Romania to Shed More Civil Service Jobs

In the battle to further trim public spending, Romania plans to shed up to 300,000 jobs in the public sector by the end of next year, President Traian Basescu said.

“We will continue layoffs in the public sector and reduce the number of state employees from 1.4 million to 1.1 million people,” Basescu announced on Thursday.

Since January 2010, the number of public servants has fallen by 180,000. The moves form parts of a drive to meet the terms of an IMF loan of €20 billion.

The centrist government of Emil Boc began to impose austerity measures under the aid package last July.

As part of the deal aimed at cutting government debt, Bucharest agreed to cut civil service wages by 25 per cent, terminate thousands of state jobs and increase VAT by 5 per cent to 24 per cent.

Some analysts approve of further cuts in public sector but others are deeply critical of the austerity measures, saying they will only plunge Romania into recession.

“Romania has to reduce its overstaffed public sector, but it needs a clear strategy to reinforce the economy and get out of the recession,” economist Ilie Serbanescu said.

“It is not enough to cut costs by reducing staff in public institutions; we also have to offer people the chance to have a job,” he added.

The IMF wants Bucharest to continue its harsh cuts in public spending despite the possible impact of cuts on growth.

The Fund recently cut Romania's growth forecast for next year to around 2.1 per cent of GDP. The country has experienced a very slow economic recovery in 2011 with growth estimated for this year at 1.5 per cent of GDP.

Romania and the IMF have agreed on a deficit target of 4.4 per cent of GDP in 2011 and of around 2.1 per cent of GDP in 2012.