Romania's government approved a plan to invest more than 10 billion euros ($12.6 billion) in the economy over the next four years to stimulate growth and create jobs, Bloomberg reported on Nov 19. The Romanian government will suspend a tax on new cars to protect jobs in the auto industry, which has been hit by the world economic crisis.

The package includes incentives to companies to hire unemployed people, boost loans to small business, and cut taxes for reinvested dividends and companies that pay taxes on time, Prime Minister Calin Popescu Tariceanu told a news conference in Bucharest today.

"These measures are meant to protect jobs or we risk facing a very difficult social situation,'' Tariceanu said after a Cabinet meeting. "There are risks of rising unemployment and layoffs. I want this plan to make Romania's economy less vulnerable.''

The global financial crisis is lowering international demand for Romanian products and some companies, including carmaker Dacia SA, Kraft Romania SA and chemicals maker Oltchim SA, have announced production cuts and layoffs. Unemployment rose to 4 percent in October from a 16-year low of 3.7 percent in July.

He said the government will have to cut spending next year in non-investment areas to keep the deficit "within macroeconomic parameters that won't deteriorate the economy.'' The government has said it targets a budget deficit of 2 percent of GDP next year, from a deficit of more than 2.4 percent of GDP this year.

Cutbacks

"I won't hide this from you,'' he said. "Part of spending will have to be cut back, but not in investment.''

Romania's economy grew an annual 9.3 percent in the second quarter on a consumption and lending boom, although the government has predicted growth will slow to about 4.5 percent next year.

The government faces general elections on Nov. 30 and a new government is to be formed by Jan. 1, with the power to change the economic stimulus package.

The stimulus package, to take effect in January, would exempt reinvest dividends from a 16 percent tax, give companies a bonus of 1,000 euros for each person they hire who has been unemployed for more than three months and grant 500 million euros in investments and aid for farmers, the government said.

It will also allocate 3 billion euros for job-creating investments, lower social insurance payments to the state and create a 250 million-euro line of financing for medium and small businesses through a cash injection into state-owned lender CEC Bank.

Investment Aid

The government will grant aid of as much as 50 million euros to companies planning to invest more than 100 million euros and create at least 500 jobs, according to the plan. Investments of less than 100 million euros that generate at least 300 jobs stand to receive aid of as much as 28 million euros.

It will also give companies a 5 percent reduction in their tax billion in exchange for paying taxes on time and exempt new car sales for a year from a "pollution tax'' that ranges from 150 euros to 700 euros per car.

The Romanian government will suspend a tax on new cars to protect jobs in the auto industry, which has been hit by the world economic crisis, Prime Minister Calin Popescu Tariceanu said Wednesday, AP reported yesterday.

Tariceanu said the government will ask the European Commission to allow the measure, which he wants to run until the end of 2009.

He made his announcement after meeting President Traian Basescu, who also said he wants to scrap the tax to protect jobs.

Dacia said last week it would halt production from Nov. 20 to Dec. 7 because of the financial crisis which has led to a 30 percent drop in cars sales in October compared to a year ago. Dacia's 14,400 workers will get 85 percent of their salaries during the production halt.

On Monday, Basescu visited Dacia and said he would support the suspension of the tax.

Dacia said its market shrank also because of "the invasion of imported secondhand cars" and warned that jobs in the car industry are in danger.

Wednesday, Subansamble Auto, a company that supplies parts to Dacia said it would send home 800 of its 3,500 workers.