Tuesday, December 22, 2009

Romanian Cabinet Named by Boc to Unlock Next Stage of Bailout

By Adam Brown and Irina Savu

Dec. 21 (Bloomberg) -- Romanian Prime Minister-designate Emil Boc, who will seek lawmaker approval to take the post a second time this week, nominated a 15-member cabinet to restore investor confidence and unlock bailout funds.

Boc named 51-year-old Sebastian Vladescu as finance minister, his second time in the job, and said he would retain Economy Minister Adriean Videanu, Transport Minister Radu Berceanu and Interior Minister Vasile Blaga.

“Next year will be tough, at least the first half, but we hope we can have significant economic growth by the end of 2010,” Boc said in Bucharest yesterday. “We’ll have to tighten the belt at the beginning of next year and hope to see the engines of the economy start in the second half.”

The new government must satisfy International Monetary Fund demands to stick to budget pledges. The absence of political leadership in the European Union’s second-poorest member delayed payment of part of a $30 billion IMF-led loan. Standard & Poor’s has warned the vacuum may trigger credit rating downgrades.

The leu strengthened as much as 0.3 percent to 4.2116 to the euro and traded at 4.2133 against the common currency in late Bucharest trading on Dec. 18. The currency fell to a seven- month low and bonds plunged after the Oct. 13 government collapse. The benchmark BET stock index fell 2.1 percent to close at 4803.92.

Parliament originally ousted Boc in October, leading to the collapse of his cabinet. Opposition lawmakers then rejected two other candidates for premier nominated by President Traian Basescu before Basescu was re-elected in Dec. 6 elections. Basescu re-nominated Boc and parliament, split between Basescu allies and the opposition, is scheduled to hear the proposed cabinet and vote on his nomination starting today.

Second Term

Mircea Geoana, president of the Social Democratic Party, and Crin Antonescu, leader of the opposition National Liberals, the third-largest group in the legislature, agreed not to block the speedy formation of a government.

Romania needs to form a government and approve the 2010 budget by Jan. 16 to release two loan payments the following month totaling 2.3 billion euros ($3.3 billion), Basescu said. That would include a delayed December transfer and advance payment of one slated for March. The EU said it could also release 1 billion euros as part of the delayed package.

Boc also said he will maintain the 16 percent flat tax and 19 percent value-added tax next year and direct 20 percent of the budget to investments.

The IMF said in an e-mail on Dec. 18 that the country’s “macroeconomic outlook seems better” and if Parliament passes a government and budget, the IMF board may meet in February to discuss resuming loan payments. It also raised its economic growth outlook for 2010 to 1.3 percent from 0.5 percent.

Failure to form a government would force Basescu to dissolve Parliament and call early elections, leaving the country without effective leadership four at least four months.

Vladescu, 51, served as finance minister between 2005 and 2007.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net;

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