Romanian court: Austerity cuts unconstitutional

[June 25, 2010]  BUCHAREST, Romania (AP) -- A top Romanian court ruled Friday that sweeping austerity measures proposed by the government are unconstitutional, a move that will likely delay a crucial multibillion loan from the International Monetary Fund.

The ruling from the Constitutional Court, whose decisions on constitutional matters such as this cannot be appealed, came after dozens of Romanians tried unsuccessfully to storm the presidential palace to protest the measures and demand an audience with President Traian Basescu.

Riot police repelled those who tried to force their way past barricades into the 17th-century palace.

The court did not publish its reasons for ruling that the 15 percent cuts to pensions and 25 percent cuts to public sector salaries were unconstitutional. But Romanian media and unions said the reason is that Romanian law forbids cutting pensions based on worker contributions.

Romania's currency, the leu, lost more than 1 percent of its value, after news of the court decision, with a rate of 4.28 lei to the euro, and 3.49 lei to the dollar.

The ruling is likely to delay the next installment of a euro20 billion ($24.49 billion) loan from the IMF, the European Union and the World Bank last year, which helped pay state wages when Romania's economy shrank by 7.1 percent.

Deputy Prime Minister Bela Marko said one solution may be for the government to increase the nation's sales and income taxes to meet the IMF demands for the loan and keep the budget deficit at 6.8 percent.

"In my opinion.... there is no other solution," the Mediafax news agency quoted him as saying.

Prime Minister Emil Boc was to make an announcement regarding the court ruling later Friday.

Romania has about 5.5 million retirees and only about 4.3 million employees -- from which about 1.36 million are public sector workers.

[Associated Press; By ALISON MUTLER]

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