European trio call in the International Monetary Fund

(BUCHAREST) - A trio of countries in southeast Europe called in the International Monetary Fund on Wednesday to provide emergency loans needed to plug budget gaps left by the financial crisis.

Romania said it had secured a 20-billion-euro lifeline from the IMF and three other lenders, Serbia reached agreement for a 4.0-billion-dollar loan, and Bosnia said it would start talks with the Washington-based lender.

All three have vulnerable economies that have fallen foul of the global economic crisis, with previously strong growth rates turning flat or negative, throwing the public accounts into disarray.

Faced with steep budget deficits and slumping currencies, they had no alternative but to turn to the IMF, set up after the Second World War as a lender of last resort to countries facing a balance of payments crisis.

Hungary, Latvia and Ukraine, other high-profile European victims of the global financial crisis that began in mid-2007, have already asked the multilateral institution for assistance.

Romania signed an agreement on a two-year standby arrangement, worth 27 billion dollars, with the IMF, the European Union, the World Bank and the European Bank for Reconstruction and Development (EBRD).

"We have successfully concluded negotiations on a multilateral support package including the IMF, the EU, the World Bank and other international organisations," said the head of the IMF's mission to Romania, Jeffrey Franks.

The IMF is putting up 12.9 billion euros of the loan, the EU 5.0 billion euros, the World Bank 1.0-1.5 billion euros and the EBRD and other organisations the rest, Franks said.

Romania's last agreement with the IMF, dating back to 2004, was suspended in 2005 after a dispute over the size of the public deficit, which the IMF wanted to be close to zero but which had ballooned to 5.28 percent of gross domestic product by 2008.

In Serbia, the IMF is to provide the crisis-hit Balkan country with almost 3.0 billion dollars for this year in addition to funds to help refinance private sector debts, Economy Minister Mladjan Dinkic said.

"The accord we have reached with the IMF is very important for Serbia, since it will bring stability to our financial system," Dinkic was quoted as saying.

Servia has agreed to cut public spending, with the biggest reductions coming in the state administration, he said in the statement carried by the Beta and Tanjug agencies.

"We are introducing lots of savings and, I would say, more responsibility than in the past," Dinkic said.

The new deal adds to a previous one, signed three months ago, in which the former Yugoslav republic country secured a 15-month stand-by loan worth 530 million dollars from the Fund.

Meanwhile in Bosnia, the government said Finance and Treasury Minister Dragan Vrankic had invited the IMF to initiate negotiations for emergency loans.

The Fiscal Council, a state body, did not provide details on the size of the loan desired, saying only that an advisory group had been set up to prepare a platform for the IMF negotiations within a week.

The government of Bosnia's Muslim-Croat entity decided last week to borrow some 80 million euros (110 million dollars) from commercial banks to fill the budget deficit of more than 130 million euros accrued last year.

The country's other entity, Republika Srpska, is in a better situation due to privatisation revenues achieved in the past two years, but these are starting to run out.

The IMF had repeatedly stated it was ready to assist Bosnia, but the country had been reluctant to ask for help as any deal would depend on unpopular spending cuts.

Bosnia is still recovering from its 1992-1995 war which devastated its economy. The conflict was ended by peace accords that split the former Yugoslav republic into the two entities linked by weak central institutions.

The Balkan country has not had a formal relationship with IMF since it had two stand-by loans totalling around 180 million euros, in arrangements that ended in 2004.

Bosnia's central bank governor Kemal Kozaric warned earlier Wednesday that the country was facing zero or even negative economic growth this year as a result of the global financial crisis.

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