[stop-imf] Romanian court rule IMF demand unconstitutional (fwd)

[Robert Weissman]

Article highlight: "Successive governments have promised
austerity, only to cave in to electoral pressures."

Court bars Romanian IMF deal
By Phelim McAleer in Bucharest
Financial Times 
Published: June 12 2000 17:32GMT | Last Updated: June 12 2000 

A key element of the Romanian government's agreement with the
International Monetary Fund, which introduced a salary cap for employees
in state-run companies, has been declared illegal by the Bucharest appeal
court.

The decision represents a setback for the country's plans to rejuvenate
its economy with the help of IMF funds. Last week, the IMF approved, after
a number of delays, the extension of a $535m standby credit and the
immediate release of $116m. This approval was expected to trigger further
funds from the World Bank and the European Union.

However, the release of the funds was only sanctioned after firm
commitments from the country's centre-right coalition government that
state spending would be reduced, with salaries pegged and
performance-related. Previously, managers at state-run industries could
award themselves and their employees bonuses despite incurring huge losses
and mounting arrears. It is not unusual for large state enterprises in
Romania to owe considerable sums to state utilities and have large
outstanding tax bills.

The court ruling followed a complaint from the Meridian Trade Union and an
announcement by other unions that they would be initiating strikes and
protests. It is likely to add to the problems of the government, which is
unpopular in opinion polls, and which may lose power after parliamentary
and presidential elections in the autumn. The former communist Social
Democrat party (PDSR) gained crucial seats in recent local elections.

The forthcoming election was one of the main reasons the IMF had delayed
granting the standby credit. Successive governments have promised
austerity, only to cave in to electoral pressures. Cracks in the
previously firm commitments from the government to the current IMF deal
have already started to emerge. The trade and industry minister has
disowned the law on state company salaries passed by the cabinet two weeks
ago. Radu Berceanu, of the Democratic party, told the Romanian newspaper,
Curentul, he was opposed to the new regulations. "The ordinance was signed
in a hurry by some secretaries of state because [Prime Minister Mugur]
Isarescu was leaving for the IMF meeting," he said.