Romania’s Negotiations With IMF Come To Deadlock Over Consumer Loan Issues

According to the source, the IMF might even have the loan agreement with the East European country cancelled.

Both the Romanian Government and ruling coalition parties disagree with amending the emergency decree adopted in June, which transposes an EU directive into the local legislation. The new act applies retroactively to existing loans and the banks denounced the measure as abusive.

Romania considers that any divergences of local legislation and European norms are solved at an institutional level within the European Union Treaty.

IMF mission chief Jeffrey Franks said recently Romania must bring its consumer loan legislation in line with European standards to receive new aid from a EUR13 billion International Monetary Fund lifeline.

According to the sources, IMF representatives also rejected certain economic measures proposed by ruling democrat liberals for 2011.

IMF officials said that, by lowering the flat tax rate and social contributions, the budget deficit will exceed the 4.4% of DGP target set for 2011.

The country must also bring its government arrears down to RON480 million by year-end and eliminate them altogether by the end of the IMF program in 2011. End-June, Romanian government arrears stood at RON2 billion, double the half-year target agreed with the IMF.

Franks said Friday Romania hasn’t met the end-September performance criteria in the sector of general government arrears and it will ask the International Monetary Fund for a new waiver of non-observance.

An IMF mission will be in Bucharest until November 1 to assess the country’s progress under the loan agreement and decide on the disbursement of new aid, worth EUR870 million.