Constitutional Court Ruling Blocks Implementation Of Govt Austerity Plan

The Court ruled that article 1 letter c) of the Law providing certain measures concerning pensions and article 9 of the Law providing certain measures necessary to restore budget balance are unconstitutional.

Article 1 letter c) of the Law providing certain measures concerning pensions refers to "the service pensions of judges, prosecutors and Constitutional Court judges or assistant magistrates," which would henceforth be considered special pensions.

Article 9 of the Law providing certain measures necessary to restore budget balance says "from the point this law enters force, the gross amount of pensions and remuneration for caretakers of pensioners with first degree disability shall be reduced by 15%. In determining the gross amount of the pensions and caretakers' remuneration to be provided from the point this law enters force, the pension point used shall be 622.9 lei." (EUR1=RON4.2808).

The Court's decision will be published in the Official Journal, thereby becoming mandatory. The Parliament will then hold its first discussions on the bills, which were previously adopted through a vote of confidence in the Government.

In the process to amend the bills to comply with the Constitutional Court's ruling, the Parliament will not be under time pressure, as the Constitution does not provide a deadline for the reassessment of provisions rejected by this Court. This means debates on the bills will follow the usual legislative procedure, which could take several months. During that time, the head of state may not promulgate the laws and the Government may not apply any measure stipulated in the two bills.

This state of affairs threatens to delay the disbursement of a new installment of the EUR20 billion rescue loan agreed upon last year with the International Monetary Fund and other international institutions.

Consequently, the Government is forced to find other solutions to reduce public expenditure or switch to the so-called "plan B." In fact, people close to the matter have already told MEDIAFAX that the Executive is considering a new plan of action to keep the budget gap around the target 6.8% of GDP stipulated in the agreement with the IMF. The sources said the plan would focus on tax hikes, such as the VAT and flat tax.

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