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Romanian State Employees Forced To Take Unpaid Holiday

BUCHAREST (Reuters) - Romania will force 1.3 million state employees to take 8 days unpaid holiday at the end of 2009 as part of efforts to meet International Monetary Fund spending targets, Finance Minister Gheorghe Pogea has said.

The move is part of deep austerity cuts that the European Union's second poorest country is planning, including up to 150,000 public sector job cuts next year.

The plans triggered mass protests last month, including a brief strike of 800,000 state workers, including teachers, policemen, and nurses.

But Bucharest, in the midst of a political crisis that has left the country without a permanent government, is struggling to overcome a policy deadlock that has stalled moves to meet the IMF's demands for huge cuts in its sprawling state sector.

If the country fails to meet its commitments to the IMF, the fund will turn off the taps on a 20 billion euro rescue deal agreed earlier this year.

"The unpaid leave for around 1.3 million workers should have been enforced in October-December. But because our plan was temporarily halted by the Constitutional Court we can only apply it in November and December," Pogea told Reuters by telephone. "This is mandatory for all state bodies."

The Constitutional Court paved the way for the planned unpaid holidays for the Black Sea state's mammoth public sector, first announced in August, last week when it rejected a complaint against cost-cutting reform bills endorsed by the IMF.

The measures are expected to save around 1 billion lei, or some 0.2 percent of GDP, and help Romania come close to its IMF-agreed budget deficit target of 7.3 percent of gross domestic product this year -- even though Pogea has already said the government could overshoot that goal.

Bucharest has also pledged to freeze state wages, cut pensions, and sack up to 150,000 public workers so it can cut its budget deficit to 5.9 percent of GDP next year.

The Washington-based lender halted a review of the aid package on November 6 and will delay a vital $1.5 billion tranche, possibly until January or later. It said it would return once Romania had a government.

But no resolution is expected in the political crisis and policy deadlock until after a December 6 presidential runoff, and it is unclear whether the government to emerge after the election will readily embrace promises made at the height of the crisis.

The victor of the vote is expected to name a prime minister candidate who can then negotiate a functioning cabinet and create a 2010 budget according to the IMF's demands, although some analysts say the standoff could extend into next year.

The postponed IMF funds and stalling of reforms have threatened to worsen an expected 8 percent economic contraction this year and drive up the state's already high borrowing costs.

But a month-long political crisis and wrangling ahead of a closely-fought, two-stage presidential race has delayed reforms and threatened the package, which is crucial for Romania to stabilize its finances and avoid deeper economic convulsions.