TRAIAN BĂSESCU: "Our goal to switch to the Euro in 2014 remains unchanged"

• "Salaries in the public sector will change this year"

Andreea Arăboaei

President Traian Băsescu together with the Central Bank and the Government, endorse the 20 billion Euros loan agreement that Romania has concluded with the international financial institutions.

The president yesterday said, during a reunion at the Bucharest Chamber of Industry and Trade: "I am aware that I had a strong involvement in this process, but I feel that involvement from people at the top is required and not simply optional. The financial situation is difficult and real support can only come from the politicians".

He said: "The agreement provides Romania with funding to help mitigate the effects of the international crisis. Moreover, the goal of the agreement is to help Romania resume growth once the countries that the global development depends on, such as the United States, Germany, France, Brazil will recover. At the same time, the foreign agreement is also intended to help us reach our goal of convergence, that was abandoned in the past two years, namely switching to the Euro in 2014."

Through the agreement with the IMF, the Government has agreed to cut public sector spending by 1.1%, the president said, who added that savings will be made by cutting wages, bonuses and spending. "This entails freezing wages in the public sector and gradually capping bonuses at 30% of the salary", he explained.

The president was adamant that "not one single Euro" of the money received by the Central Bank and the Ministry of Public Finance will go to salaries and bonuses. On the other hand, the pension system must be maintained at the level that the Government promised it would, the President said, who explained: "We will allocate resources for increasing low wages and pensions."

Another important goal of the loan is the stabilization of Romania"s currency, by keeping the leu "strong enough to preserve the earnings of the population, and weak enough to keep the current level of exports", the president explained.

The "brave" commitment to the international financial institutions will come in the form of 12.95 billion Euros from the IMF, an amount which will go to the Central Bank for consolidating the forex reserves, with an additional 5 billion Euros from the European Union and one billion Euros from the World Bank, which will go to the Ministry of Public Finances.

Following the negotiations with the IMF, Traian Băsescu said that the budget deficit will be 4.6% of the GDP this year, a level that was accepted by the other institutions involved in the agreement: the European Union and the World Bank.

"This deficit level is the worst-case scenario, and the budget adjustment that will take place will be done with this number in mind", Mr. Băsescu explained.

Lately, the Ministry of Finance has been "lapping up" money from the market, and the goal of the foreign loan was to get other resources so as to have the money remain in the economic circuit, the president explained, adding that after the "Ministry will stop "taking" money from the market, the Central Bank will be able to cut the minimum mandatory reserves for foreign currencies. He said that this thing could be feasible by May, when the first installment of the loan taken out from the Fund will come in.

"All the Romanian banks will be subjected to a stress test to check if they can overcome this difficult period that we are in", president Traian Băsescu said. He also added that the agreement won"t mean the increase of our country rating by international rating agencies, because the most important factor is the way the borrowed amounts will be used.