Wednesday, April 29, 2009

Romania government scraps plan to hike state wages

BUCHAREST, April 28 (Reuters) - Romania's centre-left cabinet on Tuesday scrapped plans to hike public wages in 2009, including for teachers and civil servants, Finance Minister Gheorghe Pogea said, to reflect an IMF-mandated budget revision.

"We cancelled plans to increase wages by 5 percent this year," Pogea told Reuters by telephone. "As a result of the crisis we did nothing else but to annul this planned increase."

The four-month-old government of Prime Minister Emil Boc has said it envisaged raising wages in line with inflation this year in its original budgetary accompanying framework.

The country of 22 million people on the EU's eastern frontier is the third member of the bloc to be bailed out after Hungary and Latvia, as world financial turmoil wipes out sources of funding for an economy heavily reliant on foreign cash.

As the global crisis engulfs Europe, Romania has turned from being the EU's fastest-growing economy to one of its most fragile as private debt in foreign currencies and a growing budget deficit have exacerbated deep external imbalances.

In a budget revision this month and endorsed by parliament on Tuesday, the government kept investment plans intact while slashing spending to meet the demands of the 20-billion-euro ($26.6 billion) IMF-led aid package it secured last month.

Spending cuts will account for roughly 1 percent of GDP while overall expenditure of just under 200 billion lei will represent 37.5 percent of the estimated nominal GDP of 531 billion lei ($169.5 billion).

However, Boc told reporters after a government meeting on Tuesday that his cabinet was still determined to increase small wages this year if economic conditions allow. (Reporting by Radu Marinas; Editing by Dan Grebler)

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