Still it is obvious that the reform of the total salary fund must not be

Still it is obvious that the reform of the total

This preview shows page 42 - 44 out of 123 pages.

Still, it is obvious that the reform of the total salary fund must not be eliminated, applying overall reductions with different percentages. As this measure
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MARIA-ANDRADA GEORGESCU 44 was applied, it was equivalent with a regressive tax, the reduction of wages in an undifferentiated manner having perverse effects and not promoting fiscal sustainability. These reductions affect the quality of public services, reduced the quantity and availability of public services, which, in the end, can have as result the continuous erosion of the population’s trust in the government. Such (mass) reductions have only a limited and short-term effect. Usually, in such a situation, the first people leaving the public sector are those with superior training, which leads to a reduction of labor productivity in the budgetary sector. When the public sector will hire again, it will have to allot additional amounts of the professional training of the newcomers. How was this decision reached? Is Romania a particular case? European examples of fiscal crisis management A number of EU countries have taken policy decisions to cut the pay of government and/or public sector employees between 2008 and 2010. It is worth mentioning the fact that half of these countries have reached IMF deals. Greece. In February 2010, the government of Greece adopted a package of cuts in public spending which included a 7% cut in earnings for all public sector jobs, as well as the cancellation of all agreed pay rises. The pay of public employees was further reduced following the agreement in March 2010 by the EC, the IMF, and the European Central Bank on a support package for Greece which included a ‘Memorandum of understanding’ on economic and fiscal policies. This led to a new law in May 2010, which included an 8% cut in earnings of all government employees and a 3% cut in earnings of all workers employed by state- owned companies. Public sector pay is frozen until 2014 3 . Hungary received a support loan from the IMF in October 2008. Part of the agreement was originally that public sector workers would lose their bonus, worth 8% of their pay, and face a pay freeze; the cut in earnings was later restored. However, in June 2010 a newly elected government announced a new package of measures designed to reduce the deficit to the level of 3.8% required by the EU/IMF, which included a 15% cut in the salaries of all 700,000 public sector employees. 4 Ireland. The government confirmed unilateral pay cuts in the budget of December 2009, which specified that from 1st January 2010 basic salaries of public employees would be reduced as follows: 5% on the first €30,000 of salary; 7.5% on the next €40,000 of salary; 10% on the next €50,000 of salary. This 3 Extraordinary measures used to activate European economic support mechanism ; Government adopts extraordinary measures to tackle economic crisis /eiro/2010/03/articles/gr1003029i.htm; 4 Back from the dead IMF pumps out loans and conditionality News|Bretton Woods Project|27 November 2008, ;
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