Basescu: Romania's 2012 Budget to Be "Very Prudent"

“Romania’s next year budget must be extremely cautious, as the costs to finance the deficit have gone up due to the worsening situation in international markets, primarily influenced by the crisis in Greece,” Romanian president Traian Basescu has said following a meeting late on Monday with the country’s prime minister and chief of central bank.

"The budget must be very prudent, not because we wouldn't be able to find money to finance the deficit, but because financing it would be very expensive," Basescu added.

The government is to announce that the 2012 budget deficit target should be lowered to below 3 per cent of the GDP. Previously, Romania and the International Monetary Fund, IMF, agreed upon a deficit target of 4.4 per cent of GDP in 2011 and of around 3 per cent of GDP in 2012.

The government said it had no other option to keep the economy afloat, but critics said that while other European countries are trying to find alternative sources to cover their deficits, Romania was relying exclusively on IMF help.

In May 2009, crisis-hit Romania obtained a two-year 20 billion euro emergency loan from the IMF, the EU and the World Bank in exchange for implementing key reforms aimed at reducing public spending. Last July the government cut civil servants' wages by 25 per cent, while thousands of state jobs were axed and VAT was increased by 5 per cent to 24 per cent.

The next IMF evaluation mission will take place later this month in Bucharest.