Romania said it would raise taxes to shore up state finances as it seeks to qualify for continued help from the International Monetary Fund and other lenders and reassure jittery markets focused on government spending and debt. Cabinet ministers approved the tax increase at an emergency meeting Saturday in order to plug a hole in the budget created Friday when the country's highest court declared that government-imposed pension cuts were unconstitutional.
Friday's court ruling, which called into question the government's ability to carry out its austerity plans, jolted markets and pushed the Romanian currency, stocks and bonds sharply lower. The currencies of neighboring Hungary and Poland also lost ground on fears those countries could have trouble curbing deficits. The cabinet's decision to boost the value-added tax to 24% from the current 19% will solve the immediate problem of holding the government budget deficit to the promised 6.8% of gross domestic product. But it is also likely to serve as a further break on economic expansion in a country where GDP fell more than 7% last year.
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