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Romania forced to repay loans by plunging further into debt

Romania forced to repay loans by plunging further into debt

Autor: Mihaela Claudia Medrega

07.09.2010, 00:14 16

President Traian Băsescu yesterday confirmed what ZiarulFinanciar had written: a new loan agreement with the IMF. Despitepromises from the Government and the NBR that there was enoughmoney to repay the huge 20 billion euro loan sealed in March 2009,the already existing debt cannot be repaid without taking on moredebt.

Romania's President Traian Băsescu yesterday announced at thebeginning of a discussion with Jeffrey Franks, head of the IMFmission in Romania that the continuation of the arrangement withthe IMF would be discussed in October.
The type of the new agreement is yet unknown, i.e. whether wecontinue to take money from the Fund or it is just a precautionaryagreement, an agreement that does not entail drawing funds but justa guarantee that the state can borrow if needed. Anyway, this meansthe Romanian state is getting into a spiral of repaying debt bytaking on more debt, which is the easiest way for a state to becomereliant on foreign debt and no longer find its way towardsdevelopment. The situation is much worse than presented by theGovernment and the National Bank in March 2009, when they announceda 20 billion-euro loan overnight, the biggest in the entire historyof Romania and half of the country's budget and reveals the failureof the finance and foreign currency reserve management.
"This time you're in Romania only to celebrate the anniversary ofthe National Bank of Romania. I am glad to see you again. I amlooking forward to the visit in October, when we won't have acelebration but an assessment of the difficulties we're having,"Băsescu said at the beginning of the meeting with JeffreyFranks.