Romania’s Basescu warns IMF he won’t approve new fuel taxes

Romanian President Traian Basescu yesterday warned the visiting IMF delegation he disagrees with the new energy taxes, especially the new fuel excise duty increase, and warned he would not sign any such bill into law, as the political strife on the new taxes between him and prime minister Victor Ponta, his archrival, continues.

“I am looking at the government spending, it is a relaxed budget from this point of view. Due to ineffectiveness in collecting taxes, new ones have been introduced. I consider them a big mistake, especially the taxes in the energy sector and those on fuels (…) the new taxes will affect both the economy, and the people (…) I will not publicly endorse such taxes because I do not think they represent a viable solution,” Basescu told the IMF delegation.

“I will not block the decisions between you and the government, but do not ask me to sign what you negotiate,” he added in a firmer tone. Later in the day, speaking at an economic forum, Basescu said he doesn’t want “useless taxes for useless governmental spending”.

The increase in the fuel excise duty by seven euro cents has pitched the president against prime minister Ponta after the government came up with it late last year amid poor revenue collection. Initially, the government said the tax would be used for the construction of highways, but changed its discourse a short while later. Basescu warned he would not approve the increase and Ponta backed down, abandoning plans to have the hike go into effect on January 1 and postponing it for April.

The issue may turn into a real electoral battlefield ahead of the presidential elections later this year – even though Basescu has served two terms and and cannot run again, he will probably seize the opportunity to use this leverage to attack Ponta at a moment when Romanians are still sensitive about new taxes, only a few years removed from the implementation of severe austerity measures aimed to cut spending in the state administration.

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(Romanian prime minister Victor Ponta, left, and president Traian Basescu in May 2012. Photo: