Private Businesses: State Owes Us 2 bln EUR

• Business associations claim the State stopped paying its debts in March

• 7.3% budget deficit target overshot

• UGIR 1903 could challenge State Budget 2010 in Constitutional Court

The State"s debts to private businesses have reached 8 billion RON (some 2 billion EUR), according to an announcement made by Ioan Cezar Coraci, President of the business association UGIR 1903, during a press conference yesterday. He explained that overdue VAT returns amounted to 2.5 billion RON of the total debt, whereas overdue invoices and overdue subsidies accounted for 5.5 billion RON.

But this is not all the bad news for the private businesses in Romania.

Ministry of Labour Secretary of State Mihai Seitan yesterday announced that the budget deficit target of 7.3 per cent would be overshot because the laws designed to cut spending had not been applied on schedule. Moreover, "the Ministry of Finance is currently making calculations for a potential spending cut," to correct imbalances, Seitan said.

Under these circumstances, businesspeople are angered at the prospect of not collecting their receivables from the State this year as the budget is already depleted, even before such payments ought to be made.

The business associations are saying that the State stopped making payments in March, so, in their opinion, the only explanation for the fact that the State"s debts were not paid, but the deficit still increased is bad management.

"The State is ruining us. The State has not made any payment towards its debt to the private sector since 1 March 2009," Ion Cezar Coraci said. He further announced that representatives of the International Monetary Fund (IMF) had met with representatives of the Romanian business associations on Tuesday and told them that the Romanian Government would like to roll-over the debts into 2010. The business associations responded that was unacceptable.

"The consequences on the private sector would be catastrophic," Coraci said, adding that the State"s exorbitant debt to the private sector originated especially in the local budgets. As a matter of fact, the Romanian Government has committed to the IMF not to have any debts to the private sector. The business associations are saying that the Government"s failure to pay its debts to the private sector has caused a financial gridlock and, indirectly, a rise in the unemployment rate.

"The economic crisis has caused the loss of approximately 450,000 jobs. An additional 250,000 jobs have been lost because of poor governance and the State"s failure to pay its debts. I estimate that an additional 100,000 jobs will be lost before the and of the year," said the president of the business association UGIR 1903.

In turn, UGIR 1903 Executive General Manager Mihai Pasculescu commented that, under such circumstances, approximately 40-50,000 companies would go bankrupt in the near future. "Another 40-50,000 companies will go bankrupt by March-April 2010. In my opinion, that will be the peak of the crisis. We might see the famed light at the end of the tunnel in September next year," Pasculescu said.

The UGIR 1903 representatives said they had proposed direct payments as a possible solution to the payment of the State"s overdue debts.

"If the State does not pay its debts to the businesses, it is clear that the businesses cannot pay their debts to the State either," Coraci said, referring to the fiscal authorities" decision to freeze the accounts of bad corporate debtors.

Last but not least, the business community is extremely displeased with the budget projection for 2010. The representatives of UGIR 1903 believe that "the framework data behind the budget projection for 2010 contain contradictions that question the architecture of the draft State Budget 2010."

Coraci believes that the data in question "do not reflect determined measures to reduce public spending and stimulate investment and the economic environment" and that will lead to "an aggravated economic and social crisis and even a budget deficit in excess of 8.5 per cent, not to mention an unemployment surge."

"We are the leaders in economic decline within the EU," Coraci said, stressing that even tax collection had fallen: "Flat tax collections have decreased by 16 per cent, whereas VAT collections have decreased by 20 per cent."

Coraci warned that, should the social stakeholders not be consulted on the draft State Budget 2010, UGIR 1903 would consider challenging it in the Constitutional Court.

"If we are not consulted on the matter of the budget for 2010, we will notify the Constitutional Court and have the draft blocked, because our constitutional right to social dialogue has been violated," the president of UGIR 1903 concluded.