Romania: Fiscal reform reinforces PSD degeneration

For a general strike and a political voice for the working class!


Almost one year ago, the Social Democratic Party (PSD) won the general elections with a comfortable majority, although against the background of the lowest voter turnout since 1989. They only won because they were the only party to put forward, after 25 years of dogmatic neoliberalism, some minimal social measures, such as increasing the minimum wage and the pensions. On the other hand, as we signalled at the time and since, first and foremost PSD serves the interests of domestic capitalists and bureaucratic networks of power at both local and national level. We said at the time that PSD intends to decrease the flat income tax from 16% to only 10%, thus draining the state budget even more and hampering any substantial social policies. However, the gift to the capitalist class proved to be even more generous than anticipated and it came two weeks in the form of a fiscal reform that will render workers in an even more vulnerable position than before. Our CWI supporters group in Romania, Mâna de Lucru, published last week a statement against this reform, which you can read below.

Our group Mâna de Lucru categorically opposes the fiscal reform of the PSD government, particularly the transfer of social contributions (i.e. national insurance contributions) from the employer to the employee (payable from the gross salary starting with 1 January 2018) and the decrease of the flat income tax from 16% to 10%. These measures represent a new attack on the vast majority of workers in Romania and on a state budget that is already severely underfinanced. As shown by this analysis provided by Syndex Romania, there are at least two major problems with this reform.

Firstly, it comes with no mechanism by which the state can guarantee that bosses will increase the gross wages of their workers so that the latter’s net wages remain at the current levels (already too low for most of us). It is highly likely that many companies, particularly SMEs in financial difficulty, will not be able or willing to raise gross wages accordingly, which would lead to a 16.6% decrease in net wages for millions of Romanian workers. The most vulnerable are the over 2 million self-employed workers, who cannot be compensated by an increase in their gross wages anyway, as they do not have wages in the first place.

Secondly, reducing the flat income tax to 10% will mean a 13.7 billion RON (nearly 3 billion euros) loss for the state budget for 2018 only. Moreover, there is no differentiation between types of income: a big multinational corporation will pay the same percentage of its profits as a worker on minimum wage! Given the severe crisis of the public services, the critical state of the infrastructure, the humiliatingly low pensions and social benefits, and the greater than ever need for social housing, the so-called ‘left-wing’ government is taking, therefore, the very opposite measures to the ones required for the vital boost to the state budget.

The only concrete benefits of this fiscal reform for the working class are the increase in the minimum wage to 1163 RON/month (250 euros) and the minimum pension to 640 RON/month (138 euros), but these increases are far from sufficient for the living costs in Romania today. So, like always, PSD makes some small concessions to the more disadvantaged social layers in order to secure their votes. They will keep receiving these votes as long as all the other parties will continue to stigmatise those social layers and fail proposing even the most minimal social agenda in a country where 40% of the population lives on the verge of poverty, which poses the need for a left alternative even more clearly and urgently.

Overall, the government’s fiscal reform only furthers the interests of capital (both domestic and international) to the detriment of labour. It is a reform that confirms once again, for whoever still had any illusions, the complete degeneration of PSD into a right-wing neoliberal party with protectionist ambitions – a party caught in between the interests of the domestic capital that it overwhelmingly represents, those of the international capital, which it does not dare to truly confront (Prime Minister Tudose’s idea earlier this year to introduce a tax on turnover for multinational corporations has been swiftly abandoned following a visit to Brussels), and the needs of the social layers that it claims to represent.

At the same time, we believe that these fiscal measures may lead to an escalation of industrial action. The biggest trade union in the country, CNSLR Frăția, which represents over half a million workers, has already initiated the procedures to organise a general strike against the reform. We fully welcome this initiative that reflects the growing militancy of the Romanian working class in recent period, which has been mostly expressed so far through the wave of spontaneous, wildcat strikes over the last year or so.

Our group appeals to the rest of the trade union movement and of the independent left to endorse the call for a general strike, which would be the first general strike in Romania after 1989. Following unsuccessful negotiations between the leaders of the trade union confederations and the government, the general strike is the only way the latter can be compelled to abandon its aggressive neoliberal measures.

At the same time, the Romanian working class needs its own political representation, its own party to defend its interests. But such a party cannot be build independently from the class itself and its main organisations, the unions. For almost three decades, the three main trade union confederations have found themselves in a more or less explicit complicity with PSD, which has been in government for half of this period and contributed decisively to the pauperisation of the country. Now, the unions need to finally cut all ties with this right-wing neoliberal party and create a new mass workers party, just like the British unions did over a century ago when they established the Labour Party.

We need a party open to all left-wing groups and orientations that are committed to fighting for the interests of the Romanian working class – for living wages and pensions, for well-financed and efficient public services, for social housing, schools and hospitals, for the rights of all marginalised categories, for the protection of the environment, and for a genuinely democratic control of the economy and society.

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November 2017