UNPRECEDENTED DECISION Traian Băsescu refuses to sign the memorandum with the IMF

• Update 14:01 Ponta and Băsescu meeting today at 17:00

The meeting between president Traian Băsescu and Prime-Minister Victor Ponta, on the issue of the state budget and the memorandum with the IMF, requested by the prime-minister, could take place today at 17:00 hours, according to sources from the press.

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President Traian Băsescu has decided not to approve the memorandum sent by the Government approving the negotiations with the IMF, due to the hike of the fuel excise.

He said yesterday: "I will not endorse this anti-economic measure, which goes against Romania's interest and of the chances of the economy for a turnaround. The government can endorse it without my signature, but I won't sign an increase of the excises for fuel". The president announced has already informed the International Monetary Fund about his position.

Thus, the discussion on the board of the IMF of the letter of intent and of the memorandum of economic policies concluded with the Romanian authorities, programmed for December, will be postponed because the documents must also be signed by the president of the country.

The president said: "I do not want measures that would put a damper on the economic turnaround, and the money that would be raised from that additional excise, by putting 7 cents in the letter, in reality would be 12 cents, when you add VAT to it, the inflation of 2012 and the exchange rate. It will amount to 52 bani at the pump for Diesel fuel and 53 for gas, meaning an 8% hike in the price of fuel. Its effects - the increase of prices, an additional hike of inflation, many SMEs and transport companies going insolvent of bankrupt and those who will be affected the worst will be precisely the ones the government claims it is trying to help. This price increase will affect the pensions more than the 3.75% hike that the law requires them to make. All the facilities which the government keeps talking about all day long will be cancelled by the effects of the 8% increase in the price of fuel".

Traian Băsescu mentioned that legally, the document can not be submitted, because it is an international agreement and it must be approved by the president.

He said: "I will not sign the memorandum and I want to warn the Government and the Parliament to drop the lies, because not applying this tax would be recouped by cutting expenses by 1.5 billion at Dragnea's ministry and I have seen another surplus allocated for the payment of the additional debt. That would make 2.1 billion at first glance".

In the memorandum agreed with the IMF it is written: "In order to reach the deficit target, we will implement additional measures. Starting in 2014, the inflation will be added as an element in the formula for indexing excises. The fuel excises will also be increased by 7 Eurocents per liter".

• Liviu Voinea: "The agreement with the IMF isn't operational if the president doesn't sign it"

The budget delegate minister, Liviu Voinea, said last night, that as long as the agreement with the IMF is not signed by the president, it is no longer operational. "The agreement is suspended de facto, under these circumstances. If we no longer have an agreement with the IMF and the European Commission, then we will have to pay a higher cost to borrow from the international markets. The memorandum can not be concluded if it isn't signed by the president. We have an agreement with the IMF, but it is no longer operational under these conditions. Romania's interest is to have an agreement with its international partners".

Minister Voinea stressed the fact that the agreement is no longer operational entails the fact that the first tranche of 170 million Euros can no longer be made available to Romania. "I've done my duty. Everybody has to do their duty in the country. We have a budget which gets passed in agreement with our partners. We have a cheaper financing that is ensured by the Eurpopean Union", the minister of the Budget concluded.

Ionel Bănculescu, the honorary advisor of Prime Minister Victor Ponta, told us: "We are witnessing the intensification of the political struggle, which, unfortunately, is spilling over into the economy. The business sector would have preferred being sheltered from this, but apparently it isn't. We have an acute political fight, which is already aimed at the economic sector. If the government has decided on a price increase, this measure is definitive and irrevocable. There is no authority that would cancel this tax levy. When the Government assumes the hike of the taxes, sooner or later the decision will be implemented".

She said that if this hike of taxes and excises were cancelled, then this would create a very dangerous precedent because it would affect the fundamental ability of the executive to impose taxes. The government doesn't accept the setting of precedents, so Mr. Blănculescu estimates that the tax hikes will remain in place.

Cristian Pîrvan, the secretary general of the Association of Romanian Businesspeople (AOAR), told us: "The government tied this memorandum to the excise hike and the electric poles tax. This caught the attention of president Băsescu, who might have signed the memorandum otherwise. I don't know what the consequences are".

Andreea Paul, the secretary of the Budget, Finance, and Banks Commission of the Chamber of Deputies, said: "It would be an unprecedented step if the memorandum gets sent in without the signature of the president and this would affect the financial relations which our country has with the international institutions. In spite of this, we await the decision of the Government, which might be a surprising one. The USL has accustomed us to a behavior similar to that of a sole political party, which is why this memorandum going to the IMF without the signature of Traian Băsescu wouldn't be out of the question".

• Ilie Sârbu: Băsescu's action is irresponsible

The leader of the senators of the Social-Democrat Party (PSD), Ilie Sârbu, said yesterday in the Parliament that the action of president Traian Băsescu of not signing the memorandum with the IMF is "irresponsible, bordering on insanity". "His action is irresponsible, and aside from that, it throws the country into chaos, or perhaps that's precisely what he wants, to set Romania on fire, and it borders on insanity", said Sârbu, who added: "He has reached the stage of mental breakdown, he wants to destroy everything, I don't know if he should be allowed to do that, but it is not up to me".