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Cablegate: Romania: Trade Unions View the New Romanian

This record is a partial extract of the original cable. The full text of the original cable is not available.

170916Z Mar 05




E.O. 12958: N/A


02900, D) BUCHAREST 00130

1. (SBU) Romania's principal trade union federations are
unanimous in taking the position that the existing labor
code requires enforcement, not amendment. They hold out the
possibility of a general strike if the GOR modifies the code
without their consent. For their part, businesses in
Romania will make a case that amending the labor code will
bring more jobs. End Summary.

Unions' Views Divided Over New Government
2. (U) EconOff in the past weeks has met with Marius Petcu,
CNSLR-Fratia trade union confederation, Liviu Luca, Atlas
Trade Union, Iacob Baciu, Confederation of Democratic Trade
Unions, and Bogdan Hossu, President of Cartel Alfa union
confederation to discuss their opinion of the new right-of-
center coalition Government, which replaced the center left
Social Democratic Party (PSD) Government in December.

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3. (SBU) Marius Petcu, CNSRL-Fratia, complained that the
new government seems uninterested in engaging in dialogue
with its "social partners," claiming lack of consultation
with the unions before the flat 16% income and profit tax
was adopted, while opining the new GOR likewise plans to
modify the labor code without the unions' approval. He
cited the cancellation of the position of Minister Delegate
for Relations with Social Partners within the Labor Ministry
as additional evidence. Bogdan Hossu, President of Cartel
Alfa, agreed "social dialogue" seemed absent from the new
GOR's governing program. However, Hossu appreciated the
fact that PM Tariceanu was the first Prime Minister to
declare publicly that Romania's fiscal policy, public
deficit or pensions are not issues to be imposed on Romania
by the IMF, but represent decisions of the Romanian

4. (SBU) Iacob Baciu, President of the Confederation of
Democratic Trade Unions (CSDR), stated that CSDR is still n
the process of forming an opinion of the government. Baciu
notes the new government has many young faces, who have
neither links to the past nor political debts and are
focused on the future. He is willing to give the new
government time to see whether their deeds match their good
intentions. Atlas Trade Union President Liviu Luca also
took a more moderate position, stating his position is "wait
and see." However, he was adamant about the necessity of
the Government consulting with unions regarding any changes
in the labor code.

President Traian Basescu Draws Mixed Reaction
5. (SBU) Baciu stated that new President Basescu is
Romania's first real President since the revolution. He
views Basescu as direct, pragmatic and willing to tackle
tough problems like corruption. Luca, on the other hand,
reproached Basescu for attempting to play all roles within
the government, including President, Prime Minister and
Parliamentarian. Petcu characterized Basescu as
"different," declaring he should observe the Constitution
and be apolitical, rather than presenting strong views on
everything. Like Luca, he characterized Basescu as a one-
man show. He criticized Basescu for overacting and at times
behaving unprofessionally, presenting a poor image of the
Romanian Presidency to foreign audiences.

Unions Question Flat Tax, Effect on "Gray" Economy
--------------------------------------------- -----
6. (SBU) Stiff union opposition to the flat tax was the
principal reason the former PSD Government shelved the
proposal last year. Petcu reiterated the unions' standard
theme in opposing the flat tax, characterizing it as
inequitable, favoring the wealthy. He claimed that
employees with average and below-average incomes are
disadvantaged by the flat tax. Petcu also is concerned that
the flat tax will result in less money into the state
budget, which could result in the government not having
sufficient funds to cover salary increases negotiated last
year with the previous government for teachers and medical
staff, worrying such raises might be cancelled. Hossu, like
Baciu, is skeptical of the flat tax, characterizing it as a
"higher pressure for the small taxpayer, and a special aid
for big taxpayers." Luca's position on the flat tax was
more moderate, stating that for energy sector employees, who
tend to have higher salaries, it is advantageous, although
still disproportionately benefiting the rich. Nevertheless,
he also questioned whether the budget could sustain it.
7. (SBU) One of the new GOR's purposes in introducing the
flat tax was to "surface" the underground, or gray economy,
in which workers' wages are either underreported or not
reported at all. Luca commented political will is required
to surface the gray economy through tough enforcement
measures. Those who don't pay taxes now aren't going to
change willingly, and Luca doubts the political will to get
tough exists. Hossu reminded that payroll taxes remain high
(49.5% of wages) which means employers will continue to
underreport wages or pay employees "under the table,"
especially in fields such as textiles and construction.

