Economic measures and prospects

In September, the annual inflation rate rose to 7.7% following the VAT rise. According to experts, the decision of the National Bank indicates caution, given the high level of fiscal uncertainty. Analysts believe the Central Bank had but little choice, with the economy still far from recovering.

Also on Tuesday, following talks with the parties in the ruling coalition, president Traian Basescu said an older government ordinance on limiting commission for loans would not be applied retroactively. The president said the only body that can penalise banks in Romania is the Central Bank, not the Authority for Consumer Protection.

By not enforcing this ordinance retroactively, the Romanian state makes sure the International Monetary Fund will disburse a new 900 million euro tranche of Romania’s foreign loan in mid January.

The Fund also wants the president not to sign into law two bills, one about the reduction of the VAT rate to 5% for food products, and another about tax exemptions for pensions amounting to less than 2,000 lei, that;s about 500 euros. Basescu has already sent these two bills back to Parliament. He says Romania, through the debt it will accumulate in 2011 to cover its budget deficit, will reach an indebtedness level of 40% of the GDP.

Basescu recalled that another condition for the payment of the next tranche of Romania’s loan is the passing of a law to introduce a single salary scheme and the budget bill for next year. The Romanian president said talks to sign a new agreement with the International Monetary Fund, the European Commission and the World Bank would begin in January.

He said the new agreement could take effect after the completion of the current agreement, that is in April. Basescu explained that the Romanian government was determined to meet the conditions set by the International Monetary Fund to secure the payment of the 6th tranche of its loan.

The opposition believes the president was wrong to send the two bills mentioned earlier back to Parliament. The Liberals accuse the president of acting under orders from the International Monetary Fund, while the Social Democrats hope the two bills would again be passed by Parliament in their current version.

The president of the Democratic Union of Ethnic Hungarians, in the ruling coalition, emphasised the need for political solidarity, while the leader of Ethnic Minorities, Varujan Pambuccian said he hoped a new agreement with the International Monetary Fund would give more credibility to Romania on the international markets and create better conditions for the business community.

Romania signed a foreign loan agreement with the International Monetary Fund, the European Union and other international financial institutions of about 20 billion euros. Bucharest has so far received 11.6 million euros from the Fund and 3.6 billion from the European Commission.

The Fund said a new agreement with Romania would most likely be of the precautionary type, which means the money stays in Washington and is only to be delivered in emergency situations.

(Radio România Internaţional, Serviciul în limba engleză).