ECONOMY

In Brief

Romanian minister resigns after austerity measures Romania’s interior minister resigned as protests over pay cuts for public employees test Prime Minister Emil Boc’s will to continue austerity measures in the face of efforts to topple his cabinet. As many as 10,000 state employees are expected to take to the streets today and all public worker unions are in talks over calling a general strike. The government reduced wages for civil servants by 25 percent to narrow the budget deficit and comply with terms of an International Monetary Fund-led bailout. The opposition Social Democrats and Liberals say they will try to oust the government in the second half of October as the IMF forecasts the economy will shrink 1.9 percent this year, extending Romania’s worst recession since the end of communism. Boc’s coalition, with 258 seats in the 471-member parliament, survived a June no-confidence vote by eight votes. «The current government is really close to losing its majority, and this is the beginning of the end,» said Adrian Moraru, an analyst at the Institute for Public Policy in Bucharest, in a phone interview. «It’s a difficult situation because it seems a new political crisis is emerging on top of the current economic crisis.» Vasile Blaga quit yesterday as interior minister after police officers who report to his ministry staged an illegal demonstration on September 24 and will be replaced by Traian Igas, 42, a senator and head of the ruling Liberal Democrats’ group in the Senate. President Traian Basescu later signed off on the nomination. (Bloomberg) Bulgarian foreign debt edges lower in July SOFIA (Reuters) – Bulgaria’s gross foreign debt edged down 0.7 percent year-on-year in July to 36.8 billion euros ($49.11 billion) following a drop in bank borrowing, the country’s central bank said yesterday. Compared with a month earlier, external debt fell 1 percent in July due to a fall in commercial banks’ debt. The recession has made banks more vigilant about extending credit and they have cut borrowing from their foreign parent banks. Gross external debt stood at 105.7 percent of annual gross domestic product compared with 106.7 percent a month earlier, the preliminary data showed. Gross private debt dropped 1.2 percent in July on the year to 32.6 billion euros, equivalent to 93.6 percent of GDP. Recession-hit Bulgaria expects its 2010 deficit to expand to 4.6 percent of GDP due to hidden deficits accumulated by the previous government and dropping revenues. The center-right cabinet, which took office last July, plans to finance the yawning fiscal shortfall with the fiscal reserves Bulgaria is obliged to keep under its currency board regime. But the government plans to tap international markets next year and seek at least 1.0 billion euros to back its finances, increasing the public debt burden. Public and publicly guaranteed external debt rose 3.3 percent on an annual basis to 4.2 billion euros, or 12.1 percent of GDP. The Balkan country paid 4.7 billion euros to service its gross foreign debt in the first seven months of the year, compared to 4.1 billion euros in the same period a year ago. ING on bonds Investors should buy Greek two-year notes and hold them for nine months in the expectation that their higher yield will see them outperform equivalent German government notes, according to ING Groep NV. «The two-year spread could withstand a widening of almost 320 basis points before the investor would have been better off in bunds,» Padhraic Garvey, head of developed markets debt strategy at ING in Amsterdam, wrote in a research note yesterday. «The equivalent break-even spread is 260 basis points in the three-year, and is still a relatively impressive 70 basis points in the 10-year.» (Bloomberg) PPC deal Public Power Corporation SA, Greece’s biggest electricity company, approved a framework for cooperation with France’s EDF Energies Nouvelles to set up and develop renewable energy projects in Greece, according to an e- mailed statement from the Athens-based company yesterday. (Bloomberg)