Unions Unanimously Reject Changes to the Labor Code
--------------------------------------------- ------
8. (SBU) Regarding the Labor Code, the union leaders are
concerned the new government will attempt to modify the law
without consulting them. They claim they don't want any new
rights, only to preserve the rights they have now. Hossu
was most adamant, saying that the unions will only seriously
discuss changes to the code when employers are committed to
observing it. Fratia's Petcu and CSDR's Baciu made it clear
that whether the labor code is modified by emergency
ordinance or law, they are likely to take their workers into
the street in a general strike. The union leaders were
emphatic in stating the government is wrong in suggesting
without changes in the labor code foreign investors won't
come to Romania. Instead, the government should be looking
at other measures, such as reduction in the VAT and payroll
taxes. The trade unionists insist that any changes in the
labor code must be negotiated between unions and employers'
associations without government intervention.

AmCham, FIC Should Join Romanian Employers' Associations
--------------------------------------------- -----------
9. (SBU) In a theme we've heard before, the trade unionists
desire foreign employers becoming members of Romanian
Employers' Associations. The reason they want this is that
the unions and these employers' associations negotiate the
National Labor Agreement. Because foreign business
associations such as the American Chamber of Commerce
(AmCham), the Foreign Investors' Council (FIC) and the
British Chamber of Commerce are not members of the
Employers' Associations, the unions cannot bargain directly
with them over the national labor contract.

10. (SBU) Trade unionists agree that holding discussions
only with Romanian employer associations is inadequate, and,
further, is not marked by an atmosphere of equality in the
relationship. They claim that the Romanian employers'
associations as they currently exist are weak, their
practices non-transparent, their leaders are "dinosaurs,"
and that the path to power in these associations is by
paying to get elected. On the other hand, the unions believe
the foreign business associations are in a position to
"clean up" the employers' associations and gradually "push
out" the corrupt Romanian employers. Baciu even opined that
the Romanian employers' associations are the real "enemy" of
foreign investors, not the unions, who instead are their
real social partners.

Hope Fades for Swift Labor Code Modification
11. (U) The Labor Ministry held its first discussions with
employers' associations and trade union confederations in
February. The trade unionists rejected completely any
changes to the labor code and refused further discussions on
the Labor Ministry's proposals. As the unions began
picketing at municipal, prefecture and GOR offices, the
Government retreated into a mediation role, leaving it up to
the employers associations and the trade union
confederations to continue negotiations. The resulting
dialogue has been counterproductive, leading even Labor
Minister Barbu to conclude that Labor Code modification is
unlikely in 2005.

12. (SBU) Romanian trade union leaders are cautious, but
clearly concerned, that a center-right, business-oriented
government has come to power in Romania. In the past, the
unions, with the exception of Fratia (which always has had
an affiliation of the former ruling Social Democrats),
frequently complained the PSD was non-responsive to their
demands. Now they concede the PSD ultimately gave them what
they wanted in the form of the so-called "Red" Labor Code,
which both foreign and domestic businesses have roundly
criticized as creating an overly expensive, inflexible labor
market in Romania.

13. (SBU) Labor unrest in the near future may be on the
rise. The unions are firmly united in their opposition to
amendment of the labor code and thus far have succeeded,
given the weakness of Romanian employer's associations and
the GOR's current retreat from an active role. The unions
have been highly successful in mobilizing their membership
in defense of the code, with over 20,000 trade unionists
turning out for a single day of protests in Arad, Brasov,
Targoviste and other smaller cities. The unions' trump card
of a general strike is a threat to be taken seriously. As
the government is aware, a general strike could paralyze the
country, derail Romania's steady macro-economic progress and
topple the current fragile coalition government.

14. (SBU) Romanian and foreign companies, however, are
planning to mount a counter-campaign to inform the public
about the benefits of a more flexible labor code. They will
argue that more jobs will come to Romania if investors
perceive Romania to be "open for business." An important
signal for this new openness, according to business, has to
be a reformed labor code that allows Romania to take
advantage of its low labor costs more effectively.

14. (U) AmEmbassy Bucharest's reporting telegrams are
available on the Bucharest SIPRNet


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