Bloomberg News

Romania Parliament Approves 2012 Budget With 1.9% of GDP Gap

December 16, 2011

(Updates with comments from prime minister in fourth paragraph, currency prices in sixth paragraph.)

Dec. 15 (Bloomberg) -- The Romanian Parliament approved the government’s 2012 budget, which narrows the deficit by more than half to meet pledges to the European Union and the International Monetary Fund.

Lawmakers voted 239-168 today in Bucharest in favor of the plan to narrow the fiscal gap to 1.9 percent of gross domestic product in 2012 from a target of 4.4 percent in 2011, said Senator Vasile Blaga, who also leads the upper house.

“Today’s vote pushes through Parliament a budget that consolidates Romania’s financial position and that doesn’t have any electoral hints ahead of the general election next year,” Prime Minister Emil Boc said after approval.

The budget outlines public-spending cuts through wage and pension freezes, trimming state jobs and revamping money-losing state companies before a general election late next year. The country is under pressure to keep to its 5 billion-euro ($6.5 billion) precautionary loan agreement with the IMF and EU.

The budget is based on economic growth of 2.1 percent, less than the previous forecast of 3.5 percent, and inflation at 3.5 percent at the end of next year. The government expects the economy to grow 1.5 percent to 2 percent this year.

The leu gained 0.2 percent to 4.3415 per euro in Bucharest trading as of 12:57 p.m. today, while the Bucharest Stock Exchange’s benchmark BET Index rose 0.9 percent to 4,315.8 points.

Widening Deficit

The government may let the budget deficit widen next year to as much as 2.5 percent of GDP under Romanian accounting standards, as agreed with the IMF and the EU, as long as it keeps the gap within 3 percent under European standards. This would enable the EU to end excessive-deficit procedures against Romania.

The eastern European country is cutting the number of its public jobs to 1.1 million by the end of next year from 1.4 million in 2010, President Traian Basescu said on Nov. 24. The government has already eliminated 180,000 jobs, he said.

The country will try to push ahead with plans to sell minority stakes in state-owned companies, such as Transgaz SA, Transelectrica SA and Romgaz SA, and majority stakes in Oltchim SA and newly formed power companies Oltenia SA and Hunedoara SA, even during a time of market turmoil that led to the failed sale of a 9.8 percent stake in OMV Petrom SA in July.

Borrowing Plans

Romania plans to borrow about 57 billion lei ($17 billion) next year and 2.4 billion euros to finance its budget deficit and pay for maturing debt, Deputy Finance Minister Gheorghe Gherghina said on Nov. 25.

Boc’s coalition government will also face a no-confidence vote filed by the opposition Social Democrats and Liberals today over a plan to merge parliamentary and local elections next year. The vote may take place on Dec. 22, Roberta Anastase, the head of the Parliament’s lower house, said on Dec. 12.

--Editors: James M. Gomez, Balazs Penz

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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