Source: The Straits Times

ROMANIA braced on Friday for a wave of protests after the president unveiled austerity cuts in public sector wages and pensions to meet a deficit target set by the IMF and avoid a Greek emergency scenario.

‘This programme to cut public expenses was inevitable,’ President Traian Basescu said during a press conference on Thursday after a meeting with IMF and European Union representatives in Bucharest.

Wages in the public sector are to be cut by 25 per cent, Mr Basescu said, adding that ‘all salaries, including the minimum one, will be affected.’ Pensions will be slashed by 15 per cent, just like unemployment benefits.

These cuts should help Romania ‘avoid an extremely difficult situation, generated not so much by what is going on in its own economy, as by developments in the region,’ he said, in a reference to the Greek crisis.

Romania last year pledged to trim the bloated civil service and freeze public wages and pensions in exchange of a 20-billion-euro aid package from the IMF, the European Union and the World Bank. But with reforms slower than expected, the deficit threatened to balloon beyond the 5.9 per cent target set by international lenders.

Moreover, the IMF has reduced Romania’s growth forecast for 2010 from 1.3 per cent to 0.8 per cent. In 2009, its economy contracted by 7.1 per cent. Mr Basescu said the government had chosen the ‘bitter pill’ of slashing public spending instead of raising taxes. The cuts will be effective from June.

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