Moldova-Styled Austerity: Who Gets the Short End?

Behind the pledges of wage hikes and streamlined governance lurk considerably less appealing details. What the government is putting forward could become the most significant revision of the pay and benefits system for civil servants and the security forces in recent memory, substantially reconfiguring the long-established balance of social protections

Under the hackneyed slogan of European integration and yet another acknowledgment of hopelessly outdated operating principles, not only will bonuses for public sector employees be cut, but so will special pensions for law enforcement agencies. Against the backdrop of heated debates unfolding in society and among experts over the proposed new fiscal policy, which calls for the abolition of special VAT rates, a number of other areas of government regulation are emerging that are set to undergo “revolutionary” changes. These include reform of the public sector’s compensation system and pension reform for law enforcement personnel and civil servants with special status. In the first case, the Ministry of Finance is the initiator and the main agency involved. As usual, only positive messages are being released to the public. The main one is that, starting September 1, 2026, most public sector employees, there are approximately 170,000 in the country, will receive a pay raise ranging from 10% to 30%. It sounds as if public sector employees are being promised the fulfillment of an unmet commitment to index their salaries, they did not receive this year. In reality, the so-called “reform” amounts to a change in the tax bracket structure and a reduction in the number of base rates to four by 2032, followed by the introduction of a single rate. Officials claim that no one will be harmed by the implementation of the new system; however, given current economic realities and institutional logic, this is debatable. The Ministry of Finance views the excessive number of different base rates as the key problem. If the coefficients at the upper levels of the pay scale are reduced while the base amount is increased, this could indeed lead to higher salaries for many workers in the healthcare and education sectors. However, for highly paid categories of public sector employees, including those in the judiciary, the situation is different. Specific allowances and performance-based bonuses will be eliminated. Funding for these items will be significantly cut. It’s a sort of “compression of the pay scale”. Figuratively speaking, the base salary will increase, but because of the reduction in allowances, specialists from “relevant” agencies will take a hit. Obviously, this won’t happen immediately, but their leadership will have fewer opportunities to provide financial incentives to their subordinates. Furthermore, final pay rates for specific professionals can only be determined within the framework of the state budget law, the details of which are not yet fully clear. This is precisely why the Superior Council of Prosecutors and the Superior Council of Magistracy have voiced criticism of the proposed changes to the compensation system, as they see serious risks to the status, income, and independence of justice system employees. Inadequate pay will reduce the attractiveness of the profession and lead to a brain drain from a system that relies heavily on a system of bonuses. Prosecutors, judges, and law enforcement officials are doubly dissatisfied that plans are in place to simultaneously strip them of their existing historical privileges, both in terms of salary determination and pension payments. Moreover, the so-called “pension reform” affecting law enforcement officials is even more telling. The proposed changes include: raising the retirement age (ending the practice of retiring at 40), increasing the required length of service (the minimum service period will rise from 12.5 to 20 years), calculating pensions based on five years of service instead of one, and capping the maximum pension amount. It’s fair to say that the Ministry of Finance has identified a “gold mine”; from a budgetary perspective, cutting back on this will be a highly effective measure in the medium term, as it will reduce the number of new retirees and lower the amount of future pension payments. The authorities are effectively creating a model in which the state cannot sustain a system of long-term special payments spanning decades. The reaction of law enforcement officials is understandable. They perceive the reform as a devaluation of their service. The result of these measures will be a further increase in the number of vacant positions, along with a growing workload for those who remain. And it will not be possible to provide financial incentives for this additional workload. However, it appears that the problem of the justice system’s declining effectiveness, that already enjoys little public trust, does not concern the authorities as much as the need to significantly cut budget expenditures. Of course, one could blame the requirements of the European Union or international financial institutions, which insist on budget transparency, the sustainability of public finances, and deficit control. Brussels likely asked whether we would be able to pay salaries and pensions in 5-10 years without a budget crisis or external bailouts. One can guess that the answer was no. Hence the carte blanche for radical measures to cut budget spending and increase the tax burden. It even goes as far as the most intimate matters – attempts to tax gifts from guests at traditional events and to encroach on the revenues of the church and nongovernmental organizations. Of course, it won’t come to that just yet. Our citizens will defend these values. It is more convenient for the authorities to promote narratives in public discourse about their willingness to take wishes into account and honor traditions – for example, to divert attention from the banking sector, which remains one of the most profitable segments of the economy and which could also fall under additional taxation, given the current climate. Against this general backdrop, there are constant references to the need to move away from outdated systems and toward modern models of government. Many citizens understand that our state institutions and current social obligations were designed for a country that no longer exists. That was a country with a different, larger population, developed industry and agriculture, a large workforce, and a broad tax base – and fewer administrative staff in the government, the president’s office, and other institutions. The past five years clearly show that progress toward European integration will not halt Moldova’s decline. Under the current system of governance, this decline is only accelerating, widening the social divide and intensifying social stratification. The logic is simple: implementing critical reforms requires specialists who must be paid slightly more so that they can properly cut the incomes of everyone else. Moldova seems to be returning to its former state, the pre-Soviet era of lords and peasants. For some – privileges and honors. For everyone else – doom and attempts to survive amid new folkloric motifs.