THE NEW AGREEMENT WITH THE IMF 5.7 billion Euros or 10-15 billion Euros?

Next year, Romania will sign a new loan agreement with the International Monetary Fund (IMF), president Traian Băsescu said in his speech before the Parliament.

The head of state claimed that Romania needs a new loan of 5.7 billion Euros. However, in a statement made for BURSA, official sources said that the amount that Romania will need to borrow next year could range between 10 and 15 billion Euros. In other words, double or triple the amount suggested by the head of state.

The same sources said that the IMF is still willing to lend to the government, as long as the Government will guarantee that it can pay back the loan on time. Most likely, the new loan will be short term, which will put even higher pressure on the government to take harsher austerity measures. This aspect was also discussed by president Traian Băsescu, who stressed that "Romania has huge issues in making long term loans" due to its current imbalances and deficits.

Traian Băsescu said that the money would be used for investments and that the new agreement is necessary to help Romania regain its credibility on the international financial markets. According to the president, on the basis of the new IMF agreement, Romania could obtain an A rating by 2012, which could make it attractive for foreign investors.

• 46,000 ongoing investment projects

President Traian Băsescu reiterated that Romania can no longer afford to borrow money for consumption and that the exclusive priority of the new loan agreement will be economic development.

The head of state stressed that, besides the making of a new loan agreement next year, a prioritization of the internal investments is necessary. "We need to prioritize the investments made using public funds, because we have 46,000 ongoing investment projects, and we would need about 40 billion Euros to complete them all", the head of state said.

Concerning the next year, the head of state said that according to official estimates, Romania will have an economic growth of 2%, which is insufficient for development. "A growth rate of 2-3% can not ensure the level of development that Romania needs. We would need to have the economy grow by 5% to do that", the head of state said.

The president also said that in 2011, the budget deficit could reach 4.4% of the GDP and advised the members of the Parliament to pay attention when drafting the budget. Băsescu stressed that the draft budget for 2012 will need to be sent to the European Commission for approval, and if its figures aren"t met, Romania runs the risk of being severely penalized by the Commission. Exceeding the budget deficit by 1% would mean that Romania would lose 1.3 billion Euros in European grants", the head of state warned.

Concerning the accession to the Eurozone, the president said that the authorities need to consider a realistic date for their accession.

• We have gone past the peak of the crisis, but not past the peak of the social crisis

In his speech, the president said that "we have passed the peak of the crisis", but "not past the peak of the social crisis". Băsescu pleaded for solidarity and for a better understanding of the austerity measures by the population.

Its appeal comes just as, according to his statements, the deficit of the public pension system could go from an estimated 1.7 billion Euros this year, to 3.1-3.6 billion Euros next year, which would require urgent adjustments. According to the head of state, the situation of the public pension system is "dramatic".

• The tax base to be expanded

Also, the president said that Romania spends 76% of its budget for welfare and said that there is not as much poverty in Romania, as there is laziness and lots of people who faked their illnesses so they could collect disability pensions.

In order to raise the budget revenues, the head of state suggested tackling tax evasion, privatizing unprofitable state owned companies, as well as the sale of minority stakes on the Stock Exchange.

The president went on to say that in Romania " there are still too many revenues and activities exempt from taxation". In this respect, the head of state pleaded for the rethinking of the current fiscal system.