Thursday, September 17, 2009

Vote of Confidence called

By Luiza Ilie
BUCHAREST, Sept 15 (Reuters) - The Romanian government called on Tuesday for a vote of confidence in parliament, trying to win quick support for tough spending cuts required by the International Monetary Fund in return for aid.

Aiming to slash public sector costs and streamline ineffective administration, the reforms should ease the financial burden on the state and free up cash for investment in the long term.But they have sparked social tensions in European Union member Romania, plagued by a deep recession and rising unemployment, putting strains on the uneasy centre-left coalition government before a Nov. 22 presidential election.Shortly before the parliament session began, the ruling leftists of the Social Democrat Party (PSD) pledged to stay in government, despite disagreements over the reform package, easing some concerns over a potential rupture in the coalition.

Local commentators have said in recent weeks the leftists may leave the coalition over the bills because of deepening rifts with their centrist partners, the Democrat-Liberals.

'I believe a government that exists and functions right now is better than a political crisis in Romania,' PSD leader Mircea Geoana said. 'Had we opposed this ... we would have seen the government collapsing and a political crisis.'Many commentators see the bills as a key test of the government's ability to agree on painful policies and meet conditions for the 20 billion euro ($29 billion) IMF package secured in March.

Romania received a first tranche worth about 5 billion euros in May. Further release of funds depends on successful completion of quarterly reviews of the deal. Without aid, the country may face a financing crisis, and any signs of the government breaking up could shake financial markets.

FISCAL BURDEN

The reforms aim to undo years of runaway growth of the public sector, which employs a third of the Romanian workforce and offers some of the highest salaries in the economy.Economists say bloated state finances are a crucial obstacle to effective development of infrastructure and modernisation of Romania, which has lagged behind many of its former Soviet bloc peers since communism fell there in 1989.'The Romanian state is oversized and overweight but is lacking resources.

Reforming such a state is painful and requires tough measures,' Prime Minister Emil Boc told deputies.But with powerful public sector trade unions an important source of support for many politicians, particularly the PSD, reform efforts so far have been lacklustre.Hundreds of workers picketed parliament during Tuesday's parliamentary debate, protesting against pay freezes and thousands of planned redundancies.

Chanting 'thieves' and 'shame', they exposed the dilemma facing policymakers who need to secure IMF funds while vying for support ahead of the presidential ballot.It pits top officials from the ruling centre and left groups against each other, with the leftists' Geoana running second in opinion polls behind incumbent Traian Basescu, who has close ties with the co-ruling centrists.

Unions have also called a general strike for Oct. 5, expected to muster 800,000 public sector workers nationwide, including doctors and teachers.After Boc's presentation of the reform package, opposition parties now have three days to schedule a no-confidence vote. If none calls for one, the bills become law automatically without a vote.

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