Romania set for mass protest

Romanian authorities closed off parts of central Bucharest today, preparing for protests against drastic spending cuts which unions say could attract up to 60,000 demonstrators.

It marks the first serious test of the six-month-old centrist government’s determination to force through austerity measures vital to securing more international aid for its recession-hit economy.

If union forecasts prove correct,today’s protest outside government headquarters will be one of the biggest since the fall of communism in 1989.

Romania has promised cuts to state wages of 25 per cent and to pensions of 15 per cent as part of an effort to meet International Monetary Fund (IMF) requirements for the release of the next tranche of loans in a €20 billion bailout package.

The IMF deal’s importance has been highlighted by two failed debt auctions this month as investors fear the government will bow to public pressure.

The IMF has said it will disburse its next tranche of aid only after Romania enforces a credible plan to reduce its budget deficit to 6.8 per cent. It was 7.2 per cent in 2009 and the IMF says that without cuts it could reach 9 per cent of GDP.

Romania’s state sector, criticised for inefficiency and corruption, employs one-third of the workforce and spending. Pensions, wages and other social benefits account for two-thirds of budget revenues.

Such spending has become increasingly hard to finance after triple-digit pay rises in the booming 2005-2009 period, as the private sector faces shrinking domestic demand and higher unemployment.

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