October 2, 2009
By DAN BILEFSKY
PRAGUE — Romania’s coalition government collapsed Thursday, fomenting a political crisis in a country with one of the most troubled economies in a region buffeted by the global financial upheaval.
Unlike Iceland, Latvia and Hungary, whose governments have fallen directly because of economic tribulations, analysts said that the crisis in Romania was caused by political infighting when nine ministers from the Social Democratic Party resigned in solidarity with Dan Nica, the interior minister, who was fired by Prime Minister Emil Boc on Monday.
Mr. Nica had made comments suggesting that Mr. Boc’s Liberal Democrats were prepared to engage in fraud in presidential elections set for Nov. 22 — allegations Mr. Boc strenuously denied.President Traian Basescu called the two parties to mediate Tuesday, but as of late Thursday there was no resolution.
Even though the government led by Mr. Boc no longer had a majority in Parliament, analysts said that he could stay on as prime minister while the parties tried to resolve the crisis. However, the opposition National Liberal Party indicated that it would call a vote of no confidence in the coming days and analysts said it was not clear whether Mr. Boc could remain in power.
Economists said that the newest upheaval would undermine the country’s already struggling economy. Romania, which was once a magnet for investment among former Communist countries, has fallen into recession and has a budget deficit of about €5.3 billion. Earlier this year, Romania agreed to an international loan package led by theInternational Monetary Fund and the European Union of €20 billion to help finance its current-account and budget deficits and to help pay state-sector salaries.
Radu Soviani, a leading economic commentator in Bucharest, said the crisis would diminish investor confidence, which was likely to increase the cost for Romania to secure outside financing and potentially destabilize the country’s currency.“This may be an inter-party squabble, but this political noise comes at a time when the economy is in bad shape and the timing could not be worse,” he said.
Romania, a poor Balkan country that is a member of the European Union, has also faced social unrest. After promising generous welfare spending, the government temporarily froze public sector salary increases, a move that caused a loud outcry from the country’s powerful unions. In recent weeks, there have been protests and strikes by railway and other public sector workers and more strikes are scheduled for next week.
Petru Dandea, deputy head of Alfa, one of the biggest Romanian unions, which represents 600,000 workers, said the Romanian economy also faced a challenge because of the decline in foreign direct investment, which had helped fuel the record growth of recent years and which economists predict will halve this year to about €5 billion.Mr. Dandea said that the decline in foreign investment would be exacerbated by the reversal of fortune of the nearly three million Romanians who worked abroad in places like Spain and Italy but lost their jobs in the global recession.