2011-01-09

Romania asks IMF-EU Precautionary Loan to Strengthen Credibility

Here's another foolish statement and another proof that things are topping and will be on the way to decline from here when it comes to sovereign solvency: Romania is asking the EU and IMF for a precautionary loan. The reason? They are now out of the recession and things are just fine again.

Will this strengthen their credibility, and solvency as stated by their President? Actually, it's quite the opposite: taking on more loans and debt makes less credit-worthy, more insolvent. But in the rosy-world of politicians, it maybe does.
(Bloomberg) Romania said it set parameters for a new precautionary loan from the International Monetary Fund and the European Union as the Balkan nation emerges from a recession.

The central bank in Bucharest gave no details of the parameters in a statement today, saying that fiscal consolidation and “structural reforms” are “essential” for economic growth. The credit line may be about 3.6 billion euros ($4.7 billion) and tapped in case of an emergency, Mediafax newswire reported, citing unidentified government officials.
[...]
Romania, which has been relying on a 20 billion-euro bailout led by the IMF to stay afloat, may take a precautionary loan from the Washington-based lender in April to strengthen its credibility, streamline the fiscal system and help absorb EU funds worth as much as 32 billion euros available through 2013, President Traian Basescu said yesterday.
[...]
The government will probably seek a one-year precautionary loan after the current two-year bailout agreement expires in May because of general elections in 2012, Bucharest-based Mediafax said.
[Thanks to blbl for sending me a report.]

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