Romania to seek EU-IMF permission to boost defence budget

Dec 01, 2014 Spacewar.com

Bucharest - Romania will seek permission from the International Monetary Fund and the European Union to increase its defence budget next year in view of the separatist rebellion in neighbouring Ukraine, the finance minister said Monday.

"It is very important to step up military spending, and one of the items of discussion with the IMF and the EU will concern an extension by 0.3 perent of gross domestic product for the army," Ioana Petrescu told reporters on the eve of a visit by the lenders to Bucharest.

"We will try to get the 0.3 percent added to the deficit" of 1.4 percent of GDP that Bucharest has committed to for 2015, she added.

Petrescu said the hike was needed "in view of the situation in Ukraine, which entails more spending, and Romania's commitments to NATO", notably to host a regional command centre for the alliance.

Prime Minister Victor Ponta said in May that the defence budget was 1.5 percent of GDP and should rise to two percent in 2017 after NATO called on its members to step up their military capacities.

Romania emerged from a deep recession thanks to an emergency loan of 20 billion euros from the IMF and EU in 2009, and in 2013 reached a new two-year accord on a credit line of four billion euros ($5 billion) to use in case of a major crisis.

Weakened by his defeat in a November 16 presidential election to right-wing leader Klaus Iohannis, Ponta must convince the international lenders that campaign promises such as raising the minimum wage and doubling benefits for disadvantaged children can be met while still limiting the deficit to 1.4 percent of GDP.

According to Ionut Dumitru, chairman of the independent Fiscal Council charged with monitoring government tax and spending policy, the campaign promises will create a shortfall of between 3.5 and 4.0 billion euros -- around 2.2 percent of GDP.