Băsescu: Eurozone banks need to maintain their exposure to Romania

Romania would find itself faced with "very serious difficulties", because it would not even be able to finance its expenditure budget for this year, if the capital flows coming from the parent banks to their Romanian branches were to shrink, president Traian Băsescu said yesterday.

The goal is to maintain the capital flowing to Romania, he said.

The president said: "This year, Romania borrowed 56 billion lei from the domestic banking market. The amount will in fact increase before the end of the year, when there will be new loans, in order to cover budget expenses, and to support the deficit. That means 13.2 billion Euros from the domestic market plus two more billion Euros from the foreign markets. If the capital flows made available by the parent banks to their Romanian branches decreased, Romania would find itself facing very serious difficulties".

That means we wouldn"t even be able to finance this year"s expenditure budget. We support the idea that the process for the recapitalization of the banks in the Eurozone should also include the requirement that the additional capital flows also be directed to the branches in the Eurozone".

The formula agreed on Monday with Jose Manuel Barroso, the president of the European Commission, would have to be extended to all the countries in the non-Euro zone, Traian Băsescu added.

He added that there are several risk factors, and one of them could be the restructuring of the Greek debt: "On principle, restructuring can mean the canceling of 20-60% of the debt and having the banks bear it. I would almost call it taking a loss. And we have strong banks here which are committed to support the Greek government. The potential risk is that banks which have exposure to Greece would pull out their capital from Romania".

President Traian Băsescu also said that the exposure of foreign banks to Romania amounts to almost 40 billion Euros and that it is important to maintain the capital flows which the private sector needs.

"It is important to preserve the sources of financing for the private sector, because it can provide us with a minimal economic growth", he said.

Traian Băsescu yesterday left for Brussels, to attend the European Council, where the leaders of the European Union will meet to design a plan to solve the issues of the Eurozone.