Today, the European Commission (EC) formally requested the European Council “to provide medium-term financial assistance to Romania of up to €5 billion.” The financial aid provided will be part of an approximately €20 billion multilateral package supported by the IMF, the European Bank of Reconstruction and Development and other international creditors. Last month, the Ecofin Council and the EC jointly issued a statement regarding its grant to Romania.
The proposed financial assistance will be in the form of a European Community loan pursuant to Council Regulation 332/2002 and “will be disbursed in [a] maximum [of] five installments during the coming 24 months, the release of which will be conditional upon the implementation of a comprehensive economic policy programme.” The conditions of the policy will addressed in further detail in a Memorandum of Understanding that will be entered into with the Romanian authorities.
Key elements of the proposed economic policy programme include the following:
- implementation of measures 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”;
- reinforcement of financial sector supervision and adoption of measures to ensure the adequate capitalization of banks; and
- adoption of structural reforms “in line with the country-specific recommendations by the Council in the framework of the Lisbon strategy” which will include policies geared towards “improving public administration, enhancing the quality of public expenditure, increased absorption of EU funds, improving of the business environment and tackling undeclared work.”
The Romanian government also intends “to limit the budget deficit to 5.1% of GDP in 2009, falling further to below 3% of GDP in 2011.” To meet these objectives "measures will be taken to improve budgetary policy credibility and predictability, as also requested by the June 2008 Commission Policy Advice to Romania.”
The EC, together with the Economic and Financial Committee, will monitor “that the economic policy conditions attached to the financial assistance are fully implemented and may request additional measures when and if circumstances so require.” The proposal is expected to be addressed at the next meeting of the EU Finance Ministers to be held in two weeks.