Romania’s lower house of parliament yesterday (5 January) approved tax breaks for pensioners, making good on a government promise to loosen fiscal policy as the economy picks up pace.
Under the measures that will come into force next month, state pensions below 2,000 lei (€443) a month will be free of tax and all pensions will be exempted from a 5.5% health care levy.
Costing an estimated 1.2 billion lei this year, they are part of fiscal reforms on the programme of the Social Democrat party, which won national elections in mid-December and will govern in a powerful leftist coalition with long-time ally ALDE after winning a parliamentary vote of confidence on Wednesday (4 December).
The new Social Democrat Prime Minister Sorin Grindeanu also wants to raise the minimum state pension by 30% to 520 lei (€115), hike welfare spending and scrap several other taxes.
The coalition is also expected to enforce a 16% rise in the minimum wage to 1,450 lei a month (€321) as of 1 February.
The International Monetary Fund expects Romania, a country of 20 million of whom about 5.3 million are pensioners, to have posted economic growth of about 5% last year, which would be the highest in the European Union.
But some economists are concerned the fiscal measures could lead to it breaching the EU’s deficit ceiling of 3% of GDP this year, raising the risk of sanctions from Brussels.
Romania is the second poorest country in the EU after Bulgaria. According to a recent report, almost half of Bulgarians (48%) and more than 40% of Romanians are currently at risk of poverty.