Posted by: mbconsulting | May 22, 2010

How to Reduce the Salaries Unlock the Recovery

Motto: “La guerre, comme la guerre!”

In Romania, there is a real concern regarding the proposed salaries reduction in the public sector.

In fact, this issue started to be taken into consideration only when the urgent need to reduce the public budget deficit was clear.

Why?

Because, all over the world, legislation is clearly stipulating that a public budget FIRST OF ALL, when comes to discuss about expenditures, have to have the necessary resources. If there are not enough incomes then the expenditures are reduced in order to balance the incomes with expenditures.

Pre-recorder status:

The controlling of state budget was forgotten when

  • the numbers of public employees were increased with more than 25% in less than 3 years;
  • pensions were doubled between 2006-2008, and when, at the end of 2008, just before general elections;
  • the wages for teachers were proposed to be increased with 50%  – this measure finally was not implemented;
  • the number of pensioners, without a complete stage of payment was overwhelming the pension fund, without a proper monitoring and controlling measures.

For all of these, the actual Boc’s government has no fault. But,…

First attempt:

In 2009, during the last summer, Mr. Boc, as PM, first tried to implement a new system for salaries paid from the Romanian budget. The implementation of proposed legislation was blocked.

Why?
There was a resistance that was clearly coming from the persons affected by this measure (it is a normal behavior), but the main resistance was coming and also supported by different systems (political forces – opposition and legislative forces). All these forces had seen only with one eye the problem, not with two big eyes, two ears and a mind able to make rational analyses/decision. (By the way, the justice is blind and, in Romania, part of it, seems to be also deaf and without honor and morality!!! – see Voicu case.)

The justice missed the most important point in the public legislation: to have secured financial resource under your budget, if you do not have them, please take act of impossibility to implement the law or our decision as a “Force Majeure”, and post-pone your measure until it will be possible.

The  political oppositions from the Parliament, abused of their power and were  going on with the “theater” of no confidence on Mr. Boc’s government just before the Presidential Elections with three months before the Presidential election, during October December 2009. There was a lack of executive power in a time that needed urgent reforms. The play costed all of us 1,3-1,4 % from GDP as Mr. Soviani from TV Money  Channel evaluated. The suspension of government did not bring any benefits for the political opposition, only wasted hopes with more money spent under their campaign.

Second attempt:

After Presidential Elections from December 2009, the Boc’s government did not act decisively, consistently and coherent for reducing the budget deficit.

The Romanian government did not fully prepared the reorganisation and the restructuring of state structures and did not also prepared for a real evaluation of the staff that would allowed a fair and drastic reduction of the jobs paid from public incomes. For all these hesitations and other back stage arrangements, the government is paying today: it is put under pressure by political forces, by trade unions, even by the other categories of citizens.

Now, because of the sever internal crisis, in an European Market affected by euro crisis, there are not enough financial resources to equilibrated the state budget and therefore it was generally understandable to REALLOCATE and to REDUCE ALL THE COSTS, including the ones with salaries. This issue was not understood or pretend not to be clear by some political and legislation forces from Romania.

What can be done?
Change the name of the public institutions, that means renewal them and quickly re-organised them. This may be done by Governmental Decision, you do not need advice from Economic and Social Council, approval from the Parliament, no protests from trade union because the renewal institution is not yet affiliated to a trade union.

Simply, this strategy was used in 2000 by previous PM, Adrian Nastase, at the beginning of this cabinet when he found that a lot of high ranked positions were occupied by members belonged of the opposition parties. Nastase invented this system and it is working until our days.

So, PM Mr. Boc may do as ex PM Nastase did, that mean that the public institutions would change the name and easily reduced the number of posts and their salaries levels (it is a reorganisation process, establishing a new salary system, hire or displaced staff according with the new structure, not trade union because is a new created entities, no rejections from Supreme Court).

It is fair? I do not know. “La guerre, comme a la guerre!”

Part of the proposed reorganisation was already performed, for example inside the Ministry of Environment and Ministry of Agriculture. Mr. Boc may continue with Ministry of Development, Ministry of Economy, Ministry of Transport, Ministry of Foreign Affairs and Ministry of Interior.

At the last one, Ministry of Interior, is the biggest problem: to many employees, to many people relatives working under the same ministry political incorrect according with European legislations, everybody is connected with somebody from the Ministry. Applying the above mentioned system, it is simply to reduce the structure of Ministry of Interior, BUT DOES Mr. BLAGA WANT DO IT???

The reform in education is performed according with new law prepared and under the new education system  the number of classes for gymnasium is already increased (therefore to assume that teachers will do more hours with the same salaries, but with a higher norms???) and in the same time, the number of high school classes are reduced, so restructuring it was almost done. If it would be also added electronic distance learning systems, the number of the teachers will be substantially reduced. No more need for teachers in the rural area, better education assured by better teachers from the distance, students pleased to use a new system.

In medical system, it may be possible to restructured by outsourcing the accounting and the human resources administration, and therefore the costs would be substantially reduced, trust me.

The structures of the national agencies in the field may be reduced to only eight regional structures, therefore are eliminated the structures at the level of county (at least less 34 structures per each national agency).

The most complicated problem is within the decentralized local administration structure. The decentralize of local administration was performed starting before 2000, but the system was not prepared to evaluate the implications and measures to be taken when there are many local authorities without enough money under their local budget. Even this issue may be sorted:  prepare recommendations for local administration with standard costs, standard organisation structure, standard procedures. On a long run, but quickly be prepared of a hard reform in public administration: reduction of the number of administration units.

If all these are not working, then I agree for SUSPENDING for 6 MONTHS the DEMOCRACY as “FORCE MAJEURE”: lack of financial resources to the public budget, but please be sure that within this period of time, the deficit budget is unbalanced with proposed measures or others. The target: a budget with a reduced budget deficit. UNLOCK the RECOVERY!

Why this dramatic approach?

Because Romania is near by a deficit with two digits, here is the big problem, and it is an urgent need for restructuring its expenditures.

Conclusion:

Maybe taken other measures?

The  IMF opinionated on increasing incomes, but this leads to a great inflation and postpones the restructuring of the state system and its budget.

In 1994-1996, we had high inflation rates  and the effects are well-known. A lot of private companies were out-of the market, especially the ones with credits from the banks. They did not recover, they died for ever.

Do you still remember the debates from that time regarding the “cut of dog tail” when PM was Mr. Stolojan? Do you remember that was recommended a short and quick cut? Romania didn’t do at that time, maybe you learnt something and apply now…

Be carefully what you wish because you will get what you want!

In fact is a hard war and “La guerre, come la guerre!”,

  • no friends,
  • no time to rest

only a battle to win for UNLOCKING the RECOVERY!

Trust on Me, Fight for It and Do not Give Up until the End!

Sincerely,

Mbconsulting@live.com

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