Romania's Foreign Debt Cut to Junk by S&P Amid Financing Woes

Romania's foreign-currency debt rating was lowered to junk by Standard & Poor's, Bloomberg reported today.

The rating was cut to BB+, one step below investment grade, from BBB-, with a ``negative'' outlook, S&P said in a statement from London today.

“The downgrade reflects the mounting risks to Romania's real economy due to high and rising private-sector leverage and the related dependency on an increasingly uncertain external financing channel,” the ratings company said in the statement.

Just weeks ago, Romanian Parliament passed a bill stipulating a 50 percent income increase for the employees in the public education system. Last Monday, the Romania’s Central Bank (BNR) governor said that BNR successfully deflected an attack against the country’s currency (‘leu’) -- attack allegedly performed by international speculators.

Economists have said repeatedly that Romania is risking major economic problems if the trade deficit will not back down, as the country will become vulnerable to any liquidity shortage on international markets.

Romania Report