The austerity measures meant to reduce budget spending in Romania, namely the 15 percent pensions cuts are not constitutional, the Romanian Constitutional Court has decided. However, the 25 percent cut of state clerk salaries is constitutional, the Constitutional Court has decided.

The recent decision means Romania needs to re-negotiate a package of measures with the International Monetary Fund, the World Bank and the European Council and decide on additional measures in order to unlock the next loan installment required to keep Romania afloat.

The alternative measures are related to tax increases, among which the Value Added Tax (VAT), according to media reports quoting sources in the Government.

The Constitutional Court ruled against some of the measures proposed by the Government after the Social Democratic Party and the National Liberal Patry have filed complaints with the Court against these measures.

Romanian Prime Minister Emil Boc has already said the Government has a backup plan for its negotiations with the IMF, WB and EC. Boc said this backup plan was already prepared and the new measures will be announced after the end of the new negotiations round with the IMF.

The announcements have triggered a drop on the Bucharest Stock Market, where indexes went down by 3 to 10 percent.

The Romanian Parliament was supposed to go on holiday next week, but might need to delay doing so in order to approve a new law which will be proposed by the Government. The Government needs to propose a new piece of law after renegotiating with the IMF, WB and EC.

The Fund had previously said it was planning to discuss about Romania's stand-by agreement in its board meeting on June 28th, which is next Monday.

TO BE UPDATED