Romania will narrow budget deficit in 2015 without hiking taxes: PM Ponta

Reuters News
Posted: Nov 11, 2014 4:54 PM

BUCHAREST (Reuters) - Romania will narrow its budget deficit next year without hiking taxes, leftist Prime Minister Victor Ponta said late on Tuesday - despite having promised pension and minimum wage increases that analysts say are unsustainable.

Ponta is widely expected to win a presidential election in a Nov. 16 run-off vote against an ethnic German mayor backed by two center-right parties, trumpeting his record of easing austerity and cutting some taxes in his two years in office.

His pledges of pension hikes and other measures have put the spotlight on the 2015 budget and on whether a new government will be tempted to loosen fiscal policy, even though the country has signed up to a European Union fiscal treaty requiring a deficit of no more than 1.4 percent of gross domestic product.

The International Monetary Fund, which has signed three consecutive precautionary aid deals with Romania since 2009, urged Bucharest not to put at risk years of progress in getting its spending under control. Romania looks set to exit its current aid deal next year.

In his first campaign debate with center-right challenger Klaus Iohannis on private channel Realitatea TV, Ponta said Romania cited figures suggesting the government had a budget surplus of 520 million lei ($147 million) for the January-October period. He said it will record a deficit well below the 2.2 percent of GDP agreed with the IMF for the end of December.

"Next year the deficit will be 1.4 percent of GDP … without any kind of tax hikes, whereas this year we will barely reach 2 percent," he said.

Ponta has enforced tax cuts and announced a growing list of spending pledges in the runup to the vote. But he has not spelled out how they would be paid for.

The 2015 budget plan will not be approved until after the vote.

Iohannis said a budget surplus was not to be welcomed as long as badly needed investment in infrastructure was being put on hold and the economy was lagging.

Earlier this month, the European Commission cut its 2014 growth estimate for Romania to 2 percent from 2.8 percent and said the cabinet would have to hike taxes or cut spending next year to offset cuts in employment and special building taxes or risk seeing its budget deficit soar to 2.8 percent.

(Reporting by Luiza Ilie; Editing by Hugh Lawson)