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Romanian Parliament Adopts IMF-Backed Pension Law

Romania’s Parliament approved a pension law critical for future disbursements from the Balkan nation’s international bailout loan.

Lawmakers today adopted with 172 votes in favor a request from President Traian Basescu to set the retirement age at 63 years for women and 65 for men, said Roberta Anastase, the Chamber of Deputies’ president and a member of Prime Minister Emil Boc’s ruling party.

Romania, the European Union’s second-poorest member, is relying on a 20 billion-euro ($26.7 billion) loan led by the International Monetary Fund as it struggles to cut its budget deficit and recover from its worst recession on record. Romania agreed on Nov. 1 to approve a 2011 budget, enact a unified wage law and revise consumer-credit and pension rules to unlock a 2.4 billion-euro installment of the emergency loan.

“I want to assure you that no pension will decline and I want to tell those who voted against the law that the day will come when you will thank your colleagues for voting in favor of a responsible pension system,” Labor Minister Ioan Botis told lawmakers in Parliament after the vote. “It is a responsible vote for the future of Romania.”

Presidential Action

The pension law now goes to Basescu, who refused in October to sign it. Instead, he sent it back to Parliament requesting a reduction of the proposed women’s retirement age to 63 years from 65 years, as contained in the initial pension law approved by lawmakers on Sept. 16.

The new retirement age will take effect in 2030, with everyone who has contributed to the system for at least 15 years qualifying for a pension. The law also links future pension increases to the inflation rate as opposed to the current average monthly wage tied to raises.

Romania’s government took the first step toward meeting the IMF’s conditions late yesterday by approving a budget draft for 2011. It sent the proposal to the Parliament today for debate and approval by the end of the year.

The draft foresees spending cuts to reach a deficit of 4.4 percent of gross domestic product next year from a target of 6.8 percent in 2010, Finance Minister Gheorghe Ialomitianu said in an e-mailed statement. In 2010 the government raised a value-added tax by 5 percentage points, to 24 percent, and cut public wages to keep Romania’s IMF-led bailout on track.

The budget envisages economic growth of 1.5 percent next year. Output will probably contract for a second year in 2010, possibly as much as 2 percent.

The leu strengthened 0.2 percent to 4.2997 per euro as of 4:23 p.m. in Bucharest trading.

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