RRI's The Week in Review

Fiscal relaxation measures in the new Fiscal Code
Romanian MPs on Wednesday adopted the new Fiscal and Fiscal Procedure Codes, which are to come into force on January 1, 2016. Among the provisions of the new codes is also the VAT cut from 24 to 19% as of next year, the elimination of the tax on special constructions as well as the excise duty on fuel. The IMF and the European Commission have warned on the risks associated with the introduction of these fiscal relaxation measures. The measures will also trigger a temporary budget deficit growth, although no higher than 3% of the GDP, Finance Minister Eugen Teodorovici has said. After sitting down with European experts in Bucharest, Minister Teodorovici said the authorities failed to reach an agreement with European Commission representatives on the new Fiscal Code.

Romania’s new election law 
The deputies passed a new parliamentary election law which reintroduces the proportional representation system, maintains the 5% election threshold and establishes the rules for the allocation of seats depending on the number of voters. In 2016, Parliament will have 134 senators and 308 deputies as well as 18 representatives of ethnic minorities with the exception of the Hungarian minority and 6 MPs representing the Romanian communities abroad.

The National Defense Strategy
Romania’s Parliament on Tuesday adopted the National Defense Strategy for 2015-2019, previously introduced by president Klaus Iohannis. The president says the strategy is aimed at safeguarding the fundamental rights, liberties and safety of the citizens, in such fields as economy, education, health care or the environment. Also on Tuesday, parliament adopted the setup of two NATO structures in Bucharest – the NATO Force Integration Unit and the NATO Multinational Divisional Command.

Romania to host US heavy weaponry
Romania is on a list of Baltic and Central-European states where the United States will pre-position 250 tanks, Bradley fighting vehicles, self-propelled howitzers and armored combat gear. The US State Department says the measure is aimed at supporting training exercises carried out by military units rotating on NATO’s eastern flank. Some 1,000 military from 25 NATO countries have taken part in an over-arching NATO collective defense exercise in Cincu Range in Brasov County.

The case of Prime Minister Victor Ponta
The European Parliament’s Committee on Civil Liberties, Justice and Home Affairs on Thursday discussed the case of Romania’s Social Democrat prime minister Victor Ponta, following a Parliament vote in Bucharest to reject a request by the National Anticorruption Directorate to strip him of his parliamentary immunity. At the moment, the prime minister is recovering from a knee surgery, with deputy prime minister Gabriel Oprea acting as the temporary head of government.

President Klaus Iohannis attends the summer meeting of the European Council
After intense talks on urgent community matters, EU leaders agreed to relocate 40,000 immigrants from Greece and Italy to other EU countries over the next two years, with home affairs ministers expected to draw up a final scheme by the end of July. A further 20,000 people will be resettled. This is one of the decisions taken at the summer meeting of the European Council, where Romania was represented by its president Klaus Iohannis.

Mihai Razvan Ungureanu, set to return as head of Foreign Intelligence Service
Before flying to Brussels, he appointed Mihai Razvan Ungureanu as the head of the Foreign Intelligence Service. Ungureanu chaired the service before, between 2007 and 2012, and also served as foreign minister between 2004 and 2007 and as a prime minister in the first half of 2012. His nomination needs the Parliament's approval.

See more on RRI. 

"No Agreement Between Romania and European Comission" on the Fiscal Code

The European Commission and Romanian authorities have failed to reach an agreement on the Fiscal Code, but it would make a decision at the upcoming meeting of the EU’s Finance Ministers of July 14, regarding the status of the financial agreement with Romania, reports RRI. 

Additionally, the IMF will cancel its assessment mission to Romania for next month, given that the Commission will already have presented its conclusions, Finance Minister Eugen Teodorovici announced on Thursday on public radio RRA.

According to the Romanian official, the European Commission is concerned regarding the impact of the new fiscal code on the budget as of next year. The new Fiscal and Fiscal Procedure Codes are to come into effect on January 1, 2016.

Among the main provisions is the VAT cut from 24 to 19%, slashing the tax on special constructions as well as the excise duty on fuel.

Additionally the authorities want to eliminate the 16% tax on dividends.

Minister Teodorovici said that Romania stands by its financial commitments, especially regarding structural reforms.

The VAT Rate Cut From 24% to 19%, "Starting January 1, 2016"

The Budget Commission within Romania’s Chamber of Deputies unanimously approved on June 22 the new Fiscal Code, which includes the VAT rate cut from 24% to 19% starting January 1, 2016.

Finance Minister Eugen Teodorovici said that analyses show that such a measure will have good effects in the economy, reports local romania-insider.com.

Already the opposition said it is favorable to the new VAT rate, "unless the budget income do not allow".

Prime Minister Victor Ponta announced on June 21 on his Facebook page that the Government will support the general VAT rate cut from 24% to 19%, and not to 20% like previously announced. He said the cut should be applied before January 1, 2016.

Health Minister Nicolae Banicioiu and Finance Minister Eugen Teodorovici visited Mr. Ponta in Turkey, where the Prime Minister went for a knee operation.

They discussed the VAT cut and the drug price reduction, Victor Ponta said.