* Admission of hidden budget gap raises wider concerns
* News hits currencies, cost of insuring debt
* Mkts primed for official Eurostat numbers due April 22
By Sam Cage
BUCHAREST, April 9 (Reuters) - Bulgaria's admission it had
hidden the truth about the size of its 2009 deficit sent ripples
across emerging Europe, raising concerns other countries in the
region may have bigger fiscal problems than they are letting on.
The bombshell dropped by Prime Minister Boiko Borisov that
Bulgaria had "lied to our (EU) colleagues about our readiness
for the euro zone" hit currencies, particularly the neighbouring
Romanian leu <EURRON=>, and the cost of insuring Romanian and
Bulgarian debt against default inched higher. []
It evoked unwelcome memories of Greece, where an admission
last year that the public deficit was more than twice previous
estimates sparked steep falls in government bonds and equities
and helped drive the euro to year lows against the dollar.
Greece has been battling to contain the deficit ever since.
That story, plus criticism from the European Commission that
budget-shrinking plans in Warsaw, Bucharest and elsewhere may
too vague or optimistic, has already prompted some economists to
wonder if eastern Europe might be vulnerable to similar
slippage.
Investors will now examine data on emerging European Union
states with an eagle eye for any signs governments have tried to
hide the true size of their deficits -- something which would
put the skids on any plans to join the single European currency.
"Once again a country that's part of the EU has done this,"
said Murat Toprak, emerging markets strategist at Societe
Generale in London.
"It will continue to fuel suspicion about the real situation
of fiscal positions in these countries and fuel the risk of
sovereign default in the region."
A key event will be deficits and debt figures due to be
released by EU statistics office Eurostat on April 22.
SUSPICION, CRITICISM
A main focus of that data will be whether any costs linked
to local governments, social security, infrastructure projects,
or other items have been hidden or whether one-off revenue not
allowed under the EU's ESA-95 accounting rules have been fudged.
"I'd like to very much see the figures. They're always a bit
of a surprise because you have central government but not
off-budget items," said Barclay's Capital economist Daniel
Hewitt.
"I'm suspicious that there might be some negative surprises,
but there might also be some positive (ones)."
He mentioned that the Czech Republic had reported a
better-than-expected 5.9 percent of GDP deficit to Eurostat. The
previous estimate had been for 6.6 percent.
But even then, the Czechs have put off euro entry into the
second half of the decade, following delays in other countries.
The International Monetary Fund said last week it was
concerned about Romania's budget figures so far this year,
though it was confident the government could plug any gap..
Poland, the region's biggest economy and the only EU state
to show growth last year, has been rapped for its plans to cut
its public finance deficit to the EU ceiling of below 3 percent
of gross domestic product by 2012 because the European
Commission says they are not specific enough.
The shortfall stands at 7.2 percent of GDP now, and although
Brussels has urged spending cuts, a presidential election this
year and a parliamentary vote in 2011 mean the government is
loathe to introduce any austerity steps.
Warsaw must also avoid the debt of the central government
breaching 55 percent of GDP as, under the public finance law, it
would trigger painful spending cuts.
Analysts say the government is likely to rely on a common
practice of keeping items off its central budget to avoid that,
and they expect one-off moves to collect some additional
revenues, such an unusually strong privatisation drive.
"Obviously, we may see a deterioration of investor
sentiment. We've already seen an impact on the leu," said
Melania Hancila, chief economist at Volksbank in Bucharest.
"I do believe that investors will be very carefully
assessing data coming from Romania and other countries in the
region... CDS quotations may rise because of this situation in
Bulgaria."
(Additional reporting by Sujata Rao in London, Mike Winfrey
in Athens and Radu Marinas in Bucharest; editing by Mike
Winfrey, John Stonestreet)
