[stop-imf] Romania: Discontinuing IMF agreement will not diminish country's credibility

[robert weissman]

http://www.reporter.gr/fulltext_eng.cfm?id=51102145919

Romania: Discontinuing IMF agreement will not diminish country's credibility

14:59 - 02 November 2005 - IMF wants policies that cannot be adopted
now, said Minister of Finance in a press conference the Minister of
Public Finance Sebastian Vladescu. Discontinuing IMF agreement will not
diminish Romania's credibility particularly since the European Union
states do not have a special relation with this institution as Romania
has had until now, Prime Minister Calin Popescu-Tariceanu says.

"We are reluctant towards some policies suggesting us the risk of an
economic imbalance at a certain point, not clearly defined. IMF forces
us to adopt policies that, economically and socially, we cannot afford
to adopt in this moment," said Vladescu.

IMF raised the issue of the budgetary revenue policy and of their low
share within GDP. Estimating 1.1 billion euros losses provoked by the
introduction of the flat tax, IMF suggests tax increases, which the
Romanian Government did not adopt for 2006, considering the present
system able to maintain the budgetary balance, said Vladescu.

Wage expenses were a major issue during the negotiations, although they
were reasonably adjusted in 2006, said the minister. Vladescu said the
budgetary deficit for 2006 is extremely low, 0.5 percent of GDP, and a
lower level or a 0.2 percent surplus, as then IMF asked, would be
impossible. He gave Bulgaria as example, who registered a current
account deficit higher that Romania, although it had a budgetary
surplus. A major difficulty was also the adjustment in domestic price
for natural gas. The minister said an increase would be operated after a
method under work until January 2006.

Vladescu also said that this time there were fewer disagreements between
the two sides and that the agreement is functional until June 2006, but
is remains suspended, frozen. The agreement with IMF will be operating
till the mid next year when it expires

The Prime Minister Calin Popescu-Tariceanu said on Monday evening that
the suspension of the stand-by agreement with the International Monetary
Fund was caused by different approaches on fiscal and budgetary policies
and that the two sides could reach no agreement.

"I want to stress that there is no decision of cancelling the agreement
with IMF. The agreement will be operating till the mid next year when it
expires," Tariceanu said in a show at the public television. He stressed
that Romania's relation with IMF was necessary over the past 15 years,
contributing decisively to the improvement of its economic profile.
Tariceanu said that the IMF officials made some critical remarks which
indicate a difference of economic philosophy.

He said that Bulgaria also interrupted the agreement with IMF last week,
which thing happened to all countries of central Europe, Poland, the
Czech Republic, and Hungary. "We must prove that we have the capacity to
come up with a set of economic policies able to make Romania an European
country," said the head of Government.

Discontinuing IMF agreement will not diminish Romania's credibility

Romania's discontinuing the agreement with the International Monetary
Fund (IMF) will not affect the country's credibility, particularly since
the European Union states do not have a special relation with this
institution as Romania has had until now, Prime Minister Calin
Popescu-Tariceanu told public Radio Romania Actualitati on Tuesday.

At present, Romania is "almost the only country in the EU" that has such
an agreement with IMF, he stressed. Bucharest and IMF have different
outlooks on limiting the budget deficit, the salary policy in the state
sector and directing the money gained from privatisation to the
development of infrastructure, Tariceanu said. He explained that the
financial institution had required a lower deficit than set by the
government.

"We have set for 2006 probably the lowest budget deficit in Europe, at
0.5 percent of GDP," he said. The IMF also required that the state
sector wages be frozen, but the Romanian authorities did not agree,
Tariceanu said.

Source: ACT Media News Agency