EU says Romania’s budget curbs allow it to transfer loan installment soon

EU to unfreeze $1.4 bn loan to Romania soon

BRUSSELS — The European Union will unfreeze a bailout loan installment of euro1 billion ($1.41 billion) for Romania after the country moved to curbed its budget deficit, the EU’s top economy official said Wednesday.

A joint euro20 billion bailout from the International Monetary Fund, the European Union and the World Bank was suspended in October after the Romanian parliament dismissed the government, partly over tough spending plans demanded by the lenders.

The 2010 budget was approved earlier this month, shortly after President Traian Basescu was re-elected, ending months of political instability.

EU Economy Commissioner Joaquin Almunia said in a statement that he was now “confident” that the EU’s executive commission would soon transfer the loan installment now the budget had been passed. Payment is likely in March.

European Commission officials said Wednesday that Romania has now “broadly met” the conditions for handling its economy that are attached to the IMF-led loan. They praised as “significant milestones” the passing of a 2010 budget that sets a budget deficit target of 5.9 percent.

They said full and timely implementation of these budget measures “will help to improve market confidence.” IMF and EU officials are also calling on Romania to make reforms to pensions, public sector wages and tax administration.

Almunia warned that “efforts need to continue, notably for what concerns the budget deficit” to bring Romania’s public finances back on track.

Romania was already running up a high budget deficit before the economic crisis and was hit hard by the sudden recession. The country is one of the poorest in the 27-nation EU, which it joined in 2007.

The EU promised last year to lend Romania euro5 billion as part of the IMF-led bailout. It paid a first installment of euro1.5 billion in July with the second installment of euro1 billion due to be transferred in the last three months of 2009.

The rest of the EU loan is due to be paid in three installments in 2010 and the first quarter of 2011.