Romania's government plans to double state pensions by 2022, it said Wednesday, approving a scheme to pump 30 billion euros a year into retirement funding, which economists fear could severely strain public finances.
The nation is one of the European Union's poorest and also has one of the lowest average government pensions payments in the bloc, at 240 euros per month to its 5.2 million retirees, although the system is fraught with inconsistencies that have created inequalities.
Following through on a campaign pledge, the ruling Social Democratic Party (PSD) will have to devote the equivalent of 11 percent of gross domestic product to pensions, compared to 6.7 percent currently.
Prime Minister Viorica Dancila insisted on Wednesday that financing the change "won't be a problem", while the country's labour minister said that the country was banking on generating enough revenue for the measure from rising GDP.
But analysts have cast doubt on the government's projections, especially as Romania already struggles to keep the public deficit below the 3 percent benchmark required by the EU.
"An economy will never run according to the most optimistic scenario on paper", Aurelian Dochia, an economist with the BRD-Groupe Societe Generale bank told AFP.
"Everybody agrees that inequalities must be corrected, but the new proposal is very ambitious and raises serious doubts about the funding", he added.
Romania's economy achieved a record growth rate of 6.9 percent in 2017, boosted by household consumption fuelled by rising wages and tax cuts.
The government projects 5.5 percent growth this year followed by 5.7 percent in 2019.
However, on Tuesday the International Monetary Fund (IMF) revised its forecasts for the eastern European country down from 5.1 to 4 percent for this year and down to 3.4 percent for 2019.
Dumitru Costin, head of the BNS trade union confederation, welcomed the extra purchasing power for pensioners in the government's plans, but added they lacked a "serious analysis of financial viability".
The government's proposals will now go to parliament to be debated and voted on.
Romania’s government plans to double state pensions by 2022, it said Wednesday, approving a scheme to pump 30 billion euros a year into retirement funding, which economists fear could severely strain public finances.
The nation is one of the European Union’s poorest and also has one of the lowest average government pensions payments in the bloc, at 240 euros per month to its 5.2 million retirees, although the system is fraught with inconsistencies that have created inequalities.
Following through on a campaign pledge, the ruling Social Democratic Party (PSD) will have to devote the equivalent of 11 percent of gross domestic product to pensions, compared to 6.7 percent currently.
Prime Minister Viorica Dancila insisted on Wednesday that financing the change “won’t be a problem”, while the country’s labour minister said that the country was banking on generating enough revenue for the measure from rising GDP.
But analysts have cast doubt on the government’s projections, especially as Romania already struggles to keep the public deficit below the 3 percent benchmark required by the EU.
“An economy will never run according to the most optimistic scenario on paper”, Aurelian Dochia, an economist with the BRD-Groupe Societe Generale bank told AFP.
“Everybody agrees that inequalities must be corrected, but the new proposal is very ambitious and raises serious doubts about the funding”, he added.
Romania’s economy achieved a record growth rate of 6.9 percent in 2017, boosted by household consumption fuelled by rising wages and tax cuts.
The government projects 5.5 percent growth this year followed by 5.7 percent in 2019.
However, on Tuesday the International Monetary Fund (IMF) revised its forecasts for the eastern European country down from 5.1 to 4 percent for this year and down to 3.4 percent for 2019.
Dumitru Costin, head of the BNS trade union confederation, welcomed the extra purchasing power for pensioners in the government’s plans, but added they lacked a “serious analysis of financial viability”.
The government’s proposals will now go to parliament to be debated and voted on.
