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Romania PM Submits Austerity Budget

February 7, 1999

BUCHAREST, Romania (AP) _ Prime Minister Radu Vasile submitted an austerity budget to Parliament on Sunday, calling on lawmakers to transform Romania’s ailing economy into a ``real market economy.″

Vasile said the underground economy has impoverished the country. ``The price of reform cannot just be borne by ... state employees, pensioners and young people,″ he told a special session of Parliament. ``The sacrifice must be equal.″

The premier called the document ``a budget of great austerity drafted with thrift by the finance minister,″ but few pertinent details were released.

Romania must approve a tight budget by Feb. 15 in order to get badly needed loans from the International Monetary Fund and other lenders which it needs to pay back some $2.8 billion of foreign debt this year.

About 40 percent of the economy is believed to be underground, with tax evasion rampant and many state enterprises losing money.

``Wealth amassed overnight..., fiscal evasion, and a parallel economy have cost us enough,″ Vasile told lawmakers gathered to discuss Romania’s budget. ``Only if we prove we can pay back our debts will we manage to sign agreements with international financial organisms ... who will recognize Romania as a viable partner.″

The government needs to narrow the budget deficit from 4 percent last year to about 2 percent, he said.

Romania has had greater problems than other former Soviet Bloc countries in restructuring its economy, formerly one of the most centralized in the region. In the past month, the national currency lost 12 percent of its value.

Much of its industry is outdated and the government has continued to subsidize money-losing state enterprises, fearing social unrest if it closes them.

The average monthly salary is about $100 and production and spending power have steeply declined in recent years, partly due to slow reforms and political feuding.

Inflation was about 40 percent last year, with Vasile hoping he can rein it in at 25 percent this year.

Foreign investment is a fraction what it is in neighboring Hungary, with investors saying they are deterred by bureaucracy, political bickering in the four-party coalition and widespread corruption.

The Party of Social Democracy, the main opposition group of leftists, immediately said it would not approve the budget. Former Finance Minister Florin Georgescu said it would lead to greater unemployment, lower production and a dive in living standards.

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