Oct. 28 (Bloomberg) -- Romania is in ``close dialogue'' with the International Monetary Fund, though it is not asking for a loan from the lender that has offered support for Ukraine and Hungary.
``We do not have discussions about such financial support under way with Romania, but we maintain a close policy dialogue with the Romanian authorities, '' the IMF said in an e-mailed statement today. ``Decision makers need to send a clear signal to the markets with wage and that are realistically attuned to a very difficult external environment. ''
Romania should scrap a 50 percent wage increase for teachers that was approved last week and rein in other government spending to cope with the global financial crisis, the Washington-based lender said.
The IMF has agreed to lend money to Ukraine and Hungary in a bid to shore up the countries' economies amid the turmoil in global credit markets and slowing global growth. The lender yesterday said it would lend $16.5 billion to Ukraine for 24 months and will announce a ``substantial financing package'' for Hungary in the ``next few days.''
After the IMF statement today, Prime Minister Calin Tariceanu said he will hold down public wage increases and will not raise state spending next year to keep the in check.
``We decided to freeze public spending to the 2008 levels and wages will rise moderately next year because we have to tighten the purse strings,'' Tariceanu told reporters in Bucharest. ``We have to cope with this difficult period.''
Romania's leu has weakened about 12 percent in the past year and the benchmark BET stock index has dropped about 74 percent as investors shun countries seen as carrying a higher risk to investment.
The IMF is helping boost economies in eastern Europe as investors, stung by losses in developed nations, sell riskier emerging-market stocks, bonds and currencies.
The spending increase approved last week may cost the government 0.75 percent of gross domestic product, the IMF said adding that extending the raise to all state workers, may cost more than 4 percent of GDP in 2009.
Romanian President yesterday said he favors a wage increase for health workers. Tariceanu, his chief political rival, has said the raise would trigger demands and strikes from other state workers and ruin next year's budget. The government has estimated the potential shortfall at 7 percent of GDP, compared with a 2 percent goal.
Politicians are fighting over state wages ahead of parliamentary elections, a three-way fight between the opposition , Tariceanu's National Liberal Party and Liberal Democrat Party, which backs Basescu.
Sed Lex, the union that represents more than 100,000 public sector employees, said it will strike as early as this month to back a 50 percent raise for all its members.
To contact the reporter on this story: Adam Brown in Bucharest at abrown23@bloomberg. net