Monday, October 26, 2009

Romania president says current leu level "optimal"

BUCHAREST, Oct 25 (Reuters) - The Romanian leu's current level is "optimal" and Romania must ensure it continues to receive international aid to avoid currency weakness that would badly hurt households, President Traian Basescu said on Sunday.

The leu EURRON= has stabilized at around 4.29 to the euro, after dropping to near-seven month lows on the collapse of the centrist minority government earlier this month.

A prime minister replacement has been nominated, but his chances of securing parliamentary backing were slim ahead of a Nov.22 presidential election, prolonging political gridlock.

Economists have warned political instability could pose problems in meeting terms of the 20 billion euro aid package Romania won this year from the International Monetary Fund to stave off the financial crisis.

On Sunday, Basescu said IMF cash has boosted the central bank's reserves, calming market jitters and helping keep the leu in a "reasonable 4.2-4.3 limit" which must be maintained.

"If we were to let the exchange rate go to near 5 lei per euro, exports could rise, but we would hit the population sharply by hurting purchasing power," Basescu said in a speech on his campaign trail.

"This is why the current level is optimal, which ... at least is not impoverishing the population and allowing the industry ... to continue to export."

The IMF said it would start a second review of Romania's aid package on Oct. 28, relenting on previous plans to postpone the mission until a new government was formed. However, it warned a follow-up mission may be needed.

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