Romania Can Raise Public Salaries By 5%, Pensions By 7% Next Year – Fiscal Council

Romania's public sector salary fund can be increased this year by no more than 5%, provided the economy grows 1.5% in 2011 and 3.9% in 2012, while public pensions could be raised by at least 7%, the Parliament-appointed Fiscal Council said Thursday.

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As per Romania's agreement with the International Monetary Fund, personnel expenses may not exceed 7.1% of the GDP in 2012.

Council president Ionut Dumitru explained that the salary fund includes the number of public employees and the average salary, meaning wages may be raised by more than 5% next year, if staff cuts are made.

Pensions must be indexed to the inflation rate plus half the real salary growth. Dumitru said inflation will likely be around 6-7% this year, so public pensions should be raised by at least 7% in 2012, putting pressure on the state budget.

The Council points out that the pension system is in a difficult place financially, as budgetary expenses with pensions are unsustainable given the collected contributions.

"Increasing the number of contributors to the pension system, raising the retirement rate and other reforms are necessary to improve the pension system's sustainability. The new pension law fulfils these requirements, for the most part, but on the short- and medium-term, the system's financial situation will continue to be a major challenge," says the Fiscal Council's yearly report.

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