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18 - 24 June 2017


The competition to digitize supply

The country’s main electricity suppliers are starting to install tens of thousands of smart meters in households across the country, paving the way for differentiated pricing mechanisms and an easier transition of consumers from one supplier to another.

Electrica Furnizare has kicked off a digitization process, firstly by expanding its payment infrastructure through partnerships with retailers and by boosting its online operations. The company has also launched a mobile app which helps households to track their consumption in real time and make payments faster.

Engie Romania has implemented applications through which it can track bills and consumption online, on clients’ smartphones, and even give instructions to their heating and air conditioning units through smart thermostats and smart cooling devices.

Enel has announced it will have 300,000 smart meters installed for its clients, of which 150,000 to be rolled out this year.

E.ON aims to install 20,000 smart meters this year, and another 350,000 in the 2018-2020 period. By 2020, the company wants to have 600,000 such meters in its network.


Gov’t sets CAS and CASS for part-time employees at the minimum wage level

The government has passed last week a decision that pegs the social security contribution (CAS) and the healthcare contribution (CASS) for part-time contracts to the country’s minimum wage (1,450 lei). Students, schoolchildren, and pensioners will be excepted; in their case, the contributions for part-time contracts would stay the same. The new regulations are to come into force as of August 1, 2017. Statistics reveal there are between 1,1 and 1,2 million part-time contracts, of which 370,000 are part-time active employees on a single part-time contract and about 710,000 insured people on part-time work contracts with an average gross income of 903 lei/month.


How it will work

An enterprise has an employer with a part-time contract and a gross monthly wage of 800 lei. By July 31st, the social contribution due to employer have been calculated related to this wage:

-    CAS = 800 lei x 15,8% = 126 lei;

-    CASS = 800 lei x 5,2% = 42 lei;

-    Contribution for unemployment = 800 lei x 0,5% = 4 lei;

-    Contribution for holiday = 800 lei x 0,85% = 7 lei;

-    Debt guarantee fund contribution = 800 lei x 0,25% = 2 lei;

-    Contribution fund for work accidents (CAEN 6920) = 800 lei x 0,15% = 1 lei.

Total contributions due by the employer = 182 lei

As of August 2017, contributions due to employer will be calculated as following:

-    CAS = 1.450 lei x 15,8% = 229 lei;

-    CASS = 1.450 lei x 5,2% = 75 lei;

-    Contribution for unemployment = 800 lei x 0,5% = 4 lei;

-    Contribution for holiday = 800 lei x 0,85% = 7 lei;

-    Debt guarantee fund contribution = 800 lei x 0,25% = 2 lei;

-    Contribution fund for work accidents (CAEN 6920) = 800 lei x 0,15% = 1 lei.

Total contributions due by the employer = 318 lei, increasing by 75%.

Romania ranks second in Europe in terms of the Q1 budgetary deficit

While in the European Union and the eurozone the government deficit fell by 0.2% in the first quarter compared to the last quarter of 2016, in Romania the government deficit recorded the highest increase among Member States –up 1.3%, from 1.8% in the fourth quarter of 2016 to 3.1% of GDP in the first quarter of this year. According to Eurostat, the deficit was three times higher than the EU average (1% of GDP) in Q1.


This figure reflects the state of affairs before the Unitary Pay Bill entering into force and before any budgetary investments being made. The Gov’t will have to make fiscal provisions to stop the downward trend of the government deficit. Under internal and international pressure, the Gov’t backed down from implementing the turnover tax, but another two fiscal measures are still on the table: pegging the social and health care contributions for part-time contracts to the minimum wage and the additional taxation of the profits obtained from the extraction of natural and unprocessed resources in Romania by at least 20% (the new royalties law to be adopted by December 2017). The National Bank of Romania (BNR) board recently remarked that in the absence of compensatory measures, keeping the budget deficit below 3% of GDP would pose greater problems in 2018. We remind here that the International Monetary Fund (IMF) warned in May that Romania’s budget deficit is expected to grow to 3.7% of GDP this year and to 3.9% of GDP in 2018 in the absence of additional fiscal measures.

Gheorghe Piperea replaces Orlando Teodorovici as honorary adviser to PM on taxation

Gheorghe Piperea is an attorney who earned fame as the lead litigator in labor class action suits against several banks, which he accused of imposing unfair contractual clauses on their clients. At the same time, Mr. Piperea is known for his critical statements against multinational companies. On February 2017, he posted a harsh message against multinational companies, thus lending PSD a helping hand during the huge public protests against GEO no. 13. PSD had said at the time that foreign investors had forced their employees to take to the streets. “Economically speaking, 82% of GDP is generated by multinational companies… These companies don’t event compete with each other, because, as in Communist China, they divided their economic areas of operation so as not to interfere with each other. Let’s see how the electricity and gas supply market, the cement industry, or the oligopolistic banking sector are split among competitors. This market splitting is predatory… Between 2009 and 2016 Romania pushed more than 250,000 domestic-owned companies into bankruptcy. In the same period, Romania bankrupted over 1 million people, or one out of five Romanian employees. In 2015, multinational companies reported a turnover of 250 billion lei. Nevertheless, the profit tax they paid in the same fiscal year was only 3 billion lei. How is that possible?”

Mr. Teodorovici has been fired after he had slammed several Gov’t controversial measures, like the building of a football stadium in Alexandria, Teleorman county (the fief of PSD leader Dragnea), and after he had spoken of potentially taxing the Church’s income. About the budget deficit, the former honorary adviser used to joke that it is an “internal issue of PSD”. “Should PSD decree a government deficit of 3%, it will be so despite the reality of 5% of GDP.”


A new political project for the Social-Democrats

Catalin Ivan (PSD), a member of the European Parliament, announced last week a new political project that envisages the internal restructuring of PSD. Ivan is known for his strong criticism of PSD chairman Liviu Dragnea for the dictatorial way the latter is leading the party. “We are working on a political draft document. I believe one is not entitled to criticize without submitting a solution. We have criticized Liviu Dragnea for his authoritarian to dictatorial leadership of the party, for his lack of vision and lately of direction as well. Very soon we will publicly present our political project to our Social-Democrat colleagues. We will thus be able to determine how many of our proposals are good and how many bad. It is important to have an internal debate – not about how to strengthen the power of one person within the party, not about how to defend some people in order to avoid being prosecuted or how to help them get richer by using public money – but about how a left-wing party that is modern, clean, European, and credible, should look like.”


The public statement of Catalin Ivan received a very quick reply from MP Ecaterina Andronescu, a former Minister of Education, who has great political experience and is very close to Liviu Dragnea. “I would urge to wisdom the people who are thinking of some political project… The priority of PSD is to fulfill its commitments, not to dress the wounds of discontented members.”

It is very clear that in PSD there is a critical number of discontented members who want to keep their distance from Dragnea. Not all PSD members agree with missteps like the amendments to the Criminal Codes, allowing convicted people to become ministers, with the fiscal measures announced or the implementation of the unitary pay bill. There are some young Social-Democrats who want to make a stand for leftist policies in accordance with good practices. In addition, no less than 53 mayors in Timis County are threatening to leave the party if Sorin Grindeanu is expelled from PSD. The turmoil within the Social-Democratic Party is steadily growing.

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