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Romania, IMF agree on 6.8 per cent deficit: minister

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(BUCHAREST) - Romania's government and the International Monetary Fund agreed Sunday on a 6.8 percent public deficit, up from the previous target of 5.9 percent, Finance Minister Sebastian Vladescu said.

Economic growth should be "around zero percent", Vladescu after a meeting with IMF representatives.

The announcement came after days of tough negotiations on ways to reduce public spending and increase revenues, in exchange for a new disbursement from the IMF.

Romania, which obtained last year a 20-billion-euro aid package from the IMF, the European Union and the World Bank, had promised to trim its bloated civil service and freeze public wages and pensions in order to trim the deficit from 7.2 percent to 5.9 percent.

On Thursday, President Traian Basescu announced a drastic austerity plan including slashing public sector wages by a quarter and 15 percent cuts in pensions and unemployment benefits.

The IMF was due to announce Monday if it deems the measures convincing enough for a new instalment to be unblocked.

Prime Minister Emil Boc insisted Sunday on the necessity of taking these "austerity measures".

"If Romania goes on without taking measures to adjust the public expenditures and without taking into consideration the agreement with the IMF, we will register a public debt of 62 percent of the GDP in 2012" compared to 30 percent at the moment, he said.

In a public address after meeting trade union leaders on Sunday, Basescu urged Romanians to be "realistic" and "prevent a Greek scenario".

"If we do not cut wages and pensions we would have to get a new loan in 2011 and this would mortgage the country's future," he warned.

Senate president Mircea Geoana, a member of the Social Democratic opposition party, condemned the measures as "anti-economic" on private news channel Antena 3.

The government should first "cut the highest salaries" rather than reducing uniformly all salaries in the public sector, he said.

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