Thursday, November 5, 2009

Romanian PM nominee torpedoed, aid seen at risk

Wed Nov 4, 2009 2:19pm EST

By Luiza Ilie

BUCHAREST (Reuters) - Romania's opposition rejected prime minister-designate Lucian Croitoru Wednesday, feeding skepticism that the government will be able to approve a tough 2010 budget by an IMF deadline to release vital aid.

The opposition Social Democrats said they would support the approval of the budget to keep the 20 billion euro ($29.5 billion) aid package afloat but analysts said the December 10 deadline would be hard to meet with a presidential election looming this month.

No party is likely to endorse the politically unpopular economic cuts demanded by the International Monetary Fund ahead of the election, which is expected to have no clear winner and so require a run-off vote on December 6.

Analysts are concerned the country of 22 million may run out of time to meet the terms for its next tranche of aid.

Cristian Mladin, analyst at BCR bank in Bucharest predicted that budget wrangling would continue past December 10. "So the budget could be passed by the end of the year, but it will be late and the tranche could be delayed until next year too."

The IMF has demanded Romania pass a budget with a gap of 5.9 percent of gross domestic product. Its representatives in Bucharest may comment on whether there is political support when their mission ends on November 9.

If Romania achieves this, it will receive a 1.5 billion euro IMF loan tranche crucial to staving off further financial crisis and safeguarding the recession-hit economy.

The leu currency was virtually unchanged after the vote and dealers said the market had already priced in Croitoru's rejection. "Uncertainty will remain high until presidential elections," said Ionut Dumitru, an analyst at Raiffeisen Bank.

The powerful opposition rejected Croitoru, a nominee of centrist President Traian Basescu, by a vote of 250-189.

Its preferred prime minister is provincial mayor Klaus Johannis, an ethnic German who has won praise for major restoration work in the medieval Transylvanian city of Sibiu.

But Basescu has made clear he will name a candidate only from his Democrat Liberal allies, making a new cabinet unlikely before the November 22 vote. He said Wednesday he planned to nominate a new prime minister designate as soon as possible.

Croitoru, a policy adviser to the central bank governor, was a member of the Romanian team that negotiated the IMF/European Union/World Bank aid package.

BUDGET MANDATE

Opposition parties united Wednesday to approve a mandate for the budget to Emil Boc, who has stayed on as prime minister since his cabinet fell in October.

"We are ready to pledge that we will support in parliament a budget plan with ... the deficit target agreed by the IMF," opposition Liberal Party chief Crin Antonescu told parliament.

Mircea Geoana, head of the Social Democrats and a candidate in the presidential election added: "It needs to pass parliament by December 10, so we have expressed readiness to back this."

Obstacles remain. EU Monetary Affairs Commissioner Joaquin Almunia said Tuesday Romania risked delays in receiving aid because it was hard to tell if it had met the terms of the deal.

Politicians also believe the political deadlock will not end until the result is known of the presidential election between Basescu, Geoana and liberal Crin Antonescu.

Most opinion polls show Basescu in front of Geoana, although one poll on October 20 showed Geoana ahead. The winner can choose who will lead the next government.

(Writing by Radu Marinas and Michael Winfrey; Editing by Mark Trevelyanand Elizabeth Fullerton)

No comments: