December 19 (SeeNews) - Romania's Social Democrat government will pass an decree for a profound fiscal overhaul that includes a 'greed tax' for banks, capping gas prices, as well as new rules for private pension funds, finance minister Eugen Teodorovici said.
"I present to you a draft for an emergency decree that will be adopted by the end of the year. The reason? It is the duty of every politician, of every decision-maker to apply measures for protecting the population of the country," Teodorovici said in a televised press conference on Tuesday evening.
The fist measure is a so-called 'greed tax' on bank's assets correlated with the values of the 3-month and 6-month Romanian Interbank Offered Rate (ROBOR).
For a minimum ROBOR rate between 1.5% and 2.0%, the tax will be set at 0.2%, while for a maximum of between 3.0% and 3.5%, the tax can reach 0.9% of the banks' assets. Romanian banks' total net assets increased to 434.6 billion lei ($109 billion/93.5 billion euro) at the end of June from 398.6 billion lei a year earlier.
Another measure stipulates that Romanians will be able to choose to opt out of the mandatory private pension funds after contributing for five years, if they agree to pay a 2% early withdrawal fee. The government also plans to lower fees for the funds' management to 1.0% from 2.5% and to allow them to invest in public-private partnerships.
The second pillar of Romania's pension system, which is operated by the private pension funds, is sustained by contributions of 5.1% of gross wage mandatory for people under 35 years old and optional for people aged between 35 and 45 years.
Net assets under the management of Romanian mandatory private pension funds increased 22% on the year to 47 billion lei ($7.53 billion/6.11 billion euro) in October, data from the financial supervision authority, ASF, shows.
Furthermore, natural gas price will be capped for three years at 68 lei per MWh, from current 77 lei per MWh. "This is a necessary measure as producers sell natural gas at a price three times higher than the production price," Teodorovici argued.
Also, the government aims to create a 10 billion euro ($11.4 million) development and investment fund that will be used to finance projects in healthcare, education and infrastructure.
The announcement by Teodorovici dragged the blue chip index BET down by 7.5% to its lowest level in more than six months on Wednesday morning on the Bucharest Stock Exchange (BVB).
The stock exchange said on Wednesday that it took note of the negative effects of the planned fiscal measures reflected in a major decline of the stock market indices.
"The investors are paying special attention to the actions of policy makers that influence the economic environment and the development of listed companies, a major aspect of the investment process being predictability and legislative stability," the BVB said.in a press release
A Romanian stock broker told SeeNews on Wednesday that losses of the Bucharest bourse could deepen if the measures are enacted.
"At one point the market will reach a balance. If the measures remain the ones announced in this initial project and do not change, there is a good chance that the balance is going to be found below, and the decreases we have witnessed today will continue so that the indicators of the companies will become more attractive," Simion Tihon, equity trader and analyst at Prime Transaction, told SeeNews in an e-mailed statement.
(1 euro=4.6478 lei)