BUCHAREST: New Romanian taxes targeting banks and energy companies triggered a heavy selloff on the local stock market on Wednesday that dropped more than 10 percent as worried investors headed for the exits.
Faced with difficult choices to keep the budget deficit below three percent of gross domestic product (GDP), the leftist government late Tuesday announced a series of tax amendments that are to kick in quickly, without prior consultations with businesses.
Romania is one of the fastest growing economies in the European Union but moves this year to raise public sector wages and pensions combined with tax cuts have depleted its coffers.
Key measures to replenish public finances include a progressive tax on banking assets indexed on interest rates that is to add up to 800 million euros ($914 million) to the state’s coffers per year.
Energy and telecommunications companies will have to pay a three-percent tax on turnover, while contributions to private pension funds will become optional, a move to channel more savings to state funds.
The announcement sent shockwaves across the Bucharest stock exchange (BVB) where shares in the country’s two biggest banks, Banca Transilvania and BRD Groupe Societe Generale, fell by 18 percent and 16 percent, respectively.
Oil major OMV Petrom dropped 12 percent.
Local media immediately dubbed the stock exchange meltdown “Black Wednesday”, while the stock exchange said it was “worried” by the new taxes which it said threatened the development of a domestic capital market.
The impact was also felt on the Vienna stock exchange where banking stocks tumbled, including Erste Group and Raiffeisen International.
“This project is plunging Romania into chaos,” said centre-right leader Klaus Iohannis, calling on the government to drop the reforms.
The reforms, he said, would likely stoke inflation further at a time when consumer prices were rising at the fastest pace in five years.
Romania’s chamber of commerce and investor association CDR accused the government of bad timing, and said its plans risked “destabilising the economy”.—AFP