7.5bn euros paid on foreign debt

Romania paid more than 7.5 billion euros in instalments and interests on medium and long-term foreign debt, which exceeded 37 billion euros. Over the last seven years, the volume of debt increased 2.7 times, while the volume of payments increased by 2.5 times. In 2007 alone, instalments and interests increased by some 1.4 billion euros compared with the previous year. January 2008 came with an 838 million-euro debt service, 33% above the monthly average of 2007. The total volume of medium and long-term foreign debt increased by 8.4 billion euros during the same interval. The upward trend of instalments and interests could pick up speed given that funding from abroad became more expensive in the final months of 2007, including those granted in the previous years, whose costs were tied to the trend of the international financial market. With bank giants still announcing massive losses as a result of the subprime crisis, any negative news on the macroeconomic climate in Romania may lead to an increase in the risk premiums on lines of credit or to such lines of credit being frozen. Much more dangerous, however, is the upward trend in the price of short-term funding, whose volume has surged over the past year.