Romania Against Contributing to EU Bank Shield

Romania wants each European country to manage its own risks in the debt crisis, and says countries whose bank systems need no extra capital should not have to contribute to a new Europe-wide fund.

"Romania’s interests are in line with major EU countries but each nation must be allowed to chart its own path," President Traian Basescu said, ahead of the EU summit on Wednesday, which was set to thrash out the conditions for a cash injection into Europe's most troubled lenders.

"We cannot accept a recapitalisation done by withdrawing money from the Romanian market, for example, in order to withstand the crises [elsewhere] in the eurozone,” he added.

Half of Romania's banking sector is owned by Austrian and Greek banks, such as Erste, Raiffeisen, Alpha Bank and Eurocredit.

The national bank, BNR, has called on foreign-owned subsidiaries to raise capital in Romania if their parent banks face troubles "back home" as a result of their exposure to Greek debt.

Basescu added that the European debt crisis had also raised Romania’s borrowing and risk costs.

EU leaders gathered on Wednesday for an emergency summit in Brussels aimed at tackling the eurozone debt crisis.

Among the measures to be discussed was raising around 100bn euro in new capital to shield banks against possible losses to indebted countries, Greece above all.

Analysts say the situation that Romania faces is worrying, because the country largely depends on foreign borrowing to finance its budget deficit and investment plans.

“Romania was among the first European countries to benefit from a bailout by the EU and the IMF in 2009," economic analyst Ilie Serbanscu recalled.

"But it has failed since then to reduce its dependency on such loans to finance its debt, so if the situation worsens in the EU, the Greek scenario could become a reality for Romania also,” he added.

Crisis-hit Romania obtained a two-year 20-billion-euro emergency loan from the IMF, the EU and the World Bank in 2009 in exchange for promising to undertake key reforms aimed at slashing public spending.

In April the country signed a new "precautionary" agreement with the IMF worth 5 billion euro.

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