Romania to cut wages and pensions

Romania is to cut wages and pensions in the public sector later this year to comply with an IMF-led rescue deal.

Romanian President Traian Basescu said the "programme to cut public expenses was inevitable".

Public sector wages will be cut by 25% and all salaries, including the minimum one, will be affected. Jobless benefits and pensions will be slashed by 15%.

Romania is the recipient of a 20bn-euro aid package from the IMF, the EU and the World Bank.

The country, as well as two other bailed-out states, Latvia and Hungary, have missed targets for cutting their deficits by significant margins.

"This [cuts] plan was inevitable," Mr Basescu told a news conference.

"The state sector is like a fat man of 200 kg sitting on the back of a 50 kg little man who is the real economy."

He also said that as part of negotiations with the IMF the country had narrowly avoided an increase in VAT from 19% to 24% and a rise in the tax on profits and income to 20% from 16%.

Meanwhile, the IMF said on Thursday it would extend a mission in Romania for two more days.

The IMF has cut its forecast for Romania's economic growth to 0.8% for this year, after the economy contracted 7.1% in 2009.