Tuesday, December 2, 2008

Socialists, Liberal Democrats Close in Romania Vote

By Adam Brown and Irina Savu

Dec. 1 (Bloomberg) -- Romania’s ex-communist Social Democratic Party won more votes than the Liberal Democratic Party in a close election that may now trigger weeks of wrangling to form a government during global economic turmoil.

The Social Democrats won 33.1 percent of the vote for the lower house while the Liberal Democrats took 32.3 percent, according to the Central Electoral Bureau, with 99.6 percent of votes counted today. The result will force them to woo the third place National Liberal Party, which took 18.6 percent, to form a government.

The 18 million eligible voters in the Black Sea nation of 22 million were asked to decide which party can best deal with the fallout of worldwide economic turmoil after years of prosperity. Romanians fear an economic slowdown, including layoffs and loss of foreign investment, as their currency weakens and markets slump.

“We need a very strong government very quickly to deal urgently with the crisis,” Ionut Dumitru, chief economist at Raiffeisen Bank Romania SA, said by telephone today. “It has to implement prudent fiscal policies as soon as possible. Right now, there is only uncertainty.”

The Democratic Union of Hungarians in Romania, which represents the ethnic minority of 1.5 million, took 6.2 percent of the vote for the lower house.

Smaller Parties

The rest of the vote went to smaller parties that didn’t pass the 5 percent threshold needed to enter Parliament, meaning only the Liberals are in a position to give one of the two leading parties a majority.

Many people traveled from their voting districts in major cities for mini-vacations taking advantage of a national holiday today. Voter turnout was 39.3 percent.

Talks to form a coalition can only begin after authorities confirm the vote in coming days. The new Parliament will have to convene by Dec. 20, and fighting over the prime minister’s job may drag on into next year.

President Traian Basescu, 57, also has the right to reject any party’s proposal for prime minister. Basescu has said he would not approve his arch-rival Tariceanu, 56, and Social Democrat leader Mircea Geoana, 50. Basescu, who faces presidential elections in July, has been allied with Theodor Stolojan, the 65-year-old candidate for premier from the Liberal Democrats.

‘Tough Negotiations’

“We’ll see only tough negotiations to form a government by spring, considering no party has a clear victory,” said Florin Irimin, a trader at Intercapital Invest SA in Bucharest. “We won’t see a positive market reaction.”

After years of an economic boom that sent wages soaring and boosted foreign investment, economists and the outgoing government say Romania is on the verge of rising unemployment, declining exports and a sharp slowdown in economic growth.

The leu has weakened more than 20 percent against the dollar and 7.6 percent against the euro in the past year as the benchmark BET stock index has shed 67 percent of its value.

The leu was little changed against the euro, trading at 3.78675 at 4:50 p.m. in Bucharest. The leu has fallen 5.4 percent against Europe’s common currency so far this year.

Companies including carmaker Dacia SA, food processor Kraft Romania SA and steel manufacturer Arcelor Mittal Romania announced cutbacks or layoffs totaling 4,000 in October alone, meaning unemployment will keep rising from the current 4 percent.

Detailed Economic Plan

The only detailed economic plan, a 10 billion euro ($12.6 billion) package announced last month by Tariceanu, could face delays or changes as talks continue.

The package would exempt reinvested dividends from a 16 percent tax, grant 500 million euros in investments and aid for farmers, allocate 3 billion euros for job-creation, lower social insurance payments and create a 250 million-euro line of financing for medium and small businesses.

The Romanian leu was little changed against the euro, trading at 3.78696 at 5:55 p.m. in Bucharest. The leu has fallen 5.4 percent against Europe’s common currency so far this year.

The most likely outcome of post-election talks is an alliance between the Social Democrats and Tariceanu’s Liberals, according to a research report by Citigroup Global Markets Ltd.

The report gave a 35 percent chance of a Liberal-Social Democrat coalition forming, followed by a 30 percent chance of an alliance between the Liberals and Liberal Democrats and a 20 percent chance of the Social Democrats allying with the Liberal Democrats, their arch rivals in the campaign.

To contact the reporter on this story: Adam Brown in Bucharest at abrown23@bloomberg.net;

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