Wednesday, May 2, 2012

Romanian Premier Sets Cabinet, Georgescu Named as Finance Chief

Romanian Prime Minister-designate Victor Ponta announced his Cabinet yesterday, choosing central banker Florin Georgescu to be finance minister as the Balkan nation continues international bailout talks.

Lawmakers in Bucharest will probably hold a confidence vote in the government on May 7, Ponta said in a televised speech late yesterday. The three-month-old Cabinet of Mihai-Razvan Ungureanu was ousted on April 27 in a no-confidence motion. Ponta will be backed by his Social Democrats and the Liberals, the opposition parties that initiated the vote against the previous administration.

The ouster of Ungureanu took place as the International Monetary Fund and the European Union were reviewing the country’s progress under a precautionary-loan accord. The lenders suspended formal discussions and said they will continue technical work until a new government is installed.

“It’s a special government, created in special circumstances with a limited mandate until the general election,” Ponta said. “It is essential for the new government to respect Romania’s pledges to its international lenders, but it is also essential to respect our pledges to our citizens.”

The Romanian leu fell to a record low of 4.4620 per euro today in Bucharest, marking the third day of losses following the government’s fall.
Bailout Talks

Romania, which secured a 5 billion-euro ($6.6 billion) credit from the IMF and the EU in 2011 to shield it from Europe’s debt crisis, is trying to assure investors it will maintain fiscal discipline and cut the budget deficit to 1.9 percent of gross domestic product this year after a gap of 4.4 percent in 2011. It hasn’t drawn any funds so far.

Georgescu, 58, is the central bank’s first deputy governor. He will return to the bank after elections later this year. Daniel Chitoiu, 44, was named as economy minister, while Rovana Plumb will become environment minister. Leonard Orban, a former European Union commissioner, stays on as the minister in charge of absorbing EU funds, Ponta said.

If Ponta, a former prosecutor, fails to get the backing of lawmakers, the president will nominate another candidate. A second failure may trigger early elections, according to the constitution. Romania is scheduled to hold local balloting on June 10 and a general election later this year.
Rating Pressure

“The fall of the second government in Romania in less than three months has increased political uncertainty,” Fitch Ratings said in a statement on April 30. “A material increase in populist policies resulting in a significant divergence from the current fiscal consolidation program, either before or after the general elections, could put downward pressure on the rating.”

Fitch raised Romania’s credit rating to an investment grade BBB- in July last year after the government embarked on a program to cut the budget deficit and the economy exited a two- year recession.

Ponta said on April 30 that he expects a letter of intent with the IMF to be approved by the new government on May 8 following the review mission.

“It’s obvious that few of the pledges Romania has undertaken so far can be changed, but the new government has its own vision,” Ponta said.
Opinion Polls

The Social Democrats and the Liberals, who formed an alliance ahead of elections this year, lead in opinion polls and would garner more than 48 percent of the votes in a general election, according a survey published by pollster IMAS on Adevarul newspaper on April 2.

Previous governments had pledged to sell minority stakes in state-owned companies such as utility Transgaz SA (TGN) and hydro- power operator Hidroelectrica SA on the stock exchange and majority stakes in unprofitable Oltchim SA (OLT) this year.

The country’s economic growth will probably slow to as low as 1.5 percent this year, after output grew 2.5 percent last year, on declining exports to western Europe and weak domestic demand, according to IMF forecasts.

The economy probably posted an annual growth of about 1.5 percent in the first quarter, outgoing Finance Minister Bogdan Dragoi said, adding that the ministry has 5 billion euros and 7 billion lei ($1.5 billion) in reserves and that the macroeconomic conditions allow the new Cabinet to restore public sector wages.

To contact the reporters on this story: Andra Timu in Bucharest at; Irina Savu in Bucharest at

To contact the editor responsible for this story: James M. Gomez at

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