Romanians vote in shadow of financial crisis

BUCHAREST (Reuters) - Romanians voted on Sunday in a parliamentary election that will determine both its response to the global financial crisis and the fate of judicial reforms, which have stalled since it joined the European Union last year.

Opinion polls show a close race between two opposition parties, the ex-communist Social Democrats (PSD) and centrist Democrat Liberal Party (PD-L), which has close links with President Traian Basescu.

The vote comes at a critical time, with the economy slowing and crucial judicial reforms all but stalled under the minority government of Calin Tariceanu.

Divisions between the three leading parties run deep and Basescu, while remaining popular with the electorate, has alienated many in the ruling elite with his often scathing criticisms of patronage and corruption, seen as an endemic weakness of this poor EU member.

The PSD and the PD-L are on about 30 percent each, with Tariceanu's Liberal party (PNL) trailing on about 20 percent.

If the polls are correct and no party wins an outright majority, the Democrats and their arch-foes, the PSD, are expected to wrestle over who will head a coalition government.

The PD-L's links with the president, who nominates the prime minister under Romanian law, give it the upper hand.

But Basescu may be forced to pick PSD head Mircea Geoana or another leftist politician if the PSD comes out ahead.

Recent opinion surveys show the PSD gaining in popularity with promises of big welfare giveaways and tax cuts for the poorest, tapping into the fears of many Romanians about the impact of the global crisis and anger about wealth disparities.

"I trust Mr Geoana. He promised aid to all the pensioners like me," said Aurelia Stancescu, 74, a retired school janitor, after she cast her ballot in a dreary Bucharest neighborhood of communist-era housing blocks.

Whoever forms the government will have to move fast to prepare the country for a sharp economic downturn and possible turbulence in its financial markets, analysts say.

They say both main parties see higher government spending as a way out, although the centrist PD-L is less likely to allow the debt burden to balloon.

REFORM LOCKDOWN

Observers say the PSD, damaged by botched reforms in the 1990s and subsequent sleaze scandals, is less likely than others to break the logjam in anti-corruption efforts, a key concern of the European Union.

"It is clear if the PSD managed to form the government, they will immediately dismantle all anti-corruption mechanisms," said Alina Mungiu Pippidi of the Romanian Academic Society think tank.

Romania joined the EU thanks to economic and judicial reforms introduced by a coalition between Tariceanu and Basescu after years of Socialist rule mired in graft and reform deadlock.

But a clash between the prime minister and the president ruptured the partnership just months after EU accession. Reform momentum slowed and parliament blunted anti-corruption efforts.

In response to the policy gridlock -- which many economists said threatens to push Romania into a crisis next year -- two agencies have cut its credit rating to sub-investment grade, making Romania the only EU member with "junk" status.

The economy has doubled in size in just four years on the back of record foreign investment and booming consumer demand, fueled by easy cash from abroad.

But many Romanians have yet to see their living standards improve, particularly those living in the countryside where a majority of households still lack indoor toilets.

Economists predict growth will slow down from this year's roughly 9-percent expansion to as little as 1-4 percent.

Voting stations opened at 7 a.m. (12 a.m. EST) and will close at 9 p.m., with exit polls due out immediately afterwards. But turnout is expected to be low, with many voters taking a long weekend break as Romania marks a national holiday on Monday.

(Writing by Justyna Pawlak; Editing by Mark Trevelyan)