Three reasons why the Ciolacu government is taking responsibility in Parliament for the austerity package

Prime Minister Marcel Ciolacu announced on Thursday that the government will take responsibility for the austerity package. It’s a move agreed with PNL chief Nicolae Ciucă, which came to Ciucă’s political aid, and took most liberals by surprise, kept in the dark by the Ciucă-Bode couple. Why did the Ciolacu-Ciucă couple choose this fast track, but with a democratic deficit, to pass their austerity measures, i.e. tax hikes and budget spending cuts?

There are several reasons related to the political game and legislative technique, but the main constraints were time and the need to shut the mouths of the liberals who opposed the various measures agreed by the Ciolacu-Ciucă tandem.

1. The PSD-PNL coalition needs money fast. The budget deficit is forecast to far exceed the assumed target of 4.4% of GDP, with some economists even talking of a deficit of over 6% of GDP this year. In addition, Japanese investment bank Nomura has warned that the currencies of several countries, including Romania, risk facing currency crises in the next 12 months.

But the coalition wants the decisions taken to take effect as soon as possible, with a target date of 1 October. An emergency ordinance solution is not feasible (see below why), and the normal parliamentary debate on draft laws would have taken months, which the government does not have. Any month’s delay in implementing austerity measures increases the danger of economic crisis.

2. Legislative technique prevents adoption by Government Emergency Ordinance. Both the Ministry of Justice and the lawyers of both coalition parties have said that the major changes the government wants to make to the austerity package cannot be made by emergency ordinance. Such a legislative solution would be extremely vulnerable before the Constitutional Court.

A similar warning came, according to G4Media sources, from the European Commission, which said that tax changes of this magnitude must be made by law to be stable.

3. Public image reasons and closing off space for dissident liberals. If the government had sent the bills to Parliament under normal procedure, the debate would have been extremely long and heated, with daily attacks from the opposition and criticism from the independent press stretching over weeks.

In addition, the coalition would also have faced internal challenges, especially from the PNL, where many MPs or county leaders oppose tax increases or the elimination of tax breaks sought by the PSD.

However, by assuming responsibility, which provides for an extremely tight timetable starting on 4 September and possibly ending the same week, the Ciolacu government will virtually eliminate the possibility of „dissent” in the governing coalition and will massively reduce the noise in society.

Ciolacu and Ciucă have calculated that the liberals who have so far opposed the package will be virtually silenced. Note that this is yet another moment in which Ciolacu is helping Ciucă consolidate his position in the party.

The constant discussions in the public space about the fiscal scenarios discussed by the coalition have caused significant image damage to both the PSD and the PNL, and the leaders of the two parties understood that prolonging the debates would accelerate electoral losses.

What will the austerity package contain? For now, there is no final version of the fiscal measures, as the government is waiting for talks with the European Commission to validate both their sustainability and real budgetary impact. In addition, the number of austerity measures will depend on the Commission’s flexibility to the government’s request to exceed the agreed budget deficit. If Brussels agrees to a one percentage point overshoot, to 5.4-5.5% of GDP, then the magnitude of the changes will be smaller. If, on the other hand, Commission officials are firm and accept a deficit of no more than 5% of GDP, then the changes will be much more drastic.

As for the type of austerity measures, Prime Minister Ciolacu gave a hint as to his intentions, saying that „I would like to take a little from us, those with the power to work, and from those who make a lot of money to give to pensioners, who have worked a lifetime, and to those in need”.

It’s a speech of the extreme left, with overtones of class warfare and fierce populism, indicating that the PM is aiming to overtax those who produce and redistribute income.

It remains to be seen whether coalition partner Nicolae Ciucă will, as before, play to the score written by the PSD leader, or try to balance the austerity package with measures to stop the huge budgetary waste. Which waste was made right under the Ciucă government, let’s not forget.