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UPDATE 3-Boc wins Romania PM nomination as deputy stands down

(Adds background, comments)

BUCHAREST, Dec 15 (Reuters) - The head of Romania’s Democrat-Liberal (PD-L) party Emil Boc won the mandate to form a centre-left government on Monday after his deputy declined the nomination, fuelling fears of political rifts and instability.

Boc, 42, faces the tough task of bridging policy differences between his party and left-wing coalition partners, the Social Democrats (PSD), and introducing tough spending cuts to ensure Romania can cope with the global financial crisis.

Economists warn any new government has to move fast to convince financial markets that it is serious about fiscal discipline in order to lower the risk of recession.

Addressing these concerns, Boc, pledged to have a government in place with the leftists by Dec. 22.

“Our common goals remain on schedule,” Boc told reporters.

“Namely the chance to give Romania a stable, efficient, performing government.”

Commentators said that while lacking the economic expertise of Theodor Stolojan who relinquished his nomination on Monday, Boc brings better managerial skills and more clout among politicians which will help him enforce tougher policies.

As mayor of northwestern city of Cluj for the last 4 years, Boc helped attract foreign investment into the area that has become a key industrial hub in Romania. Among other investors, it hosts the world's top cellphone maker Nokia NOK1V.HE.

It was unclear why Stolojan, Boc’s colleague at the PD-L, stepped down, although he hinted at difficulty controlling coalition talks.

Analysts say any partnership between the two historic rivals, the PD-L and PSD, who finished almost exactly level in last month’s election, would be riven by conflicts that may damage efforts to avoid financial crisis and weaken the fight against corruption, a key worry for the European Union.

“Now that we have the head of one of the parties as prime minister, it’s good because the authority is clear,” said Alina Mungiu-Pippidi of the Romanian Academic Society think tank.

TESTS AHEAD

Financial markets remained wary, with the leu currency trading near two-month lows against the euro on worries about future policies.

“Boc is clearly a credible alternative to Stolojan but the key question is how quickly the new government will develop a credible anti-crisis strategy,” said one western diplomat in Bucharest.

Boc’s goverment, if it wins parliament’s vote of confidence, will have to redraft a budget plan for next year, taking into account lower tax receipt forecasts and poor fiscal planning by the outgoing government of Prime Minister Calin Tariceanu.

This means the centre-left coalition may have to cut back welfare spending, a cornerstone of pre-election campaigning of both parties, at a time when a slowdown in economic growth will start taking its toll on Romanians.

So far, the country has fared relatively well in the face of global downturn, with Monday’s data showing consumption growing strong in the third quarter.

But many manufacturers have already announced job cuts and production stoppages that will affect thousands of workers, while tougher credit conditions will slow output and spending.

Some economists warn Romania may slump into recession in 2009, even though this year’s economic growth is expected to hit 9 percent.

Analysts said Boc was likely to take his cues from President Traian Basescu, his close ally and a former head of his party.

Basescu, a popular reformist, faces a re-election bid next year and commentators are divided on whether he will back tough spending plans or more lax fiscal policy aimed at buying voters’ support.

Corruption also remains a concern.

After introducing sweeping judiciary reforms in the run-up to last year’s EU accession, Romania’s fight against rampant graft has lost its bite with parliament and courts blocking key prosecutions of top officials.

Commentators warn economic reforms may come at a price of future anti-graft progress, with the PSD tainted by a history of sleaze scandals. (Additional reporting by Radu Marinas and Luiza Ilie) (Editing by Louise Ireland)

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