UPDATE 3-Romanian court leaves impeachment on knife edge
* Court rules on changing referendum legislation
* But turnout requirement still leaves result in doubt
* Power struggle raises doubts over IMF deal, hits markets
By Ioana Patran
BUCHAREST, July 10 (Reuters) - Romania's Constitutional Court gave President Traian Basescu a fighting chance of beating a referendum aimed at ousting him, ruling on Tuesday that at least half the electorate must turn out for the vote to be valid.
The ruling Social Liberal Union (USL) said it deemed a decree passed last week, stating that there is no turnout threshold, to be still valid, presaging a further constitutional battle and likely condemnation from Europe and the markets.
But in a contradictory move later, Prime Minister and USL leader Victor Ponta said he would ask parliament to meet to reconcile the court's ruling and the decree, and until then the turnout requirement would remain in question.
The attempt by Ponta's USL to unseat right-wing President Basescu has raised international concerns over rule of law in the European Union's second-poorest country.
Parliament last week approved a USL measure to suspend Basescu, saying he had overstepped his powers. An impeachment referendum is to be held on July 29.
The Constitutional Court had been asked by the opposition to rule on the legitimacy of a new law that would have made it easier to vote Basescu out - requiring only a majority of those voting in a referendum to impeach the president, rather than a majority of the whole electorate as was the case previously.
While the court ruled on Tuesday that the law was constitutional, it also said that turnout must be more than 50 percent of the electorate for the referendum to be valid.
That position effectively nullified the law's impact and gave the unpopular Basescu a chance to escape impeachment.
"The law ... on the organisation and protocol of the referendum is constitutional, provided that participation in the referendum is at least half plus one of the number of people registered in permanent electoral lists," the court ruled.
The opposition Democrat Liberal Party (PDL), which has close links to Basescu, said the decision respected the rule of law.
Ponta's administration initially said it would respect the judgement. But a USL official then said an emergency decree, passed last week and stating that no minimum turnout is required in the referendum, still applied.
"Our government's emergency decree is valid," Mihai Voicu of the USL told reporters. "(The court decision) concerns a draft law which has no identical content with the emergency decree."
UNCERTAINTY DRAGS ON
Ponta contradicted his party colleague later, saying both the emergency decree and the court ruling were valid.
"Parliament must put the two laws in agreement," he told private Romania TV. "From my point of view it would be best if 50 percent of the electorate came to vote as...it would make the result more legitimate. But it is up to parliament to decide."
It was unclear whether parliament would reach a decision by the scheduled July 29 referendum. The turnout requirement could be crucial. About 56 percent of the electorate voted in last month's nationwide local elections, dominated by the USL. But if Basescu supporters do not vote, turnout could fall below half.
Romania's political chaos has raised doubt about its International Monetary Fund (IMF) aid deal, sent the leu plunging and pushed borrowing costs higher.
The currency regained some ground on Tuesday after the high court ruling but it is still close to record lows.
The European Commission again expressed concern over the speed and consequences of events in Romania on Tuesday and analysts said the political uncertainty was far from over.
"It is important to note that the EU may find Romanian steps against its laws and it can halt the IMF/EU bailout programme," KBC analysts said in a note.
The Council of Europe has already asked constitutional experts to examine Basescu's suspension after Germany and the United States said the action threatened the rule of law. Ponta will be in Brussels on July 11-12 to address concerns.
The government denies endangering the rule of law and says it is sticking to the deal with the IMF, which wants Bucharest to narrow its budget gap, overhaul energy prices and the outdated health system and to sell inefficient state assets.
Impeaching Basescu would mean Romania would have to elect a new president in the autumn as well as hold parliamentary elections, which would stall policies as it tries to keep a 5 billion euro ($6.2 billion) IMF-led aid deal on track.
Ponta is Romania's third premier this year. Street protests against austerity and corruption toppled his predecessors.
Charges of plagiarism against Ponta, a conviction for corruption and subsequent attempted suicide of party heavyweight Adrian Nastase and the perception that the USL is seeking a stranglehold on power have damaged the premier's image.
The presidency is largely ceremonial, but its holder is in charge of foreign policy and nominates the prime minister.
Parliament suspended Basescu, unpopular because of his association with austerity, last week after he drew criticism for intervening in day-to-day policies.
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