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| Economic Measures to beat the Crisis 29/10/2010 |
| (2010-10-29) |
| Last updated: 2010-11-01 13:58 EET |
The autumn meeting of the heads of EU states and governments gave rise to some landmark decisions concerning the Union’s financial consolidation. European leaders backed a permanent crisis mechanism that would ensure financial security and bring drastic financial sanctions into play for countries with deficits exceeding 3 percent of their GDP.
Romania is among the nations that have been forced to take severe austerity measures in order to keep the deficit below the set limit. An International Monetary Fund delegation in Bucharest warned the national government that enforcing tax reduction measures and raising minimum wage would take next year’s national budget deficit above the targeted 4.4 percent figure. The IMF also asked the Romanian authorities to provide a clear investment priorities program, mainly in the fields of transportation and healthcare.
Earlier this week, the government had proposed lowering taxes, by reducing the flat tax rate from 16 to 12 percent and raising minimum wage from 600 to 700 lei. The financial organization, however, warned that raising the minimum wage to more than 650 lei next year would be unacceptable. The head of the IMF mission in Bucharest, Jeffrey Franks, believes that Romania will not be in recession next year. The economic growth predicted by the IMF might be close to the figure estimated by Bucharest – 1.5 percent.
Franks has added that granting the next installment of Romania’s loan depends on the amendment of the bill eliminating fees for public loans. IMF representatives say that this bill should only address new loans and not those already signed. The IMF delegation, whose mission will come to an end on November the 1st, aimed to assess the implementation of the current agreement and to begin talks with Romanian authorities for a new one.
Romania currently benefits from an external financing agreement with the IMF, the EU and other international financial institutions worth nearly 20 billion euros. So far, the government has received 11.6 billion euros from the Fund and 3.6 billion more from the European Commission. The next installment of the IMF loan, worth 870 million euros, is scheduled to be granted in mid December. Franks has said that a new agreement between Romania and the IMF will most likely be a preventive one, meaning that the money will remain in Washington and will only be made available in emergency situations.
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