Romania in talks with IMF on aid deal

EASTERN EUROPE:ROMANIA IS discussing an aid deal with the International Monetary Fund (IMF) to help it cover its debts and budget deficit as the economy slows and borrowing becomes more expensive.

The 22 million strong nation would become the third EU member, after Hungary and Latvia, to secure funding from the IMF as the economic crisis bites deep into central and eastern Europe.

“The meetings are part of ongoing discussions on recent economic developments and the challenges facing the Romanian economy,” said IMF spokeswoman Angela Gaviria. The talks are expected to finish today, but it is unclear if any decision will be announced immediately.

“Romania is in talks with the IMF over additional loans,” German foreign minister Frank-Walter Steinmeier confirmed after meeting his Romanian counterpart Cristian Diaconescu in Berlin.

He added that Romania might also seek funds from Brussels.

“Whether . . . other talks with the European Union are to be considered – on taking up Commission facilities to support the budget as happened towards Latvia and Hungary – that remains to be seen,” he said.

Romania’s stock market and currency – the leu – have plummeted in recent months, and industrial output has slowed as foreign demand for Romanian goods has dwindled.

Bucharest has also found it harder to borrow new cash to service its budget deficit and large hard currency debt since two major ratings agencies recently downgraded Romania’s credit status to “junk” level.

Some Romanian banks are also under strain as parent firms in western Europe withdraw capital to bolster their own account books.

There are also fears over the scale of bad debt in Romania where many people took out loans in foreign currencies when interest rates were low and are now struggling to repay them as the leu gets weaker.

Analysts suggest Romania requires €10 billion to cover its short-term financing needs. Hungary is due to received around €20 billion under its IMF-led loan deal, and Latvia €7.5 billion.

Last week the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank announced loans of up to €24.5 billion for eastern European banks.