slippage, and the decision was supported by “a very large majority” of the party’s National Political Bureau, Bolojan explained according to Agerpres.
However, he insisted that the ruling coalition should first focus on cutting public expenditures and only afterward consider hiking the tax rates.
Bolojan confirmed that PNL would accept a prime minister from the Social Democratic Party (PSD).
The Social Democrats (PSD) appear to be undecided about their future strategy.
The Social Democrats’ interim president, Sorin Grindeanu, announced that the party leaders decided, in the party meeting on June 2 unanimously, that the decision on joining or not the ruling coalition should be made after consultations with all the party’s elected officials – from the level of local councilors and mayors to parliamentarians. Grindeanu had also stated the other day that he wanted a “broad consultation” on entering the government, according to Monitoruldesalaj.ro.
Grindeanu did not set a date by which the PSD should decide on joining the ruling coalition. He said that, before making a decision, PSD needs to discuss programs and projects.
Supposedly, the “programs and projects” regard the public investment projects operated by the local administration with financing from the national budget.
The Hungarian party UDMR and reformist Save Romania Union (USR) have expressed firm willingness to be part of the ruling coalition.
iulian@romania-insider.com
(Photo source: Facebook/Nicusor Dan)
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