Romania adopts IMF-backed labour reform

Romania's coalition government adopted a new IMF-backed labour code on Tuesday to spur job creation in its recession-bound economy, and looked set to steer it through a parliamentary confidence vote next week. The changes aim to streamline labour legislation, attract foreign investment and make it easier to sack incompetent staff.
They are opposed by trade unions and the political opposition, which will seek to block them with a no-confidence vote scheduled for next Wednesday. Prime Minister Emil Boc is expected to defeat such a vote and enforce the new code, after surviving four no-confidence motions over austerity reforms backed by the International Monetary Fund last year by successively wider margins.
"We want to make Romania attractive to investors, we want to have a competitive Romania that can offer jobs in a flexible way," Boc told parliament. "This is a code that would help Romania develop through work." Bucharest enforced painful reforms including wage cuts, a pension freeze and thousands of public-sector job losses under a 20 billion euro ($27.83 billion) IMF-led bailout and to meet an ambitious budget gap target of 6.8 percent of GDP in 2010.
Romania's economy contracted more than 7 percent in 2009 and a further 1.3 percent last year. Analysts expect a slow and painful recovery and growth of about 1.1 percent this year. Under the new code, labour contracts would have to contain performance criteria and assessment schemes for workers - in line with requests from foreign investors - which would make it easier for employers to sack incompetent staff.
Existing labour legislation makes it virtually impossible to fire employees on performance grounds. The new code includes tough sanctions against the black labour market by empowering authorities to press criminal charges against those executives who employ more than five workers without a legal contract.
It also scraps immunity of trade union leaders who fail to fulfil performance objectives like any regular worker and shortens a nine-month hiring freeze for those companies that pursue collective staff cuts to 50 days. Romania will sign a new two-year precautionary deal with the IMF and the European Commission worth 5 billion euros, a reassuring signal for foreign markets that reforms and further budget deficit cuts will continue.