Bloomberg News

Romania Completes Talks With IMF, EU on Review of Its Aid Deal

August 12, 2012

Romania, the International Monetary Fund and the European Union “successfully” completed talks on the sixth quarterly review of the terms of a precautionary loan, Finance Minister Florin Georgescu said.

The government secured the amounts it needs to restore public wages to the level before a 25 percent cut in 2010, Georgescu told reporters in Bucharest late yesterday. It also pledged to sell a majority stake in chemical company Oltchim SA (OLT) to a strategic investor by mid-September and hold a public sale of a 15 percent stake in natural-gas grid operator Transgaz SA. (TGN)

“We’ve also agreed on some measures to stimulate the business environment and the creation of jobs,” Georgescu said. The economy will grow about 1.2 percent this year, while inflation will be 3.5 percent and the budget deficit 2.2 percent of gross domestic product at the end of 2012, he said.

The government of Prime Minister Victor Ponta, Romania’s third cabinet this year, pledged to continue a 5 billion-euro ($6.1 billion) precautionary loan agreement with the IMF and the EU. It secured an additional 1 billion euros from the World Bank this year, though it hasn’t yet drawn any money. The lenders are scheduled to publish their findings on the government’s progress on fiscal targets and planned asset sales in the coming days.

Georgescu also said the details of the 2013 budget will be discussed with the lenders at the next review mission at the end of November or beginning of December.

Political Turmoil

Romania, scheduled to hold parliamentary elections around that time, is going through political turmoil amid a power struggle between Ponta and suspended President Traian Basescu that’s undermined investor confidence and weakened the leu.

The bickering deepened after the Constitutional Court delayed ruling on whether a July 29 referendum to impeach Basescu was valid, citing conflicting data on the voting lists. The ministers in charge of updating voting lists resigned on Aug. 6 and were replaced the same day. The government must send updated voting lists to the court later this month.

The feud in Bucharest prompted international leaders, including the European Commission President Jose Barroso, to voice concerns about the developments in the eastern European country and urged the government to respond to requests from the Constitutional Court.

The U.S. will send U.S. Assistant Secretary of State Philip Gordon to Bucharest to discuss the concerns of the authorities in Washington about the impeachment procedure, Mediafax reported yesterday, citing a statement by the U.S. State Department.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

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


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