Thursday, October 8, 2009

Thousands rally in Romania as government teeters

* No-confidence vote set for Oct. 13

* Union rally adds pressure on minority government

By Ioana Patran

BUCHAREST, Oct 7 (Reuters) - Thousands of Romanian workers marched against public sector pay cuts on Wednesday, a demonstration of growing anger at the government which faces a no-confidence vote in parliament on Oct. 13.

Outcry against public pay reforms -- that include scrapping intricate bonus schemes and introducing mandatory unpaid leave -- split the ruling coalition last week, leaving Prime Minister Emil Boc's minority government with a weak grip on power.

Chanting "thieves! thieves!" some 13,000 trade unionists gathered in Bucharest from across the country demanded a change in government. On Monday 800,000 civil servants went on a one-day strike.

"I want this government to go. They have brought us to chaos!", said Eugen Lela, a 51-year-old heavy machinery operator from the mountain town of Campina.

Following last week's sudden split of the ruling coalition -- a result of political manoeuvring ahead of a November presidential election -- opposition parties asked parliament to hold a no-confidence vote. [ID:nL2212788]

On Wednesday parliament set next Tuesday as a date for the vote which could topple Boc's government.

Regardless of whether the vote succeeds, analysts say political instability will last until after the presidential election or well into December.

The political uncertainty spells concerns over the future of Romania's 20 billion-euro ($29.40 billion) aid package from the International Monetary Fund and the government's budget plans for 2010, creating downward pressure on the leu currency.

The presidential vote pits Boc's Democrat-Liberals against both the centrist opposition and his former coalition partners, the Social Democrats. All parties will struggle to balance meeting IMF demands with winning votes in the relatively poor EU state.

"There are few near-term paths to a fundamentally stable political arrangement," said Jon Levy from U.S.-based thinktank the Eurasia Group in New York.

Both Fitch Ratings and Moody's Investor Service said Romania's credit ratings could come under downward pressure if the problems threaten economic policies or delay fiscal reforms.

The IMF has asked Romania for sweeping reforms to curb salary growth in the public sector, impose controls on how tax money is spent and to clarify salary levels.

The goal is to free up state cash for modernisation, vital to bring back foreign investment, to prevent a financing crisis and to curb fraud in the EU's second most corrupt state.

But the cuts affect a public sector which employs roughly a third of the workforce and is a crucial voter base.

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