Wednesday, December 10, 2008

Romanian centre-left coalition not yet sealed

By Radu Marinas

BUCHAREST, Dec 9 (Reuters) - Chances of forming a centre-left Romanian coalition government hung in the balance on Tuesday as the potential partners differed over some policies and whether to include a small ethnic Hungarian party.

Late-night talks yielded no agreement between the Democrat-Liberal Party (PD-L) and the leftist Social Democrats (PSD), who finished almost tied in a Nov. 30 parliamentary election without either winning a majority.

A coalition between the two groups emerged as the most likely option on Monday when the PSD, a successor to the country's former ruling communists, pulled out of talks with the rival Liberals.

Observers said with 70 percent of seats in parliament, a PD-L/PSD coalition would give Romania a shot at political stability after two years of policy logjam, crucial to prevent the new European Union member from sliding into economic crisis.

But some warned stability could come at the price of efforts to combat corruption, an endemic problem in the poor state of 22 million, because of the PSD's poor track record on the issue. Failure to tackle it could strain relations with the EU.

'There are premises for a rational compromise but talks to try to form a stable government will continue,' PD-L chief Emil Boc said after meeting senior PSD figures.

Boc said the parties agreed on many economic issues related to helping the country's poor but gave few details, saying only there were differences over some policies and the PSD's demand that the UDMR party be excluded from talks.

The UDMR represents Romania's 7-percent Hungarian minority.

However, PSD head Mircea Geoana said talks were 'encouraging', particularly in terms of social protection plans at a time of economic trouble.

POLICY CHALLENGES

Boc also confirmed the PD-L was not in talks with the Liberal Party of outgoing Prime Minister Calin Tariceanu, even though both centrist groups were once seen as possible partners.

Whoever forms Romania's next government will have to move fast to shore up state finances, damaged by pre-election spending plans, and ensure Romania has access to enough foreign cash to fund modernisation.

Many economists see a risk of a currency crisis next year because a vast trade deficit makes Romania highly dependent on foreign money at a time when global funds are drying up.

A strong majority should help the next government push through unpopular budget spending cuts.

But critics warn the PSD, once tainted by botched reforms and sleaze scandals, may want to slow down justice reforms in return for its backing for fiscal tightening.

'This government can have one big advantage ... It is solid so it can enforce unpopular anti-crisis measures,' said Sorin Ionita of the Romanian Academic Society think tank.

'But a barter deal between them could involve suspending big (corruption) files.'

Romania's president Traian Basescu who has close links with the PD-L, is expected to nominate a prime minister on Wednesday. The PD-L wants him to tap Theodor Stolojan, 65, former premier and World Bank expert, for the job.

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