Monday, November 2, 2009

Romania's leftists to back IMF-mandated 2010 budget

BUCHAREST, Oct 30 (Reuters) - Romania's powerful leftist opposition will back a speedy parliamentary approval of the 2010 budget to help Bucharest get a much needed IMF loan tranche and unlock a policy freeze ahead of a Nov. 22 presidential election.

An IMF mission began a second review of Romania's 20 billion euro aid package on Wednesday, seeking broad political support to keep the agreement going after the collapse of the centrist minority cabinet of Prime Minister Emil Boc earlier this month.

The cabinet fell in a parliamentary vote of confidence, raising concerns over Romania's ability to meet criteria needed to continue drawing funds from the package and help safeguard the recession-hit economy.
"We're committed to observe the terms ... Romania needs the IMF money from the tranche to vigorously fight the crisis," Mircea Geoana, head of the Social Democrat Party told reporters after meeting IMF representatives.

"A budget approved in December with a deficit of 5.9 percent is the key condition and we will support it in parliament."

However Geoana said his PSD party agreed with the Fund that a follow-up mission should occur in January after a new cabinet was in place, to discuss on a potential revision of the budget in line with "the new government's vision."

He would not elaborate but said the gap ceiling should remain unchanged.

While Romania has met some of the IMF conditions, including a third quarter budget deficit cap, it still needs to unveil a budget plan with a deficit of no more than 5.9 percent of GDP from a goal of 7.3 percent this year.
Romania must also issue a fiscal responsibility law and a bill to reform the pension system by the end of 2009. The disbursement of a third tranche worth 1.5 billion euros by the end of 2009 hinges on the successful completion of the review.

Romania, which holds a hotly-contested election on Nov. 22, pitting Geoana, President Traian Basescu and Liberal Party candidate Crin Antonescu must enforce sharp cost-cutting measures to rein in government spending.

Whoever wins will play a vital role in solving the crisis.
Economists say a left-leaning government led by Geoana's PSD would be less fiscally restrictive than a centrist administration. This could make it more difficult for Romania to continue slashing costs to meet IMF terms.

IMF mission chief Jeffrey Franks said a broad political consensus was key to ensure continuation of reforms.
"The problems Romania is facing are not problems that can be solved by one single political party, they must be solved by a board, a coalition of forces that ensures Romania has solutions for its current economic problems," he was quoted by state news agency Agerpres.
"If that happens, perspectives are promising."

No comments: