EU willing to release aid to Romania
Commission gives conditional approval to latest tranche of aid package to Romania.
The European Commission today provisionally agreed to release the final €1.2 billion tranche of aid pledged to help Romania out of its economic crisis.
The Commission said that the payment, which would be made either in February or March, is conditional on Romania reforming its pension system, passing a law on wages and keeping to deficit-cutting targets.
The conditional approval follows a 12-day mission to Romania by experts from the Commission, the International Monetary Fund (IMF) and the World Bank.
The payment is part of a €20bn aid package put together by the EU and the two international financial institutions last year. To ensure that it received the loans and to avert the risk of a debt default, Romania agreed to undertake widespread economic and structural reforms intended to help it withstand short-term liquidity pressure, improve its competitiveness and return budgetary spending to sustainable levels.
The €1.2bn tranche would be the fourth payment by the Commission from the package. The aid is being released in instalments to make sure Romania implements reforms.
The Commission predicts that Romania’s economy, which shrank by 7.1% last year, will contract by another 2% this year.
However, it expects that a pick-up in activity at the end of the year will set the stage for a 1.5% expansion of the economy in 2011. This should help the government meet its 2011 budget deficit target of 4.4% of gross domestic product (GDP), down from 7.2% in 2009 and a predicted 6.8% this year. The expert mission said that cutting the budget deficit to 3% in 2012 requires implementation of wage, pension and healthcare reforms.
The mission also said that more needs to be done “to increase the low rate of absorption” of EU aid.
The EU has so far released a total of €3.7bn of the €5bn it has pledged to Romania.
The aid comes from a balance-of-payments facility used by the EU to help non-eurozone countries in financial difficulties.
An additional €12.95bn is being provided by the IMF, €1bn by the World Bank, and a combined €1bn from the European Investment Bank and European Bank for Reconstruction and Development.
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