New IMF Agreement Will Protect Romania From Populism - President

"It is [necessary], and this precautionary agreement with the IMF and the European Union can protect Romania against even its own politicians, against populism, which can grow at any moment in Romania," said Basescu, asked by the FT whether Romania needs a new agreement, given that the Government is already on target to reduce the budget deficit to 4.4% of the GDP by next year.

The newspaper points out that a new agreement could come at the cost of even more severe austerity measures than those already implemented in Romania.

"Our objective is first of all to finalize this agreement, which will expire in April. If the first agreement had the objective of saving Romania from being derailed, and to start fiscal consolidation, the next agreement with the IMF will have the centre of gravity shifted. We will shift the objectives onto EU objectives. We have objectives now to run the programs that are financed by the EU. Of course, to continue the fiscal consolidation; to run the programs, which we have with the EU; to start the implementation of the [EU's] Agenda 2020; to increase the credibility of Romania, stimulating a positive approach on foreign direct investments. These are the objectives of our precautionary agreement with the IMF and the EU," said Basescu.

These objectives "must be focused on the EU integration process, using the EU money, increasing the flexibility of our administration and of our labour force market, where we still have some problems. This is something that we have to correct next year," said Basescu, cited by the FT.

Asked whether he is confident that Romania will manage to preserve political stability long enough to implement all its budget consolidation measures, the president said there is no reason why the ruling parties' majority in Parliament shouldn't survive into 2011, since the most difficult measures have already been enacted.

He also doesn't believe there will be any large social movement in the coming months, because "the peak was reached in October."

"We survived, continuing the measures, and I don't expect there to be large social movements in the coming months, even if the population is not happy with the measures which we take," said Basescu.

The president also spoke about the Government's fiscal consolidation measures, including "a [public sector] wage reduction of 25%; cancellation of bonuses; a 15% reduction in the money allocated for social protection; freezing of pensions." The Government cut public administration expenses and almost 80,000 people have had to leave the public sector. It has also increased the VAT to 25%, introduced taxes on intellectual property and eliminated the 13th salary, "which was a tradition here in Romania." A law on fiscal responsibility was also adopted.

"All these things have happened this year. Next year we will continue with the process of [reducing] the number of state employees," said Basescu.

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