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Romania high court rules pension cuts unconstitutional

The Romanian Constitutional Court [official website, in Romanian] on Friday ruled that a government plan to reduce pension funds by 15 percent was unconstitutional, jeopardizing a pending billion dollar loan from the International Monetary Fund (IMF) [official website] needed to stabilize the Romanian economy. The planned decrease in the pension fund was part of a larger package of benefit reforms enacted in order to limit the budget deficit to the 6.8 percent required to qualify for the loan. Also included in the reforms was a 25 percent decrease in wages for public sector jobs, which the court upheld as constitutional. Romanian Prime Minister Emil Boc [official website, in Romanian] indicated that the government is working to create a new reform package [press release, in Romanian] in order to ensure that the loan can be dispersed as scheduled. The government may consider tax increases in order to meet the loan requirements, a measure that was considered [Business Week report] before the current reforms were implemented. The IMF is scheduled to meet Monday to discuss whether the loan should be dispursed.

The Greek government was recently forced to implement similar austerity measures after suffering an economic crisis [BBC backgrounder] that threatened to destabilize the international economy. Last month, the EU and IMF announced a €110 billion bailout package for Greece, which was subsequently approved by euro-zone leaders [BBC report]. Last month, Germany's Constitutional Court [official website, in German] refused to issue a temporary injunction [judgment, in German; JURIST report] against the German government's €22.4 billion contribution to the bailout fund. The suit, brought by four lawyers and a businessman, claimed that the contribution would violate Germany's constitutional law.

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