Contest in court "endangers fiscal policy"

The head of the IMF mission, Jeffrey Franks, stated he would ask for the deal with the Romanian Government to be approved by the IMF’s executive board ‘starting January’.

This is the sixth IMF evaluation for unlocking an approximately 900 million euro tranche.

‘After the IMF have approved the agreements and after the conditions agreed upon have been implemented, we can ask the Executive Board of the IMF to approve them, in middle January, according to our expectations’, said Jeffrey Franks.

He mentioned that Romania is ‘on the right way’, but that our economic policies are ‘endangered by contest in court’ concerning the public sector payrolls and pensions.

He stated that the IMF reached an agreement with the Romanian government on the single salary system law until approving the 2011 budget.

Jeffrey Franks ‘highly recommends’ that fiscal policy changes should be done with ‘extreme care’.

‘I am referring also to VAT cuts to some food products, erroneously made, as I understood.’

‘Changes like these have a significant influence on government endeavour to ensure a coherent fiscal policy”, said Jeffrey Franks.

A new agreement

Jeffrey Franks mentioned that the economy will shrink down to -2% at the end of 2010, but 2011 will have a slight growth and GDP will have ‘a 1.5% growth’.

‘To stimulate economic growth, together with the authorities, we agreed upon allocating additional investment resources in the first half of 2011, to try and absorb European funds’, stated Jeffrey Franks.

Istvan Szekely, of the European Commission, declared that he would support authorities in the European funds absorption programme.

‘The financial sector must be strengthened, new measures have to be taken in order for arrears to be paid and their value to decrease gradually’, said the European Commission representative.

As for new laws on bank loan errands, Istvan Szekely stated ‘we decided to work together with the government on the Ordinance 50/2010.’

‘Our purpose is to not destabilise the financial system’ he also said.

The government adopted a law on customer bank loans that, in the IMF’s opinion, ‘retroactively applies’.

Besides IMF loans, the government asked for the European Commission financial support to ‘be able to pass the economic crisis’.

The head of the IMF mission emphasized that during January-February 2011 IMF and Romanian government negotiations for a new agreement will take place.

Translated by: Ciocanel Tudor – Alexandru and Elena Daniela Radu
MA students, MTTLC, Bucharest University