President: The Government Is Considering State Guarantees For RAFO, Mangalia Shipyard

While in Slobozia yesterday, President Traian Basescu announced that the Government was considering issuing State guarantees for RAFO - Onesti and the Mangalia Shipyard.

"The Government is considering issuing State guarantees for RAFO - Onesti, which is currently undergoing a modernisation process after having paid all legacy debts to the State, and for the Mangalia Shipyard. Both companies have a major potential as customers to small- and medium-sized enterprises," President Traian Basescu said.

He further said that the Government had already issued a 400 million EUR State guarantee for the Ford factory in Craiova and a 69 million EUR State guarantee for Oltchim - Ramnicu Valcea as both companies were likely to generate jobs on a horizontal plane by buying various products from small- and medium-sized enterprises.

• Loan guarantees - the only solution

President Basescu explained that the Government had not intended, and it would have been impossible, to borrow enough money to cover the needs of all the enterprises affected by the crisis, so the only solution was to guarantee loans for some of them, NewsIn reported.

He stressed that the Government"s option to issue State guarantees for loans taken by major companies was stipulated in the financing agreement with the International Monetary Fund, because the risk existed that such enterprises could default and the Government would have to pay for their private loans with public money.

President Basescu also emphasized that the Government could not do more for companies as the funds borrowed from the international financial institutions were needed in order to stabilize the exchange rate, finance the budget deficit, pay public pensions and salaries and further finance investment programmes.

• Crisis end predicted for mid-2010

Referring to the ongoing economic crisis, President Traian Basescu told an audience in Ialomita County that Romania could start recovering "around mid-2010." He met with several local businesspeople, whom he informed that "Romania does not intend to exit the crisis on its own, because that is not possible."

"Many people say that the Government is supposed to get Romania out of the crisis. That is not possible and the costs would be enormous, whereas the result would be absolutely uncertain. Romania cannot afford to borrow hundreds of billions to finance enterprises, especially considering that the other pillar of economic growth, consumption, is also low," President Traian Basescu told businesspeople in Ialomita County.

• Romania, entirely dependant on the international context

President Traian Basescu noted that, no matter how much money the Government spent, the only consequence would be excessive debt and questionable results, because Romania was dependant on the performance of the global economy. The president emphasized that the Government"s policy had been focused on minimizing the effects of the crisis. He estimated that Romania would start recovering six months after the end of the crisis in major economies such as the U.S. or Germany.

"Even if the Government had decided to increase the industrial production by pumping public money - borrowed money, of course - the output would still have not been sold. The only conceivable result would have been a failure," President Basescu said.

In his closing remarks, President Basescu emphasized that investments in agriculture were the solution for the future of Romania"s economy, as a substantial unexploited potential existed.