Wednesday, March 18, 2009

Romania eyes aid package up to 20 bln euros

By Justyna Pawlak and Luiza Ilie

BUCHAREST, March 17 (Reuters) - A potential aid package for Romania to help patch up finances strained by the global crisis and calm nervous markets could total roughly 20 billion euros ($26 billion), President Traian Basescu said on Tuesday.

Romania, a Balkan state of 22 million, has approached the European Union and the International Monetary Fund for economic support which would make it the third member of the bloc to seek outside help to ride out global financial turmoil, after Hungary and Latvia.

An IMF mission arrived in Bucharest last week to hold loan talks and it is due to leave town later this month, after meeting Basescu on Tuesday.

In a televised interview, the president said details of the loan package would be made public in coming days, and said aid was a necessary "safety belt" to cushion the blow of crisis.

Asked about reports the aid could reach roughly 20 billion euros, Basescu said:

"If we are discussing a two-year (loan) then it could be close to this figure ... I don't know if this is going to be the final figure."

Earlier on Tuesday, a source close to the talks told Reuters Romania was discussing a 19 billion euro package, which includes cash from the EU, the IMF, and other financial institutions.

"But the talks going on now are about macroeconomics, not the number," the source said.

The central bank's chief economist said last Thursday the aid package for Romania could fall in a range close to 7.4 billion to 16 billion euros, or its expected 2009 financing gap.

Analysts have estimated the amount could be around 20 billion euros, about the same amount as Hungary's $25 billion deal agreed last year.

Since the crisis accelerated in October, Romania has turned from being the EU's fastest-growing economy to one of its most vulnerable as big hard currency debts and budget deficits accentuated its deep external imbalances.

Many economists expect the economy to fall into recession this year, and the IMF has said a contraction cannot be ruled out, even though Romania expanded by as much as 9 percent during parts of 2009.

An aid package should help underpin market sentiment, shaken by foreign investors' concerns that Romania may run out of money to finance debt and trade, economists say. (Editing by Diane Craft)

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