I know it’s Christmas and should be focused on entirely different things, but below is a quick note on what’s happening in Bucharest under the cover of the holidays, as the country is preparing to take over the EU Council presidency.
Last week, right as people were starting to switch off and get ready for Christmas, the government announced and passed a set of new taxes through emergency decree.
The decree affects over 40 existing laws and threatens to blow up the entire economy.
It affects telecommunications, energy, banking, and more. The banking system section is actually referred to in the decree as ‘the tax on greed’. Previously, Liviu Dragnea had lashed out viciously at foreign companies in general, and those operating in banking, telecoms, and energy in particular, accusing them of not paying their fair share to the state and cheating “the people.”
As per the AP:
Romania's government on Friday passed an emergency ordinance to levy extra taxes on banks and energy companies, the same day that Austrian Chancellor Sebastian Kurz suggested the measures could lead to foreign companies pulling out of Romania.
Hours after Kurz made his remarks, Finance Minister Eugen Teodorovici announced the government had issued a decree to remedy a fiscal shortfall that risked exceeding the EU's limit of 3 percent of GDP. The measures included new taxes on banks, energy and telecommunication companies and a cap on natural gas prices.
After taking over the government (again) in late 2016, PSD, together with their partners ALDE, announced public sector salary and pension increases. At the time, there were plenty of critics pointing out that Romania’s budget could not sustain these increases without reform measures; there simply was no money to do it. But PSD brushed it off in order to pander to their base.
Fast forward to today, they finally understood the impact of their decision. According to the Constitution, an emergency decree needs to contain a justification for its urgency. This one mentions that, without the new taxes, the budget deficit for 2019 would break the 3% threshold. If Romania’s economy is booming, like the government asserted for the better part of 2 years, why are we all of a sudden faced with the prospect of a deficit over 3% of GDP?
>3% would also put Bucharest in a delicate position: take over the Council presidency while potentially facing criticism or even an infringement procedure from Brussels for breaking the budget rules (see recent case with Italy).
Is this decree a silent admission that they were wrong? Of course not, The Party is never wrong. It’s the foreign bankers and multinational companies that are to blame. PSD has reviewed its options and decided to double down on the anti-foreigner, anti-corporation, populist card: ‘we’re taking from the rich oppressors to give to the poor people’.
Another point I’ve been insisting on in this blog is that PSD has plummeted in opinion polls since the 2016 elections. Add this as a compounding factor affecting their questionable decision-making.
In other words, PSD is desperate. They’re losing support, they have no real friends abroad, and their own economic policies have left a hole in the country’s budget, which they’ve decided to plug in the most heavy-handed, economically inept fashion (in purely Romanian style, there was no impact study conducted prior to Friday’s emergency decree).
I, for one, am looking forward to the PM going to Brussels soon and explaining the need for the decree, the impact of the measures, and the rhetoric or economic nationalism.
Meanwhile, the Romanian Permanent Representation is shooting videos of traditional Christmas dishes. The contrast between the chaos and drama at home and the priorities of the team handling the presidency is as delicious as my mom’s sarmale.
Because it’s Christmas after all, I’m not going to go into too much detail on the decree itself, and instead will go back to eating and drinking and being merry. But if you’d like to read further, below are a couple of suggestions:
Crăciun fericit / Merry Christmas / Joyeux Noël!