Romania's Constitutional Court Rules Teachers' Wage Hike Legal

The country's Liberal-led minority government of Prime Minister Calin Popescu Tariceanu asked the court to rule on the legality of the hefty wage increase earlier this month, claiming the parliament has disregarded constitutional provisions requiring that a source of funding should be explicitly stated when adopting financial measures.

The Constitutional Court's ruling cannot be appealed but the law must be approved by President Traian Basescu in order to be enacted.

Tariceanu has said the hike is economically unsustainable and may "destroy" what the government has achieved in the last few years in terms of economic growth and living standards.

Finance and Economy Minister Varujan Vosganian has said such a pay increase would mean, among other things, a budget deficit equivalent to 7.0% of gross domestic product (GDP) next year.

The country, which joined the European Union last year, aims for a budget deficit equivalent to 2.3% of GDP this year, down from 2.5% in 2007 and below the Maastricht criteria threshold of 3.0% required for the adoption of the euro.

In July the cabinet, which faces parliamentary elections on November 30, decided to raise the minimum gross monthly wage in the country by 8.0% to 540 lei ($197/143 euro) as of October 1, and to 600 lei as of January 1, under pressure from the trade unions.

Romania’s central bank has repeatedly warned about the inflationary risks deriving from wage increases that outpace the rise in productivity. The central bank in August raised its annual inflation forecast for 2008 to 6.6% from an earlier 6.0%, and for 2009 to 4.2% from a previous 3.5%.

(1 euro = 3.7659 Romanian lei)