"Immediate 15 percent cuts of pensions and salaries"

"Immediate 15 percent cuts of pensions and salaries"

BELGRADE -- Unless public sector salaries and pensions are immediately reduced by 15 percent linearly, a new reduction will have to be implemented in the next year.

The Fiscal Council made the warning on Monday, and added that any lower cut would compel the government to make up for the funds through VAT increase.

The Fiscal Council estimated earlier that a cut in the public sector salaries and pensions by 12 percent would entail VAT increase by one percent.

There is no solution that can ensure sufficient savings while avoiding pension and salary cuts for a majority of pensioners and employees in the public sector, the Fiscal Council said in its latest analysis.

Progressive models that would reduce only the salaries and pensions above the average can make room for sufficient savings only in theory, on condition that the cuts for pensions and salaries above the average exceed 50 percent, the analysis states.

The Fiscal Council said that pension and salary cuts cannot be avoided because the total amount of savings achieved in this way adds up to over EUR 800 million.

All other fiscal consolidation measures, such as regulation of public enterprise operations, reduction of gray economy and dismissal of redundant public sector employees, do not provide sufficient savings for crisis avoidance, the Council said.

Cuts in public sector salaries and pensions are an unpopular measure but they are an efficient budget deficit reduction instrument in economic terms, the Council said and noted that during the crisis, all countries which faced a similar fiscal position like the one Serbia is facing now were forced to reduce salaries and...