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Romanian Government Approves Plan To Double State Pensions

Romanian Prime Minister Mihai Tudose leaves a meeting of the ruling Social Democratic Party in Bucharest.

Romania's government has approved a plan to more than double state pensions over the next four years for the country's 5.2 million retirees, a move welcomed by labor groups but which critics say will put a heavy strain on public finances.

Under the plan approved on October 10, pension-related spending would rise steeply to 142 billion lei ($35 billion) by 2022, from about 62 billion lei this year.

The aim of the overhaul is to eliminate discrepancies that have built up between various beneficiaries of the state pension system.

The average state pension in Romania is among the lowest in Europe, at about 1,100 lei ($272) a month.

Labor Minister Olguta Vasilescu told reporters in Budapest that under the plan, after 2022 all state pensions would increase with inflation plus 50 percent of the real growth in average wages.

The Social Democrat government has a comfortable majority in parliament, where the pension plan goes next for debate and approval.

"We won't enforce any cuts in exchange, nor introduce new taxes to support this plan," Vasilescu said, asserting that brisk economic growth will suffice to raise the social-security revenues needed to finance the plan.

Romania's economy achieved a record growth rate of 6.9 percent in 2017, driven by household spending that was fueled by rising wages and tax cuts.

The government projects 5.5 percent growth this year, followed by 5.7 percent in 2019.

But economists said those projections may be optimistic. On October 9, the International Monetary Fund revised its forecast for Romanian growth down to 4 percent from 5.1 percent this year, and down to 3.4 percent in 2019.

The government is targeting a consolidated budget deficit of just under 3 percent of economic output -- the European Union's ceiling -- this year.

Based on reporting by AFP and Reuters