The socio-economic context requires responsibility from the political class in order to quickly form a new government and maintain a solid majority in Parliament that will support the measures that Romania needs to respond to two major challenges, says the Concordia Employers’ Confederation, representing 20 of the most important sectors in Romanian economy.
Main challenges identified by entrepreneurs:
- Balancing public finances. The current economic reality, characterized by a large budget deficit, the accelerated increase in public debt costs, an economic slowdown and the need to quickly draw up a credible recovery plan must be addressed in a realistic but balanced manner, without falling into the trap of implementing measures that will generate boomerang effects. Budget rebalancing must be done fairly, with a combination of measures that do not slow down economy.
- Restoring trust in the state. The results of the multiple rounds of elections were a strong signal that the population has lost trust in state institutions, wants better public services and a fairer relationship with the state, more transparency and more accountability in relation to public money and assets, and respect for the rule of law. The lack of trust and transparency has deeply fragmented society, the new government must steer policies towards people and communicate transparently with citizens and taxpayers. Romania needs to quickly regain the trust of the international community, whether we are talking about the European Commission, rating agencies or those who buy government bonds.
Although it may seem that the two challenges cannot be addressed at the same time, we believe that there are balanced measures that, although they may not be to the liking of all actors in society, can do so in a realistic manner; especially if they are supported by a solid majority of pro-European political parties.
In the narrow window of opportunity that we have to restore the trust of financiers, the reforms rightly awaited by citizens for more than a decade cannot immediately materialize, but things can be put back on track with a series of measures that send strong signals that Romania has stabilized.
In this direction, Concordia proposes a set of measures that the new government must take shortly after its installation, in order to temper the aforementioned economic and social tensions. Although they are urgent in nature, these measures must also be the result of consultation with social partners, even if at an accelerated pace. There are 4 priority areas that need urgent, short-term reforms from the new government: cutting budget expenditures, fiscal-budgetary balancing, de-bureaucratization, investments.
CUTTING BUDGET EXPENDITURE
A theme that answers both concerns stated above and aims to ensure a balance between the state and the private sector, with measures such as:
- A plan to abolish excessive privileges in public administration.
- Freezing the increase in spending on goods and services at the level of inflation and a realistic assessment of whether Romania can afford all the indexations and increases in public salaries and pensions provided for by law for 2026.
- Elimination of unjustified, irrational expenses and the widespread use of cost standards in parallel with streamlining of the public procurement system, which must be less cumbersome, oriented towards an optimal cost-benefit result and which does not allow manipulation through specific mechanisms or excessive bureaucracy.
- Some staffing standards are needed in local government that can only be exceeded through local taxes (a signal that the community wants and needs a larger administration) and similar standards regarding spending on goods and services to eliminate waste.
- Respect for corporate governance and efficiency in companies with full or majority state capital, including by separating management and regulatory functions. Many state-owned companies do not have optimal economic performance, and their remuneration packages and expenses do not take this reality into account. State-owned companies must be managed according to performance-oriented governance principles. This is entirely realistic and possible because we see certain state-owned companies that have such governance and this is visibly reflected in the activity, results and projects they carry out. We should not rule out the listing of state-owned companies on the stock exchange or even their privatization where there are no national security constraints.
FISCAL-BUDGETARY BALANCING
Romania urgently needs a deficit reduction plan on the trajectory taken on at EU level, a plan that will also restore the trust of financiers.
Postponing clear and honest decisions on both spending and the introduction of new taxes or revenue-raising measures, if budgetary arithmetic and political decision-making make them inevitable, will only increase the level of unpredictability. Companies need to understand what awaits them in the second half of the year and in the future in order to decide on investments that have already been postponed or blocked. In the absence of a balanced budget and predictability to keep the economy afloat, other major reforms that Romania needs, such as those in education and health, will not be eligible for financing.
- The government must urgently present a realistic package of measures to balance the public deficit and reduce it, in order to keep the economy from slowing down, in consultation with legitimate representatives of the private sector.
- Maintaining the flat-rate taxation system, another important asset of Romania, both in relation to citizens (supporting the middle class) and companies (increasing competitiveness).
- Fighting tax evasion as a national security measure. An efficient and fair tax system, in which all taxpayers pay their taxes, contributes to balancing the budget while increasing business confidence in the state and a healthy competitive environment.
