Thursday, December 17, 2009

WSJ: Basescu Set to Rein In the Deficit

By CHRISTOPHER EMSDEN and JOE PARKINSON

Romanian President Traian Basescu was inaugurated for a second term Wednesday and began working with political parties to form a government that can enforce the tough budget changes required by the International Monetary Fund.

The inauguration put to rest a bitter dispute over electoral fraud, making it likely the conservative Democratic Liberal Party, which is closely affiliated with Mr. Basescu, can form a government backed by a parliamentary majority and able to tap another installment of an IMF-led €20 billion ($29.2 billion) loan, which stalled amid a political crisis.

"Romania is passing through a difficult period," Mr. Basescu said in his speech. "We need solidarity more than ever."

The IMF said it is likely to disburse the next tranche of its loan in February, given that an agreement has been reached on policy changes.

The agreement is "at the technical level" and what is needed now is for the budget to be approved, Jeffrey Franks, the IMF's chief representative in Bucharest, said on a local television show.

Romania had pledged to keep next year's budget deficit below 5.9% of gross domestic product. The deficit is likely to be around 7.3% of GDP this year.

ING chief economist Nicolaie Alexandru said the expected release of the next IMF loan tranche should support the currency and steer interest rates lower, he added.

Romania hadn't had a government for two months after Prime Minister Emil Boc, head of the Democratic Liberal Party and a close ally of Mr. Basescu's, lost a confidence vote.

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