Monday, February 9, 2009

Romania would find EU loan useful chief

BUCHAREST, Feb 9 (Reuters) - Romania may find a loan from the European Union useful to help finance its external imbalances, central bank Governor Mugur Isarescu said on Monday, the first sign the bank has sent in favour of such aid.

Many economists warn the new EU member state may be next in line to seek financial aid from an international institution, following several of its eastern European peers, as the global crisis cuts off sources of cash.

Romanian president Traian Basescu said last month he was reluctant to seek help from the International Monetary Fund, as neighbours Hungary, Ukraine and Serbia have done, but he may back a loan from the European Union under IMF supervision.

'(Romania may need) around 6-7 billion euros and considering that we are not ready from the point of view of organisation, (EU funds) absorption capacity ... a general loan from the EU would not hurt,' Isarescu told a meeting with bankers.

A threat of recession and one of eastern Europe's highest current account shortfalls have forced Bucharest's new centre-left coalition to drastically cut state spending, but analysts worry that even austere budget plans will still leave it needing to borrow substantially from international markets.

Isarescu said Romania did not have a public debt problem, but a private debt one.

Romania's 2008 budget deficit was over 5 percent of GDP and current account gap around 12 percent, making it one of the most vulnerable to a slowdown in eastern Europe and growing financing risks caused by the global credit crunch.

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