- Eliminating over-taxation of part-time work contracts, in order to facilitate a fair settlement of the tax burden in relation to the work performed and to allow access to the market for categories that are currently inactive. Any suspicions of working time violation will be addressed, as is the case with other types of contracts, by the control authorities. Elimination of the Minimum Turnover Tax (IMCA) and other types of taxation that hinder economic growth.
- Using fiscal instruments to ensure a level playing field in several economic sectors: short-term rental accommodation facilities, vehicle taxation.
- Abandoning the cap on energy prices and strengthening schemes for vulnerable consumers, as well as waiving the cap on prices for basic food or margins on basic foodstuffs. These measures create massive distortions in the economy that, ultimately, do not benefit consumers. Permanent state control over the functioning of the market can be neither an economic strategy nor a trade policy, in order to develop or strengthen a competitive economy.
- Implementing tax credit for research and development as a measure to keep Romania economically relevant in the regional and global context.
DE-BUREAUCRATIZATION & SIMPLIFICATION
Such a process, which can be accelerated even with existing resources, serves several objectives, simultaneously contributing to increasing citizens’ satisfaction with the state, facilitating business development and entrepreneurship, and improving state budget collection.
- Creating of a unit dedicated to simplification and de-bureaucratization at Government level, with broad support from Parliament. With a clear timetable and themes, a team of experts must ensure the simplification of processes and interactions in the state-citizen and state-companies relationship, while eliminating additional layers of legislation that fragment the Single Market (gold plating).
- Appointing a deputy prime minister with clear responsibilities to digitize public institutions and to resolve as quickly as possible several major points with significant social and economic impact: identity cards, registrations, marriages and other important life events with which citizens should have a quick and efficient experience in relation to the state. Digitization must accompany simplification and de-bureaucratization, so that we are not put in a position to digitize bureaucracy, while at the same time, it must be seen as a key element of improving the collection of revenues to the state budget, especially by reducing uncollected VAT. Digitization must also support the process of substantiating decisions through big data and benchmarking.
- Simplifying bureaucratic processes for evaluating and accessing European funds – the evaluation of project implementation should be based on the achievement of objectives, not on other bureaucratic considerations. Monitoring the evaluation should not put pressure on beneficiaries and, instead of constant and excessively bureaucratic checks, the model used by the European Commission is preferable: a supervision of approved objectives, corroborated with a very thorough audit for a small percentage of projects.
- Simplifying procedures and eliminating requirements for issuing recurring documents, through a real interconnection between institutions at all levels.
- Limiting repeated tax audits during the statute of limitations period – taxpayers with correct tax behavior should be subject to a limited number of audits, and NAFA resources should be directed towards taxpayers identified as having an increased risk of tax evasion, through risk analysis.
- Adopting objective and transparent criteria for selecting taxpayers for control: NAFA should use clearly defined risk indicators to select taxpayers subject to controls, and explaining these criteria would contribute to reducing the perception of abuse and stimulate voluntary compliance.
- A general, unitary legal framework regarding the conduct of control activity (single law), followed by norms with individualized procedures for each institution that also ensure a clear delimitation of competences and coordination of control activities between the responsible authorities (mixed teams, single plans, proportionality of sanctions).
- Listing by the trade registry of all authorizations required for running each category of commercial activity. Making this information available to the public in an easily accessible, transparent, complete and clear manner.
- Centralizing county-level authorization institutions to a single point of contact, reducing the time for issuing documents and supporting investment development through advice and guidance.
- Ensuring predictability of payments and settlements from the state to the private sector (VAT refunds, sick leave and medication compensation, payments to energy suppliers that finance compensation schemes, etc.).
INVESTMENTS
Accelerating the attraction of European funds available to Romania that would materialize in investments and programs with a multiplier effect.
- Implementing reforms and reaching milestones in the NRRP that blocked access to current financing tranches and repositioning planned investments in order to maximize absorption.
- Unblocking European funds related to the 2021-2027 financial framework, along with their de-bureaucratization mentioned above and expanding the beneficiary base.
- Rapid and massive investments in skills development so that people have access to better jobs and be more productive, through training vouchers, financed from European funds.
- Continuation of infrastructure projects (energy, transport, environment, etc.) in progress and their completion to increase the economic competitiveness of Romanian companies. Scaling up investments financed from the NRRP that can be completed within a deadline, including by reallocating resources from projects that cannot be delivered within a given deadline.
With a contribution of 30% of GDP and over 450,000 employees in 3,900 large and small companies, with Romanian and foreign capital, Concordia is the only organization in Romania member of BusinessEurope, the International Organization of Employers (IOE) and Business at OECD (BIAC).
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