Romania to Resist Spending Increases, says Prime Minister Ponta

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from The Wall Street Journal,

Election Politics Will Not Bring About Relaxation of Fiscal Straitjacket, He Says.

Romania will keep public spending in check despite looming elections and will continue to sell off assets, the country’s prime minister said amid concerns over deep internal divisions over the country’s policy direction.

The European Union’s second-poorest member state last year brought its fiscal deficit below 3% of gross domestic product, allowing it to leave the bloc’s corrective measures for states that don’t observe the limit.

But political tensions remain high between the country’s main political leaders and the International Monetary Fund earlier this month warned against the risk of unnecessary public spending ahead of the presidential election next year.

The country’s prime minister, Victor Ponta, pledged to keep the fiscal deficit below 3% of GDP this year and next, and public debt below 40% of GDP, one of Europe’s lowest debt-to-GDP ratios.

“My absolute priority is to maintain these positive figures while keeping Romanian CDS [credit default swaps] and the interest that we pay at the lowest level in the last 20 years,” Mr. Ponta said in an interview. Fiscal consolidation won’t, however, be so drastic as to discourage public investment, he said.

Mr. Ponta is governing in an uncomfortable cohabitation with the country’s president, Traian Basescu, whom he last year unsuccessfully sought to remove from office. The prime minister, a Social Democrat, came to power in May 2012 after Mr. Basescu’s center-right allies lost parliamentary backing.

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