December 16 (SeeNews) - Romania's president Klaus Iohannis signed into law a bill for a 15% wage hike in education and healthcare sectors on Friday after the Constitutional Court gave the green light to the legislation.
At the beginning of November, the parliament approved the wage hike draft bill proposed by the Social Democrat Party (PSD), but the technocrat government challenged the move in Romania's top court soon afterwards. On Wednesday, the court ruled that the law is constitutional.
The law will enter into force on January 1, 2017, according to an announcement posted on the website of the Romanian president's office.
Including other bonuses that would apply, the wage hikes will cost the government budget 4.9 billion lei ($1.2 billion/ 1.08 billion euro), or 0.6% of GDP, in additional expenditure, according to finance ministry estimates.
Romania's technocrat government has already increased by 10% the wages of public servants in the healthcare and education sectors, in force from August 1. These wage hikes are estimated to cost the budget 3.47 billion lei ($876 million/770 million euro) in 2016 and 2017. Furthermore, in order to eliminate differences in central administration officials' pay, all wages were set at 70% of the level of wages paid as at August 1.
Also, starting May 1, the minimum gross wage in Romania was increased by 19% to 1,250 lei.
ING Bank analysts commented in October that keeping the budget deficit below the 3% of GDP ceiling in 2017 is "still doubtful as things currently stand".
Romania's consolidated budget showed a ten-month deficit equivalent to 0.17% of the projected 2016 GDP. The country targets a consolidated budget gap of 2.95% of GDP on a cash basis in 2016, below the EU 3% ceiling. Romania posted a consolidated budget deficit of 1.47% of GDP in 2015, below the 1.85% limit set in the fiscal strategy for that year.
On December 11, Romania held general elections won by PSD. Next week, the president, PSD and the other five parties that entered parliament will hold consultations on appointing the country's new prime minister.
(1 euro=4.5210 Romanian lei)
ING Bank Romania SRL is among the biggest banks in SEE. You can download our SEE Top 100 ranking
here or subscribe to our free Top 100 newsletter
here