Saturday, January 17, 2009

Romania govt vows fiscal restraint as economy slows

BUCHAREST, Jan 16 (Reuters) - Romania's new centre-left government pledged on Friday to tighten the fiscal reins this year as it struggles to finance spending in a slowing economy and reassure nervous markets.

After a marathon cabinet meeting on Friday to prepare a budget, Prime Minister Emil Boc said his month-old coalition would focus on creating jobs and supporting smaller companies to aid the struggling economy.

'The main goal of this government is to ensure stability,' he told a news conference.

Romania boasted the European Union's fastest growth last year but its twin budget and trade deficits have sparked a massive outflow of investors from local markets and many economists warn high debt levels may spark a financing crisis.

Some rating agencies see Romania, an EU member since 2007, as the riskiest member of the bloc and the only one with a sub-investment grade credit rating.

Boc's government faces a tough task to cut spending sharply and bring down the budget deficit from more than 5 percent of gross domestic last year to its new target of around 2 percent.

This will likely involve going back on social spending promises made by coalition partners and the outgoing government ahead of November's parliamentary election, which brought Boc to power, as well as shoring up revenues from a slowing economy.

Finance Minister Gheorghe Pogea expects Romania to expand by some 2.5 percent this year, against roughly 8 percent in 2008.

'Spending went out of control last year,' Pogea said.

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