Monday, October 19, 2009

Romania PM designate fails to secure key backing

By Luiza Ilie

BUCHAREST, Oct 16 (Reuters) - Romania's prime minister designate Lucian Croitoru failed to win the backing of the ethnic Hungarian party on Friday, all but shattering his chances of securing parliamentary approval.

A respected economist and member of the Romanian team that negotiated the country's 20 billion euro ($29.84 billion) aid package with the IMF, Croitoru was nominated on Thursday following parliament's dismissal of the previous administration.

Opposition lawmakers, who defeated the outgoing centrist government in a confidence vote, favour a provincial politician for the post and oppose Croitoru's nomination by President Traian Basescu.
Commentators see the tussle over the premiership as a tactical battle by political parties ahead of Romania's presidential election on Nov. 22.

"We stick to our candidate. No one will be able to form a cabinet until after the presidential election," Marko Bela, head of the ethnic Hungarian party, said after meeting Croitoru.

Many analysts saw the Hungarians and other ethnic minority deputies as crucial for Croitoru to have a shot at governing.

"Croitoru is finished as prime minister," said political commentator Mircea Marian. "But he will not give up now, he will come up in front of parliament and will fail there."

Basescu said he would nominate someone from the Democrat Liberal Party, his closest ally, if Croitoru were defeated.

Economists warn that without a stable government in place quickly, Romania risks slipping on its commitments to the International Monetary Fund and the European Union and faces delays in disbursements of its loan package.

Vital for the economy, the money is conditional on deep fiscal reforms and painful budget cuts, which the IMF says are key to ensuring long-term policy stability.

However, wrangling over who forms Bucharest's next government may last a while, possibly until after the second round of the presidential election expected on Dec. 6.

"The IMF does not expect an interruption of the agreement with Romania ... but (it) stated that a third review mission should visit Romania only after a new government is in place," said ING Bank's Nicolaie Alexandru-Chidesciuc in a note.

"It is not clear when this might happen. Therefore, at the moment, Romania faces quite a significant risk that the third IMF tranche is to be delayed."

Fitch Ratings said on Friday that any delay to the disbursement of the next IMF tranche could put downward pressure on ratings. The leu was stable against the euro as investors withheld judgement on Romania's political developments.

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