UPDATE 1-Thousands of Romanians protest austerity measures

* Police say up to 20,000 protest cuts
* Cuts crucial for IMF deal
* Union leaders call for general strike

(Releads, updates with details of protest, context, comment)

By Luiza Ilie and Ioana Patran

BUCHAREST, May 19 (BestGrowthStock) – One of the largest mass
protests since the fall of Communism in 1989 hit Bucharest on
Wednesday over deep government spending cuts, casting doubt on
Romania’s ability to meet its IMF loan commitments.

Analysts say the government may end up bowing to public
pressure and softening the planned cuts in a bid to preserve
popularity for its shaky parliamentary majority, even though
elections are not scheduled until late 2012.

The demonstration by some 20,000 people was the first
serious test of the six-month-old centrist government’s
determination to force through austerity measures, required to
secure international aid for the recession-hit economy.
[ID:nLDE64H0M1]

“We want the government to fall or they will destroy us,”
said Maria Vasile, a 42-year-old teacher carrying a whistle who
was urging people to join the protest. “It’s either us or them.”

Romania’s leu fell 0.3 percent to 4.197 per euro by 0933 GMT
(EURRON=: ) and the country’s blue-chip BET share index was down
1.6 percent (.BETI: ), while the cost of insuring Romania’s
sovereign debt edged higher.

However the drop was modest compared with other European
indexes. The pan-European FTSEurofirst 300 (.FTEU3: ) index of top
shares was down 2.3 percent at 1,002.91 points.

International Monetary Fund-led aid packages across
recession-hit emerging Europe have hit state workers and
pensioners and the protest in Romania, the second poorest
European Union state, raises the spectre of debt-wracked Greece.

Romania’s 20 billion euro IMF-led bailout package is crucial
for the government’s ability to finance its ballooning budget
deficit, an issue highlighted by two failed debt auctions
earlier this month when investors feared the government
backtrack in the face of mounting social pressure.

It has promised cuts to state wages of 25 percent and to
pensions of 15 percent as part of an effort to secure the
release of the next tranche of loans. [ID:nLDE64B1PN]

Neighbouring Bulgaria, the EU’s poorest member, is also
trying to impose public spending cuts of about 20 percent to
fill a revenue gap and keep its budget deficit under control.

IMPORTANT BLOW

Police said 18,000-20,000 demonstrators had assembled by
midmorning, shouting: “Down with the government”, making the
protest outside government headquarters one of Romania’s biggest
since mass protests forced Communist dictator Nicolae Ceausecu
to flee.

Union leaders called for a general strike.

Romania’s state sector, criticised for inefficiency and
corruption, employs one-third of the working population and
pensions, wages and other social benefits account for two-thirds
of budget revenues.

Such spending has become increasingly hard to finance after
triple-digit pay rises in the booming 2005-2009 period, as the
private sector faces shrinking domestic demand and higher
unemployment.

The IMF has said it will disburse its next tranche of aid
only after Romania enforces a credible plan to reduce its budget
deficit to 6.8 percent of gross domestic product.

It was 7.2 percent in 2009 and the IMF says that without
cuts it could reach 9 percent of GDP.

“The ability of the government to deliver substantial
cuts by July to meet IMF’s demands is low,” BNP Paribas analysts
said in a note.

“A failure to meet the performance criteria then and a
second postponement of the IMF disbursement could be an
important blow.”

Stock Market Trading

(Additional reporting by Marius Zaharia and Radu Marinas;
Writing by Sam Cage; Editing by Matthew Jones)

UPDATE 1-Thousands of Romanians protest austerity measures