Weekly Fiscal & Political Report (December 1-8, 2023)

Report prepared by Ana-Maria Anghel & Cezar Petrescu

Political Updates

INTERNAL AFFAIRS

A NEW DEPUTY IN THE PARLIAMENT. The Romanian Parliament has a new deputy after Mr. Manole Petre-Florin (PSD) was validated by the Chamber of Deputies, following the resignation of Mrs. Carmen-Ileana Mih?lcescu (appointed consul in Thessaloniki, Greece). Petre Florin Manole, the leader of the PSD District 1 branch (Bucharest), was a candidate for the parliamentary elections from 2020, being until now on the list of substitute deputies. He was also a PSD deputy from Bucharest in the 2016-2020 legislature. According to his CV, Petre Florin Manole graduated from the Faculty of History of the University of Bucharest, and started his career in the private sector, while in 2012, he entered the public administration, being elected a Local Councillor within the Town Hall of District 5. A public activist for human rights, he occupied the position of Personal Advisor for Social Dialogue of the Minister of Labor Mariana Campeanu, during the government led by Victor Ponta (PSD) - a position he held for 3 years, including during the term of social democratic minister Rovana Plumb. Regarding his concerns, as a deputy in the former legislature, Petre-Florin Manole initiated more than 100 legislative proposals, out of which almost half of them became laws. For example, he had initiated the Mountain Law no. 197/2018 and other laws on encouraging investments and economic activities in the mountain area. Other topics of interest for him include the equality between women and men, tackling discrimination, the protection of minors, the rights of the patients and of the disabled persons.

PNL JOINED THE INTERNATIONAL DEMOCRACY UNION. Yesterday, PNL joined the International Democracy Union (IDU), the largest alliance of centre-right parties in the world. As the party states in a press release, the liberals are the only Romanian party in the IDU, thus “proving” that they represent “the main right-wing force in Romania”. Naturally, given it long history, PNL is the first liberal party of Romania and the biggest one so far, and the oldest centre-right party in Europe. An important matter to remember is that IDU members share the same socio-political values (political and individual freedom, equal opportunities, supporting the private environment and respecting the rule of law), as PNL itself states. And here the situation becomes sensible, given that the rule of law in Romania is not as the European Union and the national civil society wishes for it to be. Additionally, PNL claims that it shares all these values, but the support of the private environment becomes unclear given the latest Law no. 296/2023 that brings provisions which greatly complicates the activity of the private economic sector. But from now on, PNL will have to prove that it belongs to IDU, as it will stand along other centre-right wing parties such as the German Christian-Democratic Union, the European People's Party (PPE), the US Republican Party, and the UK’s Conservative Party.

EXTERNAL AFFAIRS

THE SCHENGEN ISSUE – JAI COUNCIL DISCUSSIONS. During the December 4-5 meeting of the JAI Council, the Member States discussed the matter of the Schengen area and its enlargement. More precisely, there is a need to improve the system of returns of rejected asylum applicants, as they decided. Member states also talked on the enlargement of the Schengen area to Bulgaria and Romania, but there was no decision on this issue. Additionally, the European Commissioner for Internal Affairs, Ylva Johansson, expressed her hope that by the end of the year a positive decision will be made regarding the accession of Romania and Bulgaria to the Schengen Area. On this matter, Romanian Minister of Interior, C?t?lin Predoiu, stated that the European Union (EU) must have the courage to take the "correct and just decision" to receive the two countries in the Schengen Area. C?t?lin Predoiu also emphasized the fact that “Romania not only fulfills the Schengen criteria but performs in the field in terms of tackling illegal migration”, as shown in the statistics from the Schengen Barometer and Frontex. Additionally, the Romanian minister urged the Council’s Presidency to identify optimal scenarios for managing the subject in the future, so as to facilitate the adoption of a positive Decision on accession to the Schengen area by the end of this year. Finally, after a message poorly conveyed by the Belgian State Secretary for Migration and Asylum, Nicole de Moor, it now seems that Belgium reconfirmed its support for Romania's accession to the Schengen Area. An important support, given that Belgium will take over the Presidency of the Council from January 1, 2024.

PM MARCEL CIOLACU’S VISIT IN THE US. This week, Prime minister Marcel Ciolacu paid an official visit to the United States of America. During his meeting with the Secretary of Energy of the United States of America, Jennifer Granholm, the Romanian PM emphasized the strategic importance for Romania of the energy security. He also added that the cooperation with the US in this field transformed energy security into “one of the main pillars of our Strategic Partnership”. Additionally, he assured the American officials that the Government from Bucharest “strongly” supports the implementation of ongoing energy projects, both individually and in cooperation with the US. Instead, while talking with the representatives of the leadership of the House Armed Services Committee, PM Marcel Ciolacu emphasized the need of an increased US military presence in Romania, as well as the bilateral opportunities in the field of defence. And finally, Marcel Ciolacu had a meeting with the representatives of Google as well, an occasion on which he offered the discussion partners guarantees that the large companies in the field of information technology that want to expand their business in Eastern Europe will find "excellent opportunities" in Romania. The head of the Executive also showed that Romania wants to identify projects in the field of cybersecurity and to eventually develop them, declaring that Romania has "one of the most advanced legislations in the field of cyber security in Europe". At the same time, the prime minister mentioned that the investment in Romania can represent "a bridgehead" for companies interested in accessing the European market or other regional markets, such as the Republic of Moldova or Ukraine.

Fiscal and Economic Updates

OVERVIEW

PUBLIC POLICY PAPER ON MARKET SURVEILLANCE. The Ministry of Economy has published a public policy paper on market surveillance. According to the paper, the purpose of this public policy proposal is to achieve the strengthening of market surveillance by stepping up compliance checks and promoting closer cross-border cooperation between enforcement authorities, including cooperation with customs authorities. At the same time, the overall objective of this public policy document is to improve the functioning of the internal market by strengthening surveillance of products covered by Union’s harmonization legislation. Thus, it is stipulated that priority will be given by market surveillance authorities to the pursuit of safety, health and protection of consumers and the environment in a market for compliant and safe products introduced through offline and online means, regardless of the country of origin.

REVISION OF EU TAX RULES. European-level efforts to revise EU tax rules are being taken up by EU finance ministers at this week's ECOFIN meeting in Brussels. The main discussion will revolve around the implementation of the Excessive Deficit Procedure, which currently stipulates that when a country exceeds the 3% threshold it is obliged to reduce its deficit by a minimum of 0.5% the following year until it falls below the 3% of GDP threshold. France wants a reduction in this annual percentage from 0.5% to 0.2%, which will apply if a government reforms and invests, according to a four-year plan to be negotiated with the European Commission. Germany, on the other hand, appears unwilling to support such a move, as it knows that the German government has always been an advocate of budgetary discipline. French Finance Minister Bruno Le Maire, however, said the the two countries were 90% in the same boat, suggesting that an agreement on what EU fiscal policy will look like in the future is likely to be reached these days.

ON THE RECOVERY AND RESILIENCE PLAN

THE NEW PENSION LAW. ?The Law no. 360/2023 on the reform of the public pension system was published this week in the Official Gazette. The reform provided by this normative act is in line with Component 8 of the NRRP and aims to regulate a calculation formula based on the number of points achieved by each beneficiary, according to the principle of contribution. At the same time, the standard retirement age for both women and men will be 65 years, the minimum contribution period 15 years, and the full contribution period 35 years. The law will enter into force starting September 1, 2024, excepting the provision stipulating that the persons who reached the retirement age can continue the labour activity until at the age of 70 and the provision stipulating that the pension point will increase from January 1, 2024.