What the newspapers say: May 28, 2010

The middle class is on the brink of poverty. Elsewhere in the news, savings will be taxed in Romania. Last but not least, Rompetrol will pay a part of its debt to the Romanian state.

The middle class is on the brink of poverty, Adevarul reads, citing Forbes. The Romanian middle class, formed with great difficulty, could now fall to bits. The economic measures taken by the government and the quality of life heading down towards the lower limit of the social pyramid force the middle class to emigrate.

The 15% cut in pensions and 25% slash in salaries will have a great impact on Romania’s middle class. The population’s lower incomes attract a lower consumption and a drop in the activity in the private sector. Economy professor Mircea Cosea believes many SMEs will disappear. Plus, without interior support, small entrepreneurs will find it harder to survive in the European competition.

The child care benefit for mothers is adding to the negative impact. The economy and the middle class in general have grown on credit and consumption and crashed when the two stopped working. Approximately on million jobs were cut in the last two years and the unemployment currently reads 8.4%. The consumption dropped by 8.3% in 2009, after a year of a 6.1% growth.

The cut in salaries is affecting the education, health and administration, which are indispensable sectors in any society. Which leads to another important phenomenon: migration. Those leaving are usually part of Romania’s public sector, usually doctors, teachers and professors. The Romanian Medical Council saw a spectacular increase in the number of requests to validate studies: from 1,410 in 2009 to 4,700 in the last four months. This is 10% of the total number of doctors.

Savings will be taxed in Romania, Romania Libera reads. Any form of saving – from deposits and economy accounts share or foreign exchange transactions will be affected, one way or the other. If the project to modify the Fiscal Code is going to pass through the Parliament, Romanian citizens will have to pay a tax on the interest rates for their current account deposits.

The household banks clients and those who decided to keep their savings on the stock exchange market will be taxed as well. According to official estimates, the measures are bound to bring a 362 million lei plus to the budget by the end of this year and another 740 million lei in 2011. But the main aspect allowing the banks to launch and promote the economy account in Romania was the fact that this product avoided a tax on interest rate, meaning the current accounts were not taxed.

An average 5.5% interest rate for a saving account in lei for somebody who starts with 1,000 lei and then every month, over a year’s time, adds 300 lei, will only bring 80 lei worth of profit after taxes and playing commissions, according to www.conso.ro. The law projects eliminates the facilities granted to individuals who own listed shares.

The 1% tax on transactions with titles owned for over a year is cancelled and the 16% tax on all transaction is introduced. Moreover, on share transactions, the state will retain 10% of the value.

Rompetrol will pay a part of its debt, Evenimentul Zilei informs. the Kazak owners from KazMunai-Gaz (KMG) will come with 108 million euros (450 million lei), which is not even 20% of what the own to the Romanian state, namely 578 million euros (2.4 billion lei). Rompetrol Rafinarie shareholders, where KMG owns 98.61% through The Rompetrol Group, needs to approve on June 30a capital enlargement up to 450 million lei.

Paying up 1.95 billion lei to the Romanian state is enough to guarantee the Kakaks the ownership over the major share package in Rompetrol Rafinarie (Petromidia), according to EVZ. If, on the pay day, the state authorities decide to transform the rest of the debt in shares, they will own 50% of the company’s social capital. The state might become a minor share holder if the scenario is staged.