Thursday, December 16, 2010

Romanian Constitutional Court Rules in Favor of IMF-Backed Pension Law

Dec. 15 (Bloomberg) --Romania’s Constitutional Court ruled in favor of an International Monetary Fund-backed pension law that is mandatory for the country to win another disbursement of its bailout loan.

The nine judges of the court unanimously said the law, which sets the retirement age at 63 years for women and 65 years for men, is constitutional, rejecting challenges from the opposition, said Acsinte Gaspar, one of the court’s judges, by phone today. The president must now sign the law for it to become active.

Romania, the European Union’s second-poorest member, is relying on a 20 billion-euro ($26.7 billion) loan led by the IMF as it struggles to cut its budget deficit and recover from its worstrecession on record. Romania agreed on Nov. 1 to approve a 2011 budget, enact a unified wage law and revise consumer-credit and pension rules to unlock a 2.4 billion-euro installment of the emergency loan.

President Traian Basescu refused in October to sign the law. Instead, he returned it to Parliament requesting a reduction of the proposed women’s retirement age to 63 years from 65 years as contained in the initial pension law approved by lawmakers on Sept. 16.

“The Constitutional Court unanimously rejected the challenges on the revised pension law,” Gaspar said. “The president has now 10 days to promulgate the law.”

The new retirement age will take effect in 2030, with everyone who has contributed to the system for at least 15 years qualifying for a pension. The law also links future pension increases to the inflation rate as opposed to the current average monthly wage tied to raises.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

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