BUCHAREST Romanian Prime Minister Victor Ponta was charged on Monday with forgery and serving as an accessory to tax evasion and money laundering, further tarnishing the image of the ex-communist state as it struggles to shake off a reputation for corruption.
Prosecutors said they had named the 42-year-old prime minister as a defendant in a five-week long criminal investigation, and temporarily seized control of his property. He denies wrongdoing and says the case is politically motivated.
Financial markets shrugged off the development, which for now stops short of a formal indictment that would send the case to trial.
But it represents a new setback for Romania's efforts to clean up its murky politics, business and the judiciary under pressure from the European Union, which it joined in 2007 together with southern neighbor Bulgaria.
Romania's reputation for corruption has deterred foreign investment, and even its anti-graft efforts have had the unintended effect of slowing decision-making and delaying important contracts.
Ponta said on Sunday he was stepping down as leader of his leftist PSD party until the investigation was completed, but has made clear he will not resign as prime minister despite June 5 calls from President Klaus Iohannis for him to quit.
Asked about Ponta at a joint news conference with Spanish Prime Minister Mariano Rajoy in Madrid, Iohannis said: "I stick to the comments I made, I will have an institutional relation with the prime minister."
The investigation began on June 5 and focuses on Ponta's activities as a lawyer from 2007-2009.
"Prosecutors ordered a stepping-up of the penal action against the defendant Ponta, a lawyer at the time of the deeds ... on charges of forgery of documents - 17 counts - accessory to tax evasion... and money laundering," the DNA anti-corruption prosecutors said in a statement.
PM ON CRUTCHES
Romanian television showed Ponta, who returned to Bucharest last week after nearly a month in Turkey for knee surgery, leaving the DNA headquarters on crutches and later in the day entering the party's headquarters for his allies meeting.
The meeting yielded further support for Ponta, as expected.
"Our plan is to get together in the coalition government until the 2016 parliament election," said leader Calin Tariceanu from junior ally, the liberal grouping ALDE.
"We back Ponta as prime minister in the coalition," said another ally, deputy premier Gabriel Oprea of the leftist UNPR.
Romania has the fastest-growing economy in the region, with gross domestic product rising 4.3 percent year-on-year in the first quarter of 2015. The Romanian leu did not react to Monday's news, trading 0.4 percent stronger on the day at 4.4236 to the euro as news of a third bailout deal for Greece revived risk appetite in Central European markets.
"The domestic political factor is just secondary as long as there's an unclear outcome regarding the prime minister," said Ciprian Dascalu, chief economist at ING Bank in Bucharest.
Ponta has so far withstood intense political pressure from the opposition and from Iohannis, a centrist rival who defeated him in last November's presidential election. Protected by a comfortable majority in parliament, he has survived three opposition censure motions, most recently last month.
"Under no circumstances will the prime minister resign," said Gabriela Vranceanu-Firea, a vice-president in Ponta's party. "The legitimacy of this party was proven last time when the censure motion filed by the opposition was easily defeated in parliament."
Parliament also voted last month to block a separate investigation into Ponta over conflict of interest, preserving his immunity from prosecution for alleged offences regarding his activity in office as prime minister.
Ponta has no immunity over the charges brought on Monday, as they relate to a period before he became prime minister in 2012.
(Additional reporting by John Stonestreet in Madrid; editing by Ralph Boulton)