Mugur Isarescu: IMF Loan Agreement Stipulates What Romania Needed

• Geoana: "The concerns of the political community and the public with the negative effects of the loan are real"

Cristina MihalaŞcu

National Bank (BNR) Governor Mugur Isarescu met with the joint Standing Bureaus of the two Chambers of Parliament yesterday and assured them that the provisions of the agreement with the International Monetary Fund (IMF) reflected the needs of Romania, especially considering that the public financing resources would "compensate for the lesser generosity of the private capital." He added that the financial arrangement with the IMF would ensure, on a macro-economic level, the stability required for "rebuilding confidence" in the financial condition of Romania.

Senate Speaker Mircea Geoana saluted cooperation with the BNR and pointed out that the concerns of the political community and the public with the negative effects of such substantial loan were real. "We must not repeat the mistake made 20 years ago, when the society paid for the costs of such loan. We must avoid doing the same as other Central European countries, which took a loan and witnessed not an improvement of the country rating, but a degradation," Geoana added. He asked the Central Bank governor to make every effort to keep the schedule for the adoption of the euro so that macro-economic discipline and convergence with the EU - including the adoption of the single currency - should be "a stability anchor."

On the other side of the argument, National Liberal Party (PNL) Senator Varujan Vosganian pointed out that the meeting had strengthened his belief that the IMF loan was financing a budget deficit which the Government could no longer control. "The Prime Minister and the Finance Minister came before Parliament and guaranteed that the deficit was going to be 2%. Less than two weeks later, we learned from Washington that the deficit was going to be 6%, of which 5% as a deficit commitment before Parliament and 1% as postponed spending," he added. Senator Vosganian predicted that the consequences of the IMF loan would include a decoupling of public pensions from the average salary and a 1 billion EUR increase in the budget resources through higher taxes.

"Unlike the situation we had in October-December, when banks would not give loans because they did not know how the economy would perform, we are now in a situation where banks want to give loans, but cannot comply with the eligibility criteria of the National Bank," Vosganian added. The former Economy Minister concluded that the real economy could only be helped through "interest rate adjustments."