Friday, May 8, 2009

EU approves euro5 billion bailout for Romania

(AP:BRUSSELS) European Union governments on Thursday approved a euro5 billion bailout for Romania to help it balance its books as the economy shrinks this year amid the global financial crisis.

The loan is part of a euro20 billion package led by a euro12.95 billion loan from the International Monetary Fund, with another euro1 billion each from the World Bank and the European Bank for Reconstruction and Development.

The EU will raise the money for the seven-year loan by selling bonds and will hand over the money to Romania in five installments.

Hungary and Latvia have already received euro9.6 billion in EU bailouts and the bloc this week doubled a crisis fund for the 11 member nations that don't use the euro to euro50 billion.

EU nations said in a statement that the aid would help reduce pressure on Romania's capital and financial markets "which results from the global economic downturn and concerns about its economy, given its wide external deficit and an increasing public deficit."

In return, Romania has promised to reduce its budget gap in the long-term.

The EU executive warned the country last year to reduce its yearly budget deficit, which it estimates will fall from 5.4 percent to 5.1 percent this year and surge again to 5.6 percent in 2010 _ all well above the EU limit of 3 percent.

The EU forecast that Romania's economy would contract by 4 percent this year and not grow at all next year.

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