Tuesday, December 8, 2009

Romanian Opposition to Contest Basescu’s Election Win

Dec. 8 (Bloomberg) -- Romania’s opposition Social Democratic Party may contest President Traian Basescu’s re- election victory as early as today, deepening a political crisis and damaging ties with lenders.

Party Chairman Mircea Geoana said late yesterday he will ask the Constitutional Court and electoral officials to annul the run-off vote that gave Basescu 50.3 percent to Geoana’s 49.7 percent. Social Democrats, who claim fraud, will meet this morning in Bucharest to outline a strategy for contesting the outcome and may announce plans later in the day.

Political bickering in the European Union’s second-poorest member, has left the Balkan nation without a functioning government when it needs to unfreeze a $30 billion loan by the International Monetary Fund, cut spending and revive an economy deep in recession. A row over the presidency would leave the country devoid of leadership, risk a ratings downgrade and push bonds and stocks lower.

“Basescu’s slight election victory could open the way for a protracted political dispute that would delay the formation of a new government and the resumption of the EU and IMF program,” Kenneth Orchard, a senior analyst atMoody’s Investors Service in London, said in an e-mail. “Early elections would not seem to be in anybody’s interest.”

Falling Markets

Romanian stocks dropped the most in a month yesterday and bond risk rose for the first time in seven days. Banca Transilvania SA and BRD-Groupe Societe Generale SA, the country’s two biggest listed banks, led Bucharest’sbenchmark BET index down 2.6 percent. Credit-default swaps on government bonds climbed 6.5 basis points to 256.

The leu dropped as much as 0.9 percent to 4.2594 per euro after Basescu’s narrow victory was announced yesterday and was trading at 4.2324 against the common currency as of 10 a.m. in Bucharest today. The currency fell to a seven-month low and bonds plunged after the government of Prime Minister Emil Boc collapsed on Oct. 13.

Moody’s rates the country’s debt at Baa3, the lowest investment grade and below Russia, Hungary and the Czech Republic, while Standard & Poor’s rates the country’s debt at BB+, one level below investment grade.

S&P said yesterday that the election results will not affect its ratings for Romania and it expects the country to comply with the IMF and EU loan requirements.

Surprise Result

Basescu’s surprise win followed opinion polls that put Geoana ahead before the second-round election. Geoana was declared the winner in three of four exit polls.

The presidential race was closely watched because the winner’s first task would be to select a new prime minister to replace Boc, who is now a caretaker premier with limited powers, and pass a budget that would conform to IMF demands.

The Washington-based lender suspended the loan following the fall of the Cabinet, putting pressure on the budget and current-account deficits.

Now, the political turmoil has spread to the presidency with no sign of a resolution before April.

“The focus now turns to the difficult domestic political mix,” said Timothy Ash, a London-based analyst at Royal Bank of Scotland Group Plc. Refusal to compromise “is likely to result in early parliamentary elections.”

Fraud Charges

Electoral authorities will send the results -- which show a difference of about 70,000 votes in the nation of 22 million -- as early as today to the Constitutional Court for validation.

Geoana said he will “submit evidence of electoral fraud to the court.”

Boc, president of the Liberal Democrats, estimated in a news conference late yesterday that a court challenge against Basescu’s victory will take a week to resolve.

Election observers of the Organization for Security and Cooperation in Europe said on its Web site yesterday that the election “was held generally in line with OSCE commitments. The election administration continued to work in an overall professional manner.”

Though Basescu’s Liberal Democratic Party is the largest in Parliament, with 167 of 471 seats, he has few allies in the legislature. He has failed twice to push through a replacement for Boc and should his election victory be validated and he is unable to gain support for a third candidate, he would be forced to call new parliamentary elections.

The government collapsed amid infighting between the members of the ruling coalition, including Geoana’s Social Democratic Party and the Liberal Democratic Party, which supports Basescu. Boc continues as interim premier, with limited powers.

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

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