Commission pays € 1.15 billion in Balance of Payments support to Romania

The EU disbursed today € 1.15 billion to Romania, the third instalment of a € 5 billion loan, which was agreed in May 2009 as part of a multilateral financial assistance package. The disbursement to Romania follows a positive assessment by the Commission of the implementation by the Romanian authorities of the conditions agreed in the Supplemental Memorandum of Understanding (SMoU).

The EU disbursed today € 1.15 billion to Romania, its third instalment in the context of the Balance of Payments loan assistance granted to Romania in May 2009. The disbursement of the third tranche follows the positive assessment by the Commission of the implementation by the Romanian authorities of the policy programme under the € 20 billion multilateral assistance package.

The ambitious fiscal consolidation measures agreed with the authorities in May and June were implemented as planned. In addition, the authorities enacted further measures to compensate for the effects of lower growth. Under current policies and assuming rigorous budgetary execution, Romania is expected to reach the agreed deficit targets for 2010 and 2011, respectively (7.3 and 4.9 percent of GDP in ESA terms). Romania remains committed to reduce its deficit below 3 percent of GDP in 2012.

Good progress has been made regarding other reforms under the programme, which are conditionality for the next tranches of the EU loan. A major pension reform has recently been adopted by Parliament. An independent Fiscal Council was created to strengthen the fiscal policy framework. The government is committed to take further measures to increase the absorption of EU Funds and to combat tax evasion. The authorities are also putting the finishing touches on the implementing legislation of the unified wage law. The unified wage law is a key piece of legislation which will help ensure that wages in the public sector will be on a sustainable path.

The measures taken by Romania are an important step forward towards restoring macroeconomic stability and a sustainable fiscal position. It will be crucial going forward to ensure that the implemented fiscal consolidation measures remain in force and that their effects are not offset by other policies. Moreover, the authorities should continue to rigorously implement the reforms agreed in the context of the multilateral assistance programme.