Monday, March 2, 2009

Romania holds preliminary talks with IMF-source

BUCHAREST, March 2 (Reuters) - Romania has started preliminary talks with the International Monetary Fund on a funding deal to help patch up its vast trade deficit and finance budget spending, a source clost to the talks said on Monday.

The central bank's spokesman said deputy governor Cristian Popa was in Washington for talks with the Fund, although he declined to say what was the subject of discussions. A source close to the talks said an aid deal was being discussed.

Bucharest's centre-left government has already approched the European Union over possible financial aid as the global crisis spreads to eastern Europe.

'Deputy governor Cristian Popa is in Washington these days after (having)...been in Brussels,' central bank spokesman Mugur Stet said. 'He will have meetings, discussions and preliminary assessments with the Fund.'

Government officials say short-term financing needs amount to up to 10 billion euro ($12.62 billion), stemming mostly from corporate sector debt.

Romania is seen as one of the EU's most vulnerable economies because of its large hard currency debt and trade deficit.

Many economists believe it is the next in line in eastern Europe to be rescued by the IMF and the EU, in deals similar to those sought by Hungary and Latvia last year.

Recent downgrades of its debt to below-investment grade were a stark reversal of fortune for an economy that was the EU's fastest-growing last year.

Fast growth has bloated Romania's external imbalances as companies race to modernise. Romanians bought up consumer goods ito improve their once-Spartan living standards, leaving Romania highly dependent on foreign funding.

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