Concerns About Greece Raised Romania’s Risk Premium In Last Few Days- Franks

Dealers in the baking market said Romania's CDS peaked at 283 points Thursday, June 23, rising from 225 points starting June 7. Right now, Romania's CDS stands at 277 points.

"There have certainly been some temporary negative effects in terms of risk premium for Romania in international markets and that certainly was related to concerns about Greece, but those have exercised only in the last few days, so we have to wait and see," Franks said.

A continued increase of the CDS would result in more expensive lending, which in turn would cause more expensive investment and consumption.

The International Monetary Fund Board on Monday approved the first review of the precautionary stand-by agreement with Romania and will make the second tranche available, worth around EUR480 million.

In March, Romania and the IMF signed a EUR5 billion loan agreement, successor to a larger EUR20 billion bailout package that ended in April this year. Under the new deal, the IMF will disburse Romania EUR3.5 billion, while the EU and the World Bank contribute with EUR1.4 billion and EUR400 million, respectively. However, Romania will access the funds only in case of economic distress.

Greece concluded a EUR110 billion loan agreement with the IMF and EU last year. The loan was pinned on fiscal objectives meant to reduce the budget gap and settle the public debt, which stands close to 150% of the GDP, in a sustainable pattern. Greece failed to reach the objectives in the agreement and requires a new bailout package, of similar size, to avoid going into default.

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