The collapse of the ruling coalition in Romania could
threaten the country’s ability to attract foreign investment and thereby
exacerbate the country’s economic plight, analysts warned.
The coalition came apart last Thursday,
when Social Democratic Party (PSD) ministers resigned to protest the sacking of
one of them.
Prime Minister Emil Boc of the Liberal
Democrats (PDL), the other ruling party in the alliance, said the remaining
ministers would temporarily take the duties of their nine former colleagues and
stressed that “the government has the capacity to function properly.” He said
full-time replacements would be sought during a 45-day interim period.
Boc on Friday sought to minimize the impact
of the shake-up on the economy, pointing to planned investment in the country’s
infrastructure. But analysts noted that Romania is in the grip of a
punishing recession, with an 8.5 percent contraction in the economy foreseen in
2009. “The political crisis threatens to discourage investors and donors,” said
financial analyst and former banker Bogdan Baltazar.
“Romania desperately needs funds to
finance its public deficit and it’s now not clear how it’s going to close the
gap.” The government is expected soon to launch a 500-million-euro
(731-million-dollar) bond issue, the cost of which could now rise sharply, he
warned.
Romanian representative to the
International Monetary Fund (IMF), Mihai Tanasescu, said “it is not advisable
to undertake a eurobond issue in the current political climate.” Ratings agency
Standard and Poor’s said on Friday that the breakup of the coalition had “no
immediate impact on the sovereign credit ratings” for Romania.
Nonetheless, the agency cautioned: “If the
current situation leads to political gridlock, such that the government is
prevented from carrying out its economic and fiscal consolidation program and
public finances worsen, the sovereign credit ratings on Romania would
come under further downward pressure.” The Romanian currency, the leu, is
already paying a price for the upheaval, falling on Friday to its lowest level
in six months.
In addition, public sector workers are
threatening to take to the streets to protest salary reforms they say will cut
deeply into their purchasing power. A general strike by teachers, doctors and
police officers is planned for today, and on Wednesday a demonstration here by
public sector employees is expected to draw 20,000 people. Boc has called for a
moratorium of several months on public protests to allow time for a compromise
to be worked out in the face of demands for a hike in the minimum wage.
“Canceling already announced political
actions is out of the question,” insisted Dumitru Costin, head of the National
Labour Bloc. “It’s not our fault if the political parties cannot agree,” he
said. “Talks on our salary demands have been dragging on for months.” The
salary reform, designed to lower public spending, is among commitments Romania has
made to the IMF and the European Commission in exchange for a loan of 20
billion euros.
Tony Lybek, the IMF’s representative in Romania, said
last week he did not foresee a suspension of the agreement.
“This agreement was negotiated with Romania and not
with a political party. We expect that the Romanian authorities will continue
their efforts to reach the fixed objectives.” PSD leader Mircea Geoana said on
Saturday that he would keep the country “on track” if he wins December’s
elections.
(from the newspaper "E-Kathimerini", 5/10/2009)