Friday, December 18, 2009

Romania’s Basescu Aims to Keep Ousted Boc as Premier

By Adam Brown and Irina Savu

Dec. 17 (Bloomberg) -- Romanian President Traian Basescu re-nominated ousted Prime Minister Emil Boc

Basescu, inaugurated to a second five-year term yesterday, said lawmakers know they must satisfy International Monetary Fund demands to stick to budget pledges. The opposition, which has rejected Basescu’s two previous candidates, agreed today not to use procedural delays to stall a vote on a government.

Boc will need the support of a Parliament that ousted him by 254 votes to 176 in October, leading to the collapse of his Cabinet. The absence of political leadership in the European Union’s second-poorest member has delayed payment of the latest tranche of a $30 billion IMF-led bailout loan and Standard & Poor’s has warned the turmoil may trigger credit rating downgrades.

“This government will pass Parliament because no party wants to be seen as blocking IMF funds,” said Adrian Moraru, a political analyst at the Institute for Public Policies in Bucharest. “The opposition will only get serious about fighting the government after that immediate problem is solved.”

Basescu, backed by the Liberal Democratic Party, won a second term as president on Dec. 6 with 50.3 percent support to the 49.7 percent for Mircea Geoana, president of the Social Democratic Party, a margin of 70,000 votes in the nation of 22 million.

‘Worst Solution’

While Geoana said the election was marred by voter fraud, the Constitutional Court upheld the victory, giving Basescu the right to nominate a prime minister.

“This government is the worst solution for Romania but we will have to work as quickly as possible to have a government to get back on schedule for financing agreements,” Geoana said in a news conference after Boc’s nomination.

Crin Antonescu, leader of the opposition National Liberals, the third-largest group in the legislature, said his party will “speed up Parliament procedures because Romania needs a government as soon as possible. We will stay in opposition.”

The leu strengthened as much as 0.3 percent to 4.2116 to the euro and traded at 4.2133 against the common currency as of 4:37 p.m. in Bucharest. 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 today to close at 4803.92.

IMF Payments

“The political situation is moving in the right direction,” Nicolaie Alexandru-Chidesciuc, chief economist at ING Bank Romania SA, wrote in a note to clients today. Boc’s re- nomination “could be positive for markets as he negotiated with the IMF from the start of the deal.”

Romania needs to form a government and approve the 2010 state 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 said today he will hold talks with allies through tomorrow and announce Cabinet selections over the weekend. The nominated ministers then face two days of hearing in Parliament before the vote on the new government.

Basescu said he is confident Parliament will pass his proposal because failure to do so could trigger early elections and put the IMF loan in limbo, an option all parties have said they want to avoid.

Muster Support

“We all know that a government will pass no matter what,” Basescu said. “That’s not the biggest problem we have.”

The Liberal Democratic Party has 167 of the 471 seats in Parliament and says it has gained enough allies to muster the 236 votes needed. Basescu has the support of the Democratic Union of Hungarians in Romania, an ethnic minority party with 31 seats.

Basescu also gained the support of independents, lawmakers from other ethnic minorities and some defectors from rival parties. Two Social Democrat lawmakers left their party after the election.

In a news conference today, Boc called for an overhaul of Parliament, including reducing the number of seats to 300 and merging the Senate with the lower house to fight political corruption.

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

Economic Outlook

Parliament may hold hearings early next week on Boc’s Cabinet, which has yet to be named, and vote on Dec. 23 on whether to approve the government.

The IMF said in an e-mail today that the country’s “macroeconomic outlook seems better” and if Parliament

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.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net;
as head of government as political opponents indicated they will shelve their objections to keep international bailout funds flowing. 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.

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