November 23, 2009 / 6:39 PM / in 9 years

UPDATE 1-Incumbent Basescu tops Romanian poll first round

* Two leading candidates head for Dec. 6 run-off

* Next president key to ending government crisis

* IMF package aid subject to quick formation of government

(Adds details, new results)

By Justyna Pawlak

BUCHAREST, Nov 23 (Reuters) - President Traian Basescu led by a slim margin in the first round of Romania’s presidential election on Monday, but the close results pointed to tough talks ahead to build a new government.

Failure to form a new governing coalition rapidly could further endanger a 20-billion-euro ($30 billion) aid package led by the International Monetary Fund and hamper efforts to move the country quickly out of recession.

Partial results from 97 percent of polling stations showed centrist Basescu had 33 percent of the votes cast in Sunday’s ballot. Social Democrat (PSD) leader Mircea Geoana had 31 percent.

If Basescu wins the second round on Dec. 6, he will be able to choose a new prime minister to put an end to a government crisis that has delayed IMF aid and put off investors.

However, commentators say Basescu’s confrontational style has made him enemies among other political groups, raising questions about his ability to form a stable coalition.

His Democrat-Liberal Party cannot rule alone.

Confirming these concerns, Liberal Party leader Crin Antonescu, who was third in the polls with 20 percent, said his grouping would not negotiate a deal with Basescu’s party.

“I repeat, I rule out any collaboration,” he told reporters.

At stake is Romania’s ability to modernise after years of shoddy reforms in the two decades since the collapse of communism which have left it poorer and more corruption-prone than most of its former Soviet bloc peers in the European Union.

Sunday’s election had been an obstacle to political stability, with Basescu’s centrists and Geoana’s leftists unwilling to work together to end an impasse that began when the two parties’ coalition collapsed in October.

Under Romanian law, a president has little effect on day-to-day policy decisions but controls the formation of the government by appointing a prime minister.

OLD-GUARD

Commentators say Basescu, a former ship captain who attracts voters with a promise to reform Romania’s murky political classes, may try to fragment Antonescu’s grouping to win additional support for his candidate for premier.

This could give him a shot at securing a government but would raise concerns that fleeting political alliances would damage its ability to push through painful reforms.

Geoana still stands a chance of victory in the second round, which some commentators say could mean a less vigorous push for reforms but more success in implementing them.

Basescu and Geoana have both vowed to move quickly to mend relations with the IMF, but Geoana opposes vast public sector layoffs, a vital part of conditions set by the Fund in return for aid.

Geoana’s election would bring back to power old-guard politicians from his PSD, a party with deep roots in Romania’s communist era. Its rule during the early post-communist years was marred by slow economic transformation and sleaze scandals.

“Geoana would have an easier task to get a government in place ... and Romania, having the problems they have (Romanians), they need a quick government to be approved by parliament,” said Daniel Hewitt of Barclays Capital in London.

“But the problem is that it’s not so clear what a Geoana government could do.”

Broad reforms are vital. Twenty years after the execution of Communist dictator Nicolae Ceausescu, the Balkan country of 22 million people is struggling to eradicate corruption that distorts the impact of free market reforms.

The economy is expected to shrink by up to 8 percent in 2009, millions of Romanians live on less than 100 euros ($149) a month and no senior officials accused of graft have been convicted.

The Romanian leu showed little reaction to the results of Sunday’s first round, with markets waiting for more clarity on the future government.

It has lost 6 percent of its value this year while other regional currencies have mostly regained ground after suffering heavy damage in the first quarter of 2009. (Editing by Robin Pomeroy)

((— For a Factbox on possible scenarios after Sunday’s first round, click on [ID:nGEE5AL0E4]

— For a factbox on Romania’s main presidential candidates, please click on [ID:nLL59014].

— For a factbox on key facts and figures about Romania please click on [ID:nLG452747].

— For a timeline of the political wrangling please click on [ID:nLG447344])) ((radu.marinas@reuters.com ; +40 21 315 8320; Reuters Messaging: radu.marinas.reuters.com@reuters.net)) ($1=.6679 Euro)

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