By Radu Marinas
BUCHAREST, March 10 (Reuters) - Romania asked the EU's
executive for aid on Tuesday to save it from a possible
financing crisis, making it the latest member of the bloc to cry
for outside help against the global economic storm.
Once the European Union's fastest growing country, Romania
is scrambling to address an evaporation in foreign lending and
investment that has caused fellow members Latvia and Hungary to
grab IMF-led lifelines and given rise to public unrest.
Romania's finance ministry said it and the central bank had
started talks with the Commission, the International Monetary
Fund and other institutions to seek "medium-term foreign
financial assistance", code-language for a financial bailout.
It followed a call on Monday by President Traian Basescu for
popular support for belt-tightening measures and an IMF loan.
An EU source familiar with the talks said an agreement could
be reached very quickly.
"Negotiations will start very soon. When they are concluded
will depend on conditions to be proposed for the aid package and
whether the Romanian government accepts right away," the source
said. The Romania leu was little changed after the announcement.
An IMF mission will arrive in Bucharest on Wednesday for two
weeks. Mihai Tanasescu, Bucharest's representative to the IMF,
said he saw a potential programme running at least two years.
The European Commission has pledged to help struggling
economies in the bloc's eastern wing on an ad hoc basis.
But lacking broad support, it has baulked at a wider plan to
cover the region as a whole and has so far let the International
Monetary Fund lead bailout packages in deals requiring austerity
measures that are all the more unpopular because they cut state
spending in countries already facing a collapse in growth.
On Tuesday, EU finance ministers backed a call from the IMF
to double its crisis funds to $500 billion, with an emphasis
that states like China and Saudi Arabia could pay a big share.
BELT TIGHTENING
There have been no details on a potential bailout but
economists say it could amount to around 20 billion euros, near
$25 billion of IMF, EU and World Bank money agreed in a bailout
of Hungary last October.
They also add, though, that the centre-left government could
face a difficult fight to meet the IMF's requirements, bound to
include tough spending cuts for the country of 22 million, which
is the EU's poorest state when adjusted for price differences.
"As support will probably come with strings attached on the
fiscal front, a smooth process should not be taken for granted,"
Citibank said in a report. "The mettle of the coalition
government is likely to be tested by the difficult decisions
ahead."
After several years of booming growth, the 10 ex-communist
states that have joined the EU since 2004 have been walloped by
the economic crisis due to the dearth of foreign financing as
well as a collapse in western demand that has hammered exports.
A regional selloff has also cut up to a third off the value
of floating currencies like the Polish zloty and put governments
with units pegged to the euro under pressure to devalue, a move
that would hit millions who took loans in euros and Swiss francs
in the belief they would soon join the euro zone.
Social unrest, including violent protests in Bulgaria and
Latvia, has risen in some countries, and the latter country's
government was forced to step down last month. This week,
officials in Lithuania tried to reassure the public after people
rushed to buy foreign currency due to devaluation rumours.
On Tuesday, Lithuania's prime minister said the litas would
not stray from its peg, but he said budget cuts were needed.
"In this context, our main objective is to secure the
stability of the litas, and that we can do by securing the
stability of our financial system," he said.
(Additional reporting by Nerijus Adomaitis; writing by
Michael Winfrey; editing by Patrick Graham)
