BUCHAREST Feb 25 Romania's feuding coalition
government could split in a matter of days, a break-up that
might disrupt five years of economic reform backed by the
International Monetary Fund (IMF).
The Liberal party, the second largest member of Prime
Minister Victor Ponta's ruling alliance, was set to meet for
crisis talks on Tuesday evening to decide whether to pull their
ministers out of the government. That could shortly be followed
by a formal split from Ponta's leftist Social Democrats.
The meeting was the culmination of a series of rows between
Romania's two biggest parties, mainly over ministerial
appointments, as they jockey for position before European
elections in May and a presidential election in November.
The infighting comes at a time when Romania should be
capitalising on an economic rebound that has seen growth jump to
5.2 percent in the last quarter, buoyed by a bumper harvest in
2013 and a rise in exports to a recovering Europe.
A weakened or unstable government could hamper policymaking
in the European Union's second poorest member state. High on the
agenda for Romania is to speed up a process of selling off or
restructuring inefficient state companies, as part of a 4
billion euro ($5.49 billion) aid deal with the IMF.
"I see the danger of populism in this particular election
year is enormous and the risk to the IMF deal seems big," said
Cristian Patrasconiu, a Bucharest-based political analyst.
"The government committed to the restructuring of
inefficient state firms including in the railway sector this
year, with layoffs on the cards," Patrasconiu said. "I don't see
the new government enforcing any pay cuts or pursuing any
redundancies ahead of European and presidential elections."
GOING IT ALONE
Political squabbles have often hampered Romania's progress
in the 25 years since it threw off Communist dictator Nicolae
Ceausescu, and its economy trails other emerging EU countries
such as Poland and the Czech Republic.
Ponta's own alliance was formed after it brought down a
centre-right coalition government in a confidence vote in May
2012. That government had imposed unpopular austerity measures
to help Romania recover from a deep recession.
While Ponta's coalition commands a more than two-thirds
majority in parliament, in recent weeks its rule has been
overshadowed by a series of bust-ups.
Most recently, Ponta has blocked the appointment of a
charismatic Transylvanian mayor as a new deputy prime minister.
Earlier this month, a disagreement over a policy proposal to
reschedule the bank debts of low-income borrowers prompted the
Liberal party to sack its own finance minister.
The increased risk of a split in the government helped push
Central European assets down on Tuesday, although movements were
slight compared with last week's swings on the crisis in
Ukraine. Mihai Tantaru, an economist at ING
bank, says a formal coalition breakup could push the Romanian
leu towards year lows of around 4.55 to the euro.
If the coalition fractures, Ponta would probably be able to
cobble together another alliance and still command a majority in
parliament, albeit with reduced numbers.
Doing so could strengthen his hand in some ways, as it would
unshackle him from an agreement under which the Liberals put
forward their nominee as the coalition's presidential candidate.
Ponta, who has seen his own policies repeatedly pushed back
by his arch-rival, the outgoing president Traian Basescu, would
be free to put forward his own choice for president.
"It's a safer bet for Ponta, if he can push it through, to
have his own president," said Otilia Dhand, a vice president at
But going it alone could ultimately put the brakes on the
Romanian government's push to liberalise its economy - a drive
seen as vital if it is to catch up with its European peers.
Romania has pledged to stick to an IMF-agreed June 30
deadline to list a 15 percent stake in hydropower producer
Hidroelectrica and also in coal-fired Oltenia, which operates
lignite-fired power plants, in October.
It is also due sell a 51 percent stake in state-controlled
power distributor Electrica in an initial public offering in
"At least the sale of a majority stake in Electrica is
highly unlikely, as we know the (Social Democrats) won't like to
embark alone on any large privatisation drive," said a
Bucharest-based economist of an international bank.
"This situation does note bode well in terms of credibility,"
the economist said.