Thursday, October 29, 2009

Romanian president: IMF agreement needs revisions

BUCHAREST, Romania—An International Monetary Fund delegation heads for Romania on Wednesday to evaluate the country's economic performance, with President Traian Basescu saying the country will not be able to honor all the requirements of its bailout loan agreements.

Basescu says some terms of the $17.1 billion agreement to fight the economic crisis will have to change.

"The agreemeent for 2010 must be revised", Basescu said Monday according to the agency Agerpres news agency. "It is clear that certain changes must be made, (...) because Romania will not be able to fulfill all its commitments by Dec. 31."

Romania is mired in a deep recession and political infighting and is dependent on the IMF loan to pay government workers' wages. The economy is predicted to shrink by 8 percent this year.

The government of Prime Minister Emil Boc and supported by Basescu was dismissed two weeks ago in a no-confidence vote. Parliament and Basescu have been embroiled in bitter feuds for years.

Next week the Parliament is scheduled to vote on a new government led by Lucian Croitoru, an adviser to the central bank governor. Basescu nominated Croitoru as prime minister despite strong opposition from three political parties with a parliamentary majority, who want a different candidate. It is unlikely that a Croitoru government will receive the Parliament's support.

Until a new government is voted by Parliament, the caretaker government led by Boc has only limited powers.

Some of the reforms initiated by Boc's government to comply with the terms of the IMF loan agreement are still on stand by. The Constitutional Court must rule whether several laws freezing salaries and laying off workers in public institutions are constitutional.

The government led by Boc insisted the unpopular reforms were needed to keep the budget deficit in check. The IMF expects the authorities to draft the budget for 2010, with a budget deficit no higher than 5.9 percent of GDP.

The two-year IMF loan is part of a larger $26.4 billion package to which the European Union, the World Bank and the European Bank for Reconstruction and Development are contributing, among others. The money is made available in quarterly installments subject to the IMF's review of Romania's economy

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