Banks Reticent To Finance Romania At 7% Yield, Despite Low Mkt Rates - Ctrl Bker

Romanian banks still hesitate to finance the state at a 7% annual yield, despite money market rates of around 2%, central bank governor Mugur Isarescu said Thursday.

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Speaking at an economic seminar, Isarescu said the central bank's operations to boost market liquidity do not influence the budget deficit financing.

The lenders' reluctance in accepting a 7% yield should be proof that indirect financing doesn't work either, the central bank's head added.

Even if the central bank would be allowed to finance the deficit, Romania's situation would not be resolved, Isarescu said.

Romanian consolidated budget posted a deficit of 16.7 billion lei (EUR1=RON4.2594) in the January-May period, amounting to 3.1% of the gross domestic product.

The government has recently announced a series of austerity measures to boost revenue and contain the budget gap to 6.8% of GDP this year, from a deficit of 7.4% of GDP in 2009.

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