Thursday, December 24, 2009

Romanian Parliament Approves Boc to Unlock IMF Loan

By Adam Brown and Irina Savu

Dec. 23 (Bloomberg) -- Romania’s Parliament approved a government led by Prime Minister Emil Boc, ending an impasse that has left the country without leadership since October and damaged relations with international creditors.

Parliament voted 276-135 today to approve Boc as premier, Sebastian Vladescu as finance minister and 13 other proposed Cabinet members. Most members of the second and third-largest parties in the legislature opposed Boc.

“This is pretty much a secure majority,” Adrian Moraru, a political analyst at the Institute for Public Policies in Bucharest, said by telephone after the vote. “It is comfortable enough to ensure passage of the budget and other urgent issues. The majority will also probably increase with time.”

The new government must act within weeks to 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.

“This will bring things back to normal and we can make the political decisions we need,” Boc said in a speech to Parliament. “In the coming years, we need a return to reason and stability.”

Government Collapse

Parliament originally ousted Boc in October, leading to the collapse of his Cabinet. Opposition lawmakers then rejected other candidates for premier nominated by President Traian Basescu before Basescu was re-elected in Dec. 6 elections.

Basescu, won the election with 50.3 percent against 49.7 percent for opposition leader Mircea Geoana, a difference of 70,000 votes in the nation of 22 million. Geoana claimed fraud and appealed to the Constitutional Court, which upheld the results more than a week after the election. Basescu then re- nominated Boc, 51.

Romania is the most corrupt nation in the European Union, according to Berlin-based monitor Transparency International. The Balkan state joined the EU in January 2007 along with southern neighbor Bulgaria. More than 20 Cabinet ministers and former ministers have been accused by prosecutors of corruption and the EU in July warned Romania to accelerate steps to fight graft.

The vote backing the government included 167 members of Boc’s Liberal Democrat Party, which is loyal to Basescu, as well as 31 from the Democratic Union of Hungarians in Romania, an ethnic minority party. The rest came from independent lawmakers, other representatives of ethnic minorities, and defectors from the opposition.

‘Traitors’

Geoana, president of the Social Democratic Party, and Crin Antonescu, leader of the opposition National Liberals, said they will remain in opposition. The government has an “unstable” majority based on “traitors,” Geoana said.

“The anti-crisis and economic plans of this government are unclear and that is a principal reason for voting against this government,” Geoana said in a speech before the vote. “What we see he is a recipe for repeating mistakes of government in recent years.”

Budget Approval

The leu strengthened 0.6 percent to 4.1940 to the euro in Bucharest after the vote. The currency fell to a seven-month low and bonds plunged after the Oct. 13 government collapse. The benchmark BET stock index rose 0.2 percent to 4661.56 after today’s vote.

Romania needs to 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 last week. That would include a delayed December transfer and advance payment of one slated for March. The EU said it may also release 1 billion euros as part of the delayed package.

Boc said he will maintain the 16 percent flat tax and 19 percent value-added tax next year and direct 20 percent of the budget toward investment. He also said today he will extend a tax exemption on re-invested profit into his new term.

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

To contact the reporter on this story: Adam Brown in Bucharest at abrown23@bloomberg.net

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