Saturday, December 20, 2008

Romania finmin pledges to cut public spending

By Marius Zaharia BUCHAREST, Dec 20 (Reuters) - Romania's finance minister designate pledged on Saturday to cut spending on public administration, freeze hiring of state employees and 'rationalise' welfare to boost confidence in the economy.

The leu has been battered in recent weeks by political uncertainty and worries over the fiscal policies of the new government coalition which emerged from a Nov. 30 election and its ability to address the global financial crisis. 'The signal I want to send (to the currency market) is that ... I intend to create the premises so the deficits will not widen and to reduce them and the primary instrument we have for this is to cut spending,' Gheorghe Pogea told reporters.

Pogea's comments came after a meeting with parliament's budget and finance committee which gave its approval for his nomination ahead of a final parliament vote on Monday. Pogea said he planned to cut spending on goods and services by public institutions by 15 percent, to block about 140,000 vacant jobs in administration, to 'rationalise' social spending and to cut bonuses for state employees.

He targets a budget deficit of 1.7 percent of GDP next year, based on a revenues projection of 32.5 percent of GDP and a spending plan of 34.2 percent of GDP. Pogea also said public spending cuts would help Romania reduce its current account deficit to 10.5 percent of GDP next year, from about 13 percent in 2008, as imports will slow due to lower domestic demand. 'My priority is to stimulate gross capital formation, not consumption,' he said. Pogea did not comment on whether Romania would ask for help from the IMF like its neighbours Hungary, Ukraine and Serbia, but he said he was willing to discuss the issue with other policymakers.

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