THE MISSION OF THE IMF ENDS The economy remains in stand-by

• Jeffrey Franks: "The economy is still in a difficult situation" • Unions are backing down

The Mission of the International Monetary Fund (IMF) in Romania ends today, after two weeks of discussions and negotiations on the subject of the commitments of the Romanian authorities based on the stand-by agreement.

The final discussions between the IMF officials and the members of the Boc cabinet on the reforms that the Government wants to enact in the near future, intended to lower the budget deficit, were held over the last two days.

Government sources, quoted by Agerpres, claim that the Executive agreed with the IMF on a budget deficit target of 6.5%-6.8% of the GDP for 2010. The government announced in a communiqué that the steps which will be adopted will cause the budget deficit to drop below 7% of the GDP.

The quoted sources also claim that the Romanian authorities estimate the economy will grow 1% in 2010, but they are also considering more pessimistic scenarios (08% or even 0%).

The measures intended to lower public sector spending announced by president Traian Băsescu include a 25% reduction of the wages of public sector workers, a 15% cut of pensions and of unemployment aids as well as redistributing subsidies to people who truly need them.

Government sources, quoted by Mediafax, claim that the IMF accepts the reduction of the budget deficit by cutting wage and pension expenses, instead of requesting a raise in taxes, subject to the funds thus saved being used exclusively for investments.

The head of the IMF mission, Jeffrey Franks, said that the Romania is still in a difficult economic condition, and said that the Fund would announce the results of the evaluation mission today.

The release of the fifth EUR 850 million tranche of the loan from the IMF depends on the outcome of the mission, as well as on the way the cost-cutting measures will be implemented. The officials of the IMF have mentioned that the decision on the best ways to cut public spending rests with the Romanian government.

The reforms are stipulated in the letter of intent, a document which the government decided to adopt in the first session. The measures which were announced have caused the anger of unions, which threatened with strikes and wide-scale protests.

The leaders of the main union centers yesterday had an emergency meeting with president Traian Băsescu, just as they had almost completed the schedule of the protests. Professional associations urged unions to hold off protests to avoid worsening the condition of Romania"s economy. After three hours of negotiations, on Tuesday the unions decided to resume discussions with the government.