UPDATE 2-IMF to start Romania aid deal review, tough tasks await

* IMF to release loans to Romania pending Jan 20-27 review

* Stiff opposition to IMF-mandated reform seen ahead

(Add fresh currency reaction, details)

By Radu Marinas

BUCHAREST, Jan 15 (Reuters) - The International Monetary Fund will release further aid to Romania if it passes a one-week review of the country's stalled 20 billion euro international aid deal starting on Jan. 20, the Fund said on Friday.

The statement follows Bucharest's approval of a cost-cutting 2010 budget on Thursday -- the main condition for the Fund to put its rescue package back on track and allow it and the European Commission to disburse loans worth 3.3 billion euros.

But implementing the budget plan, which entails 100,000 job cuts, or around 8 percent of state employees, will be painful and stiff political and public opposition is expected.

Romania is attempting to put behind it a 3-month-long political crisis that had threatened efforts by the EU's second poorest member to catch up with the richer West.

The leu currency was buoyed by Friday's developments, hitting a one year peak against the euro. By 1313 GMT it had reached 4.1020 per euro, its highest level since Jan. 8, 2009.

Financial markets have been eagerly awaiting resumption of IMF/EU money flows, while economists say the deal would provide badly-needed budgetary funding and could allow the central bank to stimulate the battered economy by cutting interest rates.

"Subject to the completion of the reviews ... both the third disbursement ... 1.5 billion euros, and the fourth disbursement (of) 0.8 billion euros of the IMF-supported program would become available," Tonny Lybek, IMF regional representative said.

Analysts said Prime Minister's Boc centrist coalition, benefitting from fragile support in parliament, may face tough times ahead to pursue their IMF-mandated reform agenda because of stiff leftist opposition in parliament.

Signs of acrimony surfaced in Thursday's debate when the powerful Social Democrats tried to torpedo the budget with thousands of amendments that were eventually tossed out by Prime Minister Emil Boc's slim majority.

Following a disputed presidential election in the new European Union member in December which the opposition said was stolen by fraud, the fight over budget signals a rocky period ahead for Prime Minister Boc's centrist coalition cabinet.

"This government resembles a tightrope walker. It is risking its reform plans in parliament because of its fragile support," said political analyst Cristian Patrasconiu.

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At stake is IMF-prescribed legislation to overhaul the country's unsustainable communist-era pay-as-you-go pension system. If the present trend persists, one worker will pay the pensions of four retirees by 2050.

Political wrangling since the collapse of a centrist minority cabinet late last year has already prevented Bucharest from meeting an IMF committment to have it approved by Dec. 31.

"A new deadline would be probably set following the upcoming IMF review," said one senior government official.

Under the plan, Romania is seeking to index pensions to inflation rather than to average wages as at present, raise the retirement age and scrap special pensions for so called "privileged" public job categories.

The 2010 budget law aims to cut the fiscal deficit to 5.9 percent of gross domestic product, from an expected 7.3 percent in 2009, and freezes in pensions and wages in 2010 that would allow Romania record 1.3 percent growth, against an expected 7 percent contraction last year.

"The resumption of IMF funding would undoubtedly be good news for the economy not least because it will provide cover for further cuts in domestic interest rates," Capital Economics said in a research note. (Editing by Toby Chopra)