EC Proposes European Council To Provide EUR5B Financial Aid To Romania

The financial assistance is conditional upon the implementation of a comprehensive economic program to which the Romanian authorities committed to and which will, ultimately, put the Romanian economy on a sound and sustainable footing, the Commission said in a statement.

 

"The support is conditional upon the implementation by the Romanian authorities of a major program of fiscal, financial and structural adjustment. This will ultimately put Romania in a position to return to a sound and sustainable convergence path," European Economic and Monetary Affairs Commissioner Joaquin Almunia said.

 

The proposal is expected to be on the agenda of the next meeting of the EU finance ministers on 5 May.

 

The assistance is being provided in conjunction with the International Monetary Fund (EUR12.95 billion). Additional multilateral support of EUR2 billion will be provided by the World Bank (EUR1 billion), the European Investment Bank and the European Bank of Reconstruction and Development (EUR1 billion together) on top of their general lending activities.

 

This brings the total to up to EUR 20 billion over the period to the first quarter of 2011, the Commission also said.

 

The financial assistance will be disbursed in maximum five installments during the coming 24 months, the release of which will be conditional upon the implementation of a comprehensive economic policy program.

 

The policy program is designed to enable the economy to withstand short-term liquidity pressures while improving competitiveness and supporting an orderly correction of imbalances in the medium term, hence bringing the economy back on a sound and sustainable footing.

 

A sound management of the funds received is expected with a strong role for independent and well functioning auditing and anti-corruption institutions.

 

A key element of the economic policy package is an immediate and sustained fiscal consolidation to limit the budget deficit to 5.1% of GDP in 2009, falling further to below 3% of GDP in 2011.

 

To support these targets, measures will be taken to improve budgetary policy credibility and predictability, the Commission said.

 

The economic program will also include structural reform measures, towards improving public administration, enhancing the quality of public expenditure, increased absorption of EU funds, improving of the business environment and tackling undeclared work.

 

The policy conditions will be further detailed in a Memorandum of Understanding to be concluded shortly with the Romanian authorities.

 

The European Commission said the medium-term financial support to Romania comes on top pre and post-accession EU funds, which are estimated at about 3% of Romania’s GDP in both 2009 and 2010. Furthermore, in 2009, Romania will benefit from an increase in advance payments of structural funds by about 0.2% of its GDP, as part of the European Economic Recovery Package.