Proell: Romania should take out a foreign loan

During yesterday's talks with Minister of Public Finance Gheorghe Pogea and the Governor of the National Bank of Romania (BNR), Mugur Isarescu, Austrian Minister of Finance, Josef Proell, encouraged the Romanian state to take out a loan from either the International Monetary Fund (IMF) or the European Union (EU), and use such funds mainly to support the Romanian banking system rather than for the financing of the country's budget deficit, sources close to discussions told Business Standard.

BNR's Chief Economist, Valentin Lazea, said yesterday that a possible foreign loan will be considered at the end of the first half of this year.

Proell's visit to Romania is part of a tour of Eastern European countries to request support for Austria's plan to save lenders in the region. Proell told The Money Channel that the task of both Romania and other Eastern European countries is to ensure national currency liquidity and the stability of the national currency. "Austria, with its mother-banks, has a national program and will supply money. We are doing this because we are negotiating with our banks to help them: what we cannot do, what must happen on local markets. This is a correct planning of the country's basic data, of the national currency, and of the existence of national currency liquidities. Here we do need cooperation, in terms of Austrian measures for mother-banks and measures for local banks," added Proell. 

The Austrian minister said that there are several possibilities to ensure an adequate level of liquidity in the Romanian banking system, all the more as the central bank has high reserves, referring to a possible lowering of the Cash Reserve Ratio (CRR).

"Austrian banks present in Romania inform us that there are very high BNR capital shares. The important thing is to use all available instruments so that the liquidity flow is uninterrupted," Proell said. Romania's President Traian Basescu said Wednesday that before contracting loans to cover financing deficits in the private sector, authorities have the obligation of doing all in their power so that mother-banks can meet the obligations they committed themselves to following the process of privatization of Romanian lenders.

The Chief Economist of the European Bank for Reconstruction and Development (EBRD), Erik Berglof, said that the region's financial systems are still functioning, as most local lenders are owned by international financial groups. "The parent banks are contracting but they haven't abandoned their subsidiaries in our countries of operations, which is very important.

This is something we are trying to support. We are working with the other international financial institutions, home country governments and host countries to ensure that the different parties coordinate their responses and avoid any unilateral actions that could undermine financial stability," said Berglof at the end of January, quoted by the Reuters news agency.

Business Standard