Romanian government survives challenge

Romania's fledgling coalition government survived a no confidence vote on Monday, paving the way for unpopular tax increases needed to cut the European Union's largest budget deficit.

The government had rushed plans through parliament to raise sales tax, excise duties, and other levies starting from next month in a bid to try and avoid a drop in its credit rating and continue to have access to EU funds.

Romania's Prime Minister Ilie Bolojan heads a coalition of four pro-EU parties that gained power in late June, resolving months of political deadlock that began when a presidential election was canceled in December before being re-run in May.

Coalition members have been cautious to back the tax increases, which face strong opposition from business leaders and labor unions and that have attracted protests from thousands of public sector employees.

Right-wing opponents, who launched Monday's failed confidence vote, have threatened to pursue further challenges to the leadership, reported Reuters.

"I understand the opposition does not agree with the measures proposed by the government," Bolojan told lawmakers.

"What then are the solutions? On the one hand, we are told the problems in the economy are serious, on the other not to take these measures. We can't have both," he said.

Though all coalition members backed the tax plan, the Social Democrats, which is the coalition's biggest party, spoke out against the measures on Monday.

"For solid, continued political support we must quickly correct some of the absurd things from this first package of measures," Social Democrat leader Sorin Grindeanu said.

The Social Democrats wanted to switch from the current flat-rate income tax to a step-by-step tax system instead of hiking sales tax, or VAT, but other parties rejected the idea, and tax officials said they would not be able to enforce such a change.

Bolojan promised earlier this month his government would take all steps necessary to cut the deficit to about 8 percent of GDP by the end of the year, down from 9.3 percent last year, and aim for near 6 percent by 2026.

The opposition said it plans to fight the tax changes in Romania's constitutional court, as permitted by law.

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