The European Commission approved on Tuesday and asked the European Council to grant a medium-term loan of EUR 5 bln to Romania, as part of the multilateral financing program of up to EUR 20 billion agreed with the IMF.
The proposal is on the agenda of a reunion of the EU Finance Ministers, due to take place on May 5, a press release issued by the Commission. The granting of this loan depends on the introduction of an adequate economical program by the Romanian authorities. “EU support to Romania underlines our solidarity to our Member States. In return, the support is conditional upon the implementation by the Romanian authorities of a major programme of fiscal, financial and structural adjustment. This will ultimately put Romania in a position to return to a sound and sustainable convergence path, ” said European Economic and Monetary Affairs Commissioner Joaquin Almunia. The assistance is being provided in conjunction with the International Monetary Fund (EUR 12.95 bln). Additional multilateral support of €EUR 2 bln will be provided by the World Bank (EUR 1 bln), the European Investment Bank and the European Bank of Reconstruction and Development (EUR 1 bln 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 financial assistance will be disbursed in maximum five instalments during the coming 24 months, the release of which will be conditional upon the implementation of a comprehensive economic policy programme, the communique reads. The policy programme 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.
In the financial sector, the programme would seek to ensure adequate capitalisation of banks and to strengthen financial sector supervision, including banking and winding-up laws. The deposit guarantee scheme would be further bolstered. The programme will include a commitment by parent commercial banks to rollover and recapitalisation.
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, as also requested by the June 2008 Commission Policy Advice to Romania.