Council: Cut pensions and salaries by 15%
Serbia must cut pensions and public sector salaries by 15 percent during the budget review, "as these measures are key to a successful fiscal consolidation."Source: Beta, Tanjug
This is what the Fiscal Council - an independent state organ that reports to the Serbian parliament - announced on Thursday.
According to the council, pension and salary cuts will save EUR 800 million, "and this is the only measure that will have full effect as soon as in 2015."
Another option they presented was to instead increase VAT by two percent.
Further, council member Vladimir Vukčević advised an increase of the price of electricity by 15 percent, so that the public power enterprise, EPS, "can start breathing" - that is, "stop making losses that are transferred to the state."
Serbia needs to make spending cuts worth almost EUR 2 billion to reduce the fiscal deficit from current 8.3 percent to 3 percent of GDP by 2017, the Fiscal Council also said.
In a summary delivered to reporters before the news conference at the National Bank of Serbia (NBS), the council said that the 2014 deficit will exceed EUR 2.6 billion or 8.3 percent of GDP, which is above the target, as budget revenues will stand at around RSD 50 billion, and spending could be trimmed by around RSD 30 billion.
With the current state of public finances, Serbia has to take out loans worth around EUR 5 billion every year, so as to finance the deficit and loan installments, and these liabilities are growing year by year, the Council notes.
If launched immediately, structural reforms could ensure spending cuts worth around EUR 700 million on an annual level.
In the summary titled “Key Points and Recommendations for Budget Review and Medium Term Fiscal Adjustment 2015-2017”, the Council notes that there is a danger of public debt crisis, which calls for the urgent implementation of fiscal consolidation.
“The government does not have much choice any more or room for further delay,” reads the summary by the Fiscal Council.