A foreign loan is vital but painful

• Baltazar: "The loan agreement with the European Commission and the IMF is vital for the economy"

• "The capitalization of CEC Bank is ridiculous and demonstrates a big mistake in reasoning"

The lending agreements with the European Commission (CE) and the International Monetary Fund (IMF) are vital for improving our country"s image with foreign investors and foreign lenders, claims financial consultant Bogdan Baltazar.

Present at the launch of the Annual Forecast and Analysis Report of the Romanian Academic Society (SAR), Baltazar said that this will help companies get access to funding and ensure better stability of the lending process.

The financial consultant said that Romania"s borrowing costs will greatly increase in the future, if it does not enter an agreement with one of the international financial institutions, and said that right now, the state is borrowing at 11%, as it is subsidized by commercial banks.

"Right now, the state is being subsidized by the commercial banks, in other words by their customers", Baltazar said.

Mr. Baltazar said that agreements with the EC and the IMF could represent "a parachute" for the country"s economy, because it could Romania obtain cheaper foreign funding.

Baltazar claimed that the year 2009 will be a difficult year for Romania"s economy and it will be totally different from 2008, which was considered a great year, where Romania received almost nine billion Euros in direct foreign investments and loans received on very good terms.

Speaking about consumption, Baltazar showed that it has increased "erratically" last year, and emphasized that this tendency will continue to deepen the current economic imbalances. "Whereas in 2007 we had a current account deficit of 14%, in 2009 it is expected to reach 7-8%", added Baltazar, who said state institutions should try to do a better job of managing public funds and try to cut bureaucracy in the system.

Mr. Baltazar also said he was extremely unhappy with the policy for the capitalization of CEC Bank.

He claimed that instead of capitalization, increasing the ability to guarantee or counter-guarantee loans made to SMEs by commercial banks.

Mr. Baltazar said that the capitalization of CEC Bank is ridiculous and demonstrates a big mistake in reasoning.

• Boc: "We will decide who we are going to borrow from in two weeks"

Also present at the debate, Prime Minister Emil Boc said that the decision on a foreign loan with from the European Community, the IMF or some other international institution will be made in two weeks.

"Any agreement with the IMF must pass through the European Commission, but an agreement with Brussels is not required to be approved by the IMF", said Boc, who added that for now, no decision has been made on a foreign loan.

On the matter of the current status of the banking system, the Prime-Minister said that the government does not intend to nationalize commercial banks and added that the government will tighten its relationship with the Central Bank, in order to coordinate government and fiscal policies.

• Ionuţ Popescu: "An agreement with the commission will also involve an agreement with the IMF"

Former minister of Finance Ionuţ Popescu, current advisor to the Prime-Minister, showed that an agreement with the European Commission will also lead to an agreement with the IMF.

"Romania"s last agreement with the IMF, which did not involve any financial aid for Romania, was made at the EU"s request, just as Romania was in the process of joining the EU, and specifically because the EU did not have the monitoring capacity that the Fund has", said Ionuţ Popescu, quoted by Newsin.

The former minister mentioned that all the states that asked the EC for help have also entered loan agreements with IMF and said that, in the current circumstances, a loan from the IMF would be granted under less restrictive terms than the previous agreements.

• Geoană: "I shiver whenever I think of the previous IMF agreement"

Social-democrat leader Mircea Geoană said yesterday, during a press conference held by his party that remembering the relationship that our country had with the IMF last year "makes him shiver".

Geoană said that a possible agreement with the IMF will be made under extremely harsh conditions and will have a great social impact.

The chairman of the Social Democratic Party (PSD) said that after adopting the state budget, the coalition will discuss Romania"s economic situation, which will also involve the governor of the Romania"s central bank Mugur Isărescu, to show the Government the economic policy it should adopt.