June 3, 2020 / 1:33 PM / a month ago

Romanian lawmakers pass child benefit hike, fiscal pressure on govt grows

BUCHAREST, June 3 (Reuters) - Romanian lawmakers on Wednesday passed a bill that doubles state subsidies for schoolchildren from this month, piling pressure on a minority government already grappling with a rising deficit and economic fallout from the coronavirus epidemic.

The previous leftist Social Democrat government proposed the child benefit hike in December. The current centrist administration decreed it should be postponed until after August, a ruling that lawmakers led by the Social Democrats - now in opposition - rejected on Wednesday.

Finance Minister Florin Citu said the increase, to 300 lei ($69.40) per month per child, would cost the state 6 billion lei ($1.39 billion) per year and accused the Social Democrats of “economic terrorism”.

Even before the pandemic, Romania was struggling with a rising budget deficit, and a 40% pension hike effective Sept. 1, also approved last year by the previous government, has prompted warnings of ratings downgrades.

Prime Minister Ludovic Orban said this week that the pension hike would be less generous.

Bills approved by parliament, which need to be signed into law by the president, can be challenged at the Constitutional Court, and the government could also win time by issuing another decree postponing the hike.

The budget deficit will jump to 6.7% of gross domestic product this year while the economy will contract by 1.9%, the government has estimated.

All three major credit agencies have Romania on their lowest investment grade with negative outlooks. It faces an S&P review on Friday that some analysts have said could feature a downgrade to junk territory. ($1 = 4.3230 lei) (Reporting by Luiza Ilie; editing by John Stonestreet)

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