Romania's centrist coalition government approved a cost-cutting 2012 budget on Friday in line with commitments made under an International Monetary Fund-led aid agreement, Prime Minister Emil Boc said. Bucharest completed a 20 billion euro bailout earlier this year and its new programme - from which it will only draw funds if needed - provides an important emergency buffer, shoring up investor sentiment in the European Union's second-poorest economy.
"This is what describes our budget for next year: prudence, responsibility, investment and jobs," Boc told reporters, adding that Romania was on track to meet this year's budget deficit target of 4.4 percent of GDP. The 2012 budget, which includes a continued freeze on state pensions and wages, will target a deficit of 1.9 percent of gross domestic product in cash terms under Romanian accounting standards, Boc said, a figure already discussed with the IMF.
This leaves open the possibility of raising the ceiling to 2.5 percent of GDP, officials have said. Under stricter European accounting standards (ESA95), the 2.5 percent gap would amount to 3 percent of GDP, the European Union's official deficit limit as stipulated by the Maastricht treaty.
"Salaries and pensions will not decrease in 2012, that's the message and the main goal of the government will be to attract at least 6 billion euros in European Union funds," Boc said. "However if things do not worsen in Europe ... we have a possibility (to raise pensions and wages.)" Next year's growth is forecast at 2.1 percent, Boc said, down from earlier forecasts of 3.5-4 percent due to the euro zone's deepening debt crisis and ebbing domestic demand.
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