Re-elected Romanian president vows to modernise public sector
Romania's newly re-elected president pledged to modernise the EU member's bloated public sector.
Romania's newly re-elected president pledged to modernise the EU member's bloated public sector on Wednesday and officials agreed with the IMF on steps to cut next year's deficit and unlock frozen aid.
Following a knife-edge runoff victory on Dec. 6, Traian Basescu negotiated with parties on forming a new government to end a political crisis that had stalled a 20 billion euro ($29.07 billion) rescue loan package.
The deal took life again on Wednesday when the International Monetary Fund said it had agreed with officials on steps to cut costs in the 2010 budget and that it expected to open funding taps again by February, lifting the leu currency.
"My top goal at this moment is modernising the Romanian state," Basescu said after the Constitutional Court confirmed his victory for a second five-year term. "The costs of the state are a heavy burden on the shoulders of Romanians."
With 1.3 million workers, the state sector makes up a third of jobs and its payroll swallows 9 percent of gross domestic product, which analysts say is twice the cost it should be.
It also sponsors political patronage and has murky bonuses, rewarding a select few, and is a breeding ground for the graft that has led Romania to be European Union's most corrupt member.
Economists say trimming the state sector is key to meeting IMF demands to cut the 2010 budget gap to 5.9 percent of GDP from an estimated 7.3 percent this year.
Budget, government, cuts
Basescu narrowly defeated opposition Social Democrat leader Mircea Geoana in a ballot that the leftist contested in court and has continued to cast doubt on, saying the former ship captain incumbent won through "massive fraud".
Owing to the turmoil, the IMF delayed a 1.5 billion euro aid tranche due this month, but mission chief Jeffrey Franks told Reuters the two sides had agreed measures needed to meet the IMF's 2010 budget target.
Later he told news agency Mediafax the mission would return in January and would go to the Fund's board as soon as possible once the budget was passed, adding: "the calendar will be very tight" and "the tranche will most likely come in February".
The leu currency rose 0.6 percent following the comments, in line with its regional peers, to 4.219 per euro.
Sources close to the budget talks say the measures could include more than 100,000 public sector job cuts, an issue that could cause tension in the coalition talks.
"The budget is almost 100 percent ready," said government spokeswoman Ioana Muntean. "All that is left is to decide on allotting funds to priority sectors. But that is a political decision that will be made by the future government."
Prime minister-designate Liviu Negoita stepped aside on Wednesday to ease the coalition talks. Basescu had tapped him last month to lead a minority cabinet replacing centrist Emil Boc, ousted by the opposition in a confidence vote in October.
Basescu said he would probably name a new prime minister designate on Thursday. He prefers a government based on his centre-right Democrat-Liberal allies and the centrist Liberals, but the Liberals resisted on Wednesday, with their leader demanding a prime minister from his party or an independent.
Analysts also say Basescu can easily form a majority from the Democrat-Liberals and an ethnic Hungarian party, with backing from other ethnic minorities and a group of 25 independent parliamentarians.
That formula would give them up to five more than the 236 votes they would need from both houses of parliament in a vote of confidence and it would let them push through a budget, but would provide only shaky support for more serious reforms down the road.
Reuters Last Mod: 16 Aralık 2009, 21:44