UPDATE 2-Romanian government wins confidence vote after split
* PM Ponta wins after forging new alliance
* President threatens to block new government
* Standoff with president could prolong political instability
* Romania votes in two elections in 2014
By Luiza Ilie and Radu Marinas
BUCHAREST, March 4 (Reuters) - Romanian Prime Minister Victor Ponta won a confidence vote in parliament on Tuesday, as expected, securing a new mandate to push through a series of IMF-backed reforms aimed at speeding up growth in the European Union's second-poorest country.
Ponta's Social Democrat-led (PSD) government won a vote in both houses by a combined 346 votes to 192, having partly restored its majority with new allies following the departure last week of the Liberal party.
The departure of the Liberals had sparked worries about Romania's ability to implement commitments it made under a 4 billion-euro aid deal with the International Monetary Fund, including tackling losses at state-owned companies, in an election year.
Having won the vote, Ponta faces a new threat to his government from his arch-rival, President Traian Basescu, who has questioned Ponta's constitutional right to form a new administration and threatened to mount a challenge in court.
This could prolong a bout of political instability that, along with emerging market jitters about the Federal Reserve's tapering of its monetary stimulus programme and continuing turmoil in neighbouring Ukraine, pressured Romanian assets.
The leu, one of the region's most stable currencies, has fallen about 1.1 percent since Feb 6, the day when the Liberal finance minister resigned in a policy dispute that helped to precipitate his party's exit from the government. Dealers say the central bank could intervene to stem sharp falls.
"I do think that stability is essential for what we have to do going forward," Ponta told parliament before the vote, when lawmakers sat in the chamber or chatted and smoked in a fug-filled marble hallway outside. "Romania must remain an attractive country for investors."
EYE ON PRESIDENTIAL POLLS
The leftist Ponta shored up his party's support by inviting an ethnic Hungarian party and other minorities to back his government, collecting about 55 percent of the seats in parliament. Ponta had commanded a majority of more than two-thirds until his Liberal allies quit.
High on the agenda for Romania this year is to speed up the sale or restructuring of inefficient state companies, and further cutting the fiscal deficit and raising some taxes, as part of its precautionary aid deal with the IMF.
Ponta will need all the support he can get to push through such policies, in a year when the Black Sea nation of 20 million votes in European elections in late May and again in a presidential poll in November. A backlash against more severe austerity measures toppled a previous government in 2012.
The prime minister on Monday picked one of his economic advisers, a 34-year-old Harvard graduate called Ioana Petrescu, as the new finance minister. Petrescu is likely to stick closely to Ponta's existing policies.
In any case, her role is less powerful than in other countries. The position's responsibilities were diluted in 2012 with the creation of a separate budget ministry.
"While the new coalition means a smaller parliamentary majority for Ponta ... the outlook for government stability will actually improve, as the PSD will be the only dominant party of the coalition, which lessens the potential for clashes within the coalition," said Otilia Dhand, vice president at Teneo Intelligence, in a note on Tuesday before the vote.
"Yet, Ponta's tense relationship with President Traian Basescu will likely continue to be the key source of political risk until the November 2014 presidential elections."
Unshackled from a deal with the Liberals, Ponta now has the freedom to put up forward his own candidate - or himself - for president after Basescu departs following two consecutive terms in office. Previously, the coalition had aimed to put up a Liberal candidate.
Romanian law makes the president's role largely ceremonial. But Basescu wields influence at key moments, since he has the power to veto a winning party's choice for prime minister after an election. He also has a big say in how Romania negotiates international agreements.
Ponta has repeatedly clashed with Basescu over a series of policy proposals, including over a new fuel tax.
Tuesday's vote was preceded by several hours of debate, peppered with frequent interruptions. When Ponta rose to speak, a small group of opposition MPs began chanting calls for his resignation.