Brussels, 25 March 2008
"I am pleased that it was possible to come to an agreement rapidly on a
significant financial assistance package. I welcome the commitment by the
Romanian authorities to implement a major programme of economic adjustment aimed
at bringing the economy on a sound and sustainable growth path, including
through strengthening financial sector supervision. I am aware of the hardships
that Romania and its citizens are encountering at this time of crisis, but I am
confident that with the right policies and with the help of the EU and other
international bodies they will emerge stronger," said European Economic and
Monetary Affairs Commissioner Joaquin Almunia
The support will be provided in conjunction with the International Monetary Fund (€13 billion) and the World Bank (€1 billion). The European Bank of Reconstruction and Development and other multilateral creditors will jointly provide a total of €1 billion, bringing the total to up to € 20 billion over the period to the first quarter of 2011.
The financial assistance will be conditional on the implementation of a comprehensive economic policy programme. The financial assistance and the policy programme are designed to enable the economy to withstand short-term liquidity pressures while improving competitiveness and supporting an orderly correction of imbalances in the medium term, hence bringing the economy back on a sound and sustainable footing.
In the financial sector, the programme would seek to ensure adequate capitalisation of banks and to strengthen financial sector supervision, including banking and winding-up laws. The deposit guarantee scheme would be further bolstered.
A sound management of the funds received is expected with a strong role for independent and well functioning auditing and anti-corruption institutions.
A key element of the economic policy package is an immediate and sustained fiscal consolidation to limit the budget deficit to 5.1% of GDP in 2009, falling further to below 3% of GDP in 2011. To support these targets, measures will be taken to improve budgetary policy credibility and predictability, as also requested by the June 2008 Commission Policy Advice to Romania.
The economic policy conditionality will be set in a forthcoming Council decision and further spelled out in a Memorandum of Understanding to be concluded shortly with the Romanian authorities. The agreed measures and targets will also be reflected in the forthcoming Convergence Programme update. The Commission in collaboration with the Economic and Financial Committee will monitor regularly and closely that the economic policy conditions attached to the financial assistance are fully implemented and may request additional measures when and if circumstances so require.
We also urge the financial institutions operating in Romania to continue providing adequate funding of their operations there as well as appropriate financing of the economy. In this context we would very much welcome the confirmation of the long-term commitment of foreign parent banks to Romania and to support their subsidiaries in the country.
EU assistance will take form of a BoP loan
The proposed medium-term financial assistance to Romania will be based on a Council Decision based on a Commission recommendation to grant this assistance. Such support is provided under Council Regulation 332/2002 establishing a facility providing medium-term financial assistance for non-euro area EU Member States' balance of payments (BoP). The Commission is expected to adopt this recommendation for a Council Decision in the coming weeks. Following the Council Decision, the Memorandum of Understanding, which spells out the precise policy conditions, as well as the loan agreement, will be agreed between the European Commission and the Romanian authorities.
This support comes on top of the increase in advance payments of structural funds from €0.5 billion to €0.8 billion for 2009, as part of the European Economic Recovery Package. Romania is also likely to benefit from the significant increase of the EIB resources.
The EU also agreed to grant a BoP loan to Hungary of €6.5 billion and to Latvia of €3.1 billion and an additional €2.2 billion is committed to Latvia by some individual Member States. On a proposal by the Commission, the Council decided to increase early December 2008 the overall financial assistance ceiling to €25 billion from an original €12 billion (see IP/08/1612). The European Council of 23 March 2009 has welcomed the suggestion by the Commission to double the BoP facility to €50 billion.