Tuesday, December 2, 2008

Tight election in Romania hands initiative to president

The Financial Times

By Thomas Escritt in Bucharest

Published: December 2 2008 02:00 | Last updated: December 2 2008 02:00

The result of Romania's parliamentary election was too close to call yesterday evening with the two main parties of the centre-left and centre-right running neck-and-neck, leaving the country facing long coalition negotiations at a time of economic slowdown.

A definitive result of Sunday's poll is not expected for several days, and the make-up of parliament is hard to predict given the introduction of a new first-past-the-post voting system.

The impasse hands the initiative to Traian Basescu, the president, who has links with the centre-right Democrat Liberal (PDL) party, having been a member before ascending to the presidency four years ago.

Mr Basescu is no friend of the centre-left Social Democrats (PSD), heirs to the former Communist party, and has backed an anticorruption campaign in which the PSD has been the biggest target.

This makes a PDL-led government a likely prospect, regardless of the make-up of parliament. The third-placed National Liberals (PNL), who currently head a minority government with PSD support and who previously governed in coalition with the PDL, could emerge as kingmakers. But Alina Mungiu, head of the Romanian Academic Society, a think-tank, said a grand coalition was also a possibility if the PNL's price were too high.

The closeness of the popular vote - the leftist PSD was on 33 per cent yesterday afternoon, less than a percentage point ahead of its centre-right PDL rival - mirrors the lack of clear policy differentiation between the two sides. Both parties, along with the National Liberals, who won 18 per cent of the popular vote, have promised a range of economic stimulus measures to tide Romania through next year, when growth is forecast to slow from 7.5 per cent this year to 3 per cent.

"The difference between the two main parties on economic policy is paper-thin," said Liviu Voinea, a partner at the Group for Economic Analyses think-tank.

The impasse is likely to leave the country saddled with this year's budget, which was drawn up in more optimistic times.

The sharp slowdown that hit in October already threatens to wreck the planned 2.4 per cent budget deficit for 2008, leaving the country increasingly reliant on costly international debt markets.

Romania is seen in international financial markets as vulnerable to external economic shocks, given its dependence on foreign capital inflows.

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