Reforms, Presidential Vote in Focus after Romania Coalition Splits
Bucharest – Ministers from Romania’s Liberals resigned from the government on Wednesday, a day after the party quit the ruling coalition in a break-up that will trigger a confidence vote and has changed the dynamics of a presidential election in November. The rupture has left the rump of Prime Minister Victor Ponta’s Social Democrat-led alliance with a slender majority in parliament, which will likely prompt him to ask an ethnic Hungarian party to join the government to shore up his support.
The government is expected to win the confidence vote, which will likely happen on March 4. Analysts also say there is scant chance the split will trigger early an parliamentary election, which is not due until 2016. But a reduced majority could make it harder for the government to push through reforms, including cleaning up inefficient state companies, agreed with the International Monetary Fund in a 4 billion euro aid deal.
Like other emerging markets, Romanian assets have been hit by jitters about U.S. monetary stimulus winding down, as well the political upheavals in Ukraine and Romania’s own domestic political instability. But this is a time when the European Union’s second poorest state should be capitalizing on an economic rebound that has seen growth surge to 5.2 percent in the last quarter, pushed up by a stellar harvest in 2013 and a recovery in exports.
“… the point is that the country is again moving into the political volatility of the past years, which was exactly what the current government aimed to stop,” said Simon Quijano-Evans, the head of emerging market research at Commerzbank. “… Any shortfalls on the political side will just lead to increased headaches for foreign investors,” he added. (Reuters)