Of course, solutions must be found to reduce the deficit, but they must come after analyzing what caused it to swell to the point where it exploded. Without such a transparent review of fiscal policy management, burdening the economy and the population with increased taxes is unacceptable and will not produce the desired results.

All the debate about a very serious problem, namely the need to cover the permanent deficit of revenues created by the budget, let’s call it elegantly reckless, today revolves around the presidential salary or the accumulation of income from salaries and pensions from the state.

This is a failed formula to mask the real reforms urgently needed by fiscal policy under the super-populist idea that an income of more than 5,000 euros gross (that is, about 3,000 euros net) of the head of state would be something maximal and that, therefore, no worker who receives a salary from the budget , should not exceed this threshold without excessive taxation.

Although the death of the neighbor’s goat is almost always gratifying, an estimate of the impact on deficit reduction would be disappointing

Does this also apply to university professors, doctors or magistrates, and they receive a salary from the state budget, which, due to salary growth and/or the salary law, easily exceeds the so-called threshold?

It has not yet been specified, since, as usual, the share of the savings obtained in this way in the GDP is also unknown. In my opinion, this is because, while the death of the neighbor’s goat is almost always highly gratifying, the estimated impact of reducing the deficit would be staggering, to say the least.

Let’s stop talking about questions related to the constitutionality of differential taxation of state employees and the rest of the world, because then we can throw everything in the trash. But perhaps this is the first step towards a progressive taxation of all incomes for all, although politicians strongly deny this, and €3,000 of the president’s net income will be the maximum monthly amount that can be earned every month without spending tax. All this can be done, and then one can jokingly hope that the presidency will be much more generously rewarded, as it should be, in my opinion.

A return to progressive taxation will not bring timely results

But a return to progressive taxation, even if it were to be applied from tomorrow, which is a legally impossible task, would not give a timely result both for technical reasons, since the entire system with ANAF needs to be reconfigured, and the administration of the expenditure is likely to will seriously exceed the additional income over a long period of time.

We don’t even know what a return to progressive taxation would mean as a percentage of GDP, although some experts are talking about 1 percent or so.. In short, it’s not the time for anything like that. And then we go back to the root causes of the budget crisis, which have much deeper roots than a random loss of income, because what you see is a nasty surprise, inflation is coming down, the price of energy is the same, what do you do talking about that gas level that is below the ceiling , established last year.

In reality, what we are suffering from now is the result of a mixture, not to mention a patchwork of fiscal policies and misaligned revenues that persist for years and cannot be quickly corrected in advance.

The alphabet of any finance minister should draft a balanced budget with a zero deficit

Romania’s budget deficit is chronic for several reasons and will remain so if nothing changes in fiscal policy

First of all, it is necessary to understand at the level of the government, namely the Ministry of Finance, that the limit of 3 percent of GDP in the European rules does not mean that year after year, regardless of the progress of the economy or the assessment of revenue receipts, that is, the initial level.

In fact, a 3% deficit is allowed in exceptional circumstances, in years when the economy needs fiscal stimulus, not in years of rapid economic growth. It is the alphabet of any finance minister that he should project a balanced budget with zero deficit, no uncertain revenue projections and no underestimation of expenditure. That is, something that has not happened in Romania for many years.

Second, the chronic nature of the deficit is not related to the method of setting taxes, which must be confused and possibly changed several times during one year. In Romania, in terms of the share of tax revenues in GDP (), history shows that we have not achieved much, despite frequent changes in tax rules.

The state collects equally poorly with low VAT, with high VAT, with a single rate, and with progressive ones, we also bathed in the region of 27-32 percent. The problem is not in the structure of taxes and fees, but in the administration of the fiscal policy itself. As bitter proof, the correction of the deficit has almost always been done under the coercion of arrangements with the Fund, so the decision has somehow been handed over to someone who can.

Third, to prevent budget deficits once corrected through desperate and painful last-minute measures from spiraling out of control again, the electoral cycle must have as little influence on economic policy decisions as possible.

Because it is unnatural and dangerous that in times of peace and economic growth, with zero or negative interest rates around the world, as has been the case for a decade, for a country to borrow at junk interest rates, increasing budget and current account deficits and public debt when common sense says they should be reduced.

It was obvious from the start that the pseudo-theory of wage growth inflating government spending, applied relentlessly and simultaneously with income tax cuts and dozens of tax exemptions, some of them scandalously inappropriate, would lead to what we see today. government and current account deficits that stimulate each other, explosively growing public debt, inflation. All this is subordinated to short-term political interests. What was drawn from the purchasing power set by law to enable beneficiaries to realize…

Fourth, the law on fiscal responsibility must be reinstated, which, although it is valid, is either ignored by way of retreat or ridiculed in the last resort, even though simple compliance would avoid mistakes. The Fiscal Council must be respected, as it is professional, and its warnings heeded, especially when it signals grossly overstated revenues and understated expenditures.

Last but not least, let us honor ourselves as a country by honoring our commitments made through the PNRR, which provides us with grant or low-cost funding on a scale that we are unlikely to encounter again in our short lifetimes.

N. Red: Daniel Oantsa is a leading expert in the BNR. The opinion expressed above does not bind the institutions with which it is associated.