A cut in CAS (social security contributions) is being considered in the government's letter of intent to the IMF, but will be conditional on the performance of budget revenues, says Mihai Tănăsescu, Romania's representative to the IMF.

"Budget revenues are looking good and Romania has the necessary fiscal space to reduce the social contributions this year. But the problem is what will happen in 2012, when not only will the budget deficit have to be cut to 3% of GDP, but it will have to be calculated based on the European ESA 95 methodology, and will include debts of state-held companies whose financial statements had not been centralized by the end of the Fund mission's visit, and which could produce surprises."

Such being the case, Tănăsescu says a careful analysis is necessary prior to making a decision, with social contributions being a very important segment of budget revenues. "It would be a grave error to decide a reduction of social contributions hastily, and have to take additional fiscal action in 2012 to make sure Romania meets its deficit target, despite the impact of consolidating the financial statements of state-held companies." He adds that in this respect, the government acted hastily when it announced as early as in the first four months of the year the prospect of cutting the social contributions in the second half of 2011.

A cut in CAS (social security contributions) is being considered in the government's letter of intent to the IMF, but will be conditional on the performance of budget revenues, says Mihai Tănăsescu, Romania's representative to the IMF.

"Budget revenues are looking good and Romania has the necessary fiscal space to reduce the social contributions this year. But the problem is what will happen in 2012, when not only will the budget deficit have to be cut to 3% of GDP, but it will have to be calculated