Monday, November 17, 2014

Romania Opposition Chief Johannis Wins Presidency in Upset

Romanian Liberal Party leader Klaus Johannis erased a deficit of 10 percentage points to upset Prime Minister Victor Ponta and win the country’s presidency, a surprise result that threatens to unsettle the ruling coalition.

Johannis, 55, the ethnic German mayor of the Transylvanian city of Sibiu since 2000, got 54.5 percent of the vote to 45.5 percent for Ponta, gaining 2 million votes to reverse the premier’s lead in the first round two weeks ago. Ponta conceded defeat in a televised speech last night, even before partial results were announced. He said he won’t resign from his post.

Johannis is the first member of an ethnic minority to become president in Romania, where the majority’s relations with ethnic groups including Hungarians are often strained. After a campaign focused on a pledge to crack down on corruption and strengthen the rule of law, he rode an increase in voter turnout to victory.

“I will be a free president who will represent all Romanians,” Johannis, a former high school physics teachers who received praise for helping Sibiu became Europe’s capital of culture in 2007 by restoring medieval buildings, said in a televised speech. “The citizens gave a signal for profound change and I got this message loud and clear. I’m ready to start working.”

The leu gained 0.1 percent to 4.4245 per euro at 12:30 p.m. in Bucharest today, while the yields on the government’s euro-denominated bond due in 2024 fell 2 basis points, or 0.02 percentage point, to 2.75 percent, according to data compiled by Bloomberg.
‘Unseating Ponta’

About 64 percent of the 18.3 million eligible voters cast their vote, up from 53 percent in the first round, according to the Electoral Bureau. Social Democrat Ponta, 42, who can still lean on the ruling coalition’s parliamentary majority, is defying criticism over voting procedures for Romanians abroad and losing his first-round lead.

“Johannis will likely use the presidency’s influence over the majority in parliament to undermine Ponta’s government,” Tsveta Petrova, an analyst at New York-based Eurasia Group, said in an e-mailed note before the vote. He may seek “a government that is more business-friendly than the current governing coalition, though not necessarily able to change the course in the medium term.”
‘Political Fracas’

Ponta’s coalition, which includes the ethnic Hungarian party, has 358 lawmakers in the 572-seat parliament. It would control 315 votes without the Hungarians and other minority representatives, according to the legislature’s website.

“One shouldn’t rule out a political fracas in the period going forward and, possibly, a readjustment of the leftist parties’ strategies in Parliament,” Radu Craciun, chief economist at Erste Group Bank AG (EBS)’s Romanian unit said in a note.

Johannis urged the government to present a 2015 budget “as soon as possible,” called on parliament to reject an amnesty law and lift the immunity of lawmakers being probed by prosecutors. He also asked the President and Ponta’s cabinet to punish those responsible for the poor management of voting abroad, including the recall of some diplomats.

Several thousand people took to the streets in Bucharest and other cities last night to protest long lines at voting centers abroad and celebrate Johannis’s victory.
‘Will Pay’

“I want to show my children that we still live in a democratic country and that whoever insults our right to vote will pay the price,” said Rebeca Ion, a 40-year-old consultant, marching in Bucharest.

More than 10,000 demonstrators in Bucharest demanded Ponta’s resignation after television images showed thousands lining up for hours to vote in London, Paris, Munich and other cities in Europe. Police fired tear gas in Turin and Paris to disperse Romanians angry they weren’t able to cast their ballots before polls closed there, according to Realitatea TV.

“Ponta was defeated after annoying the urban electorate by failing to organize the voting abroad and showing too much confidence in his victory,” Cristian Ghinea, head of the Romanian Center of European Policies, said today by phone.

With economic growth exceeding estimates and a target to adopt the euro in 2019, Romanians voted to replace outgoing president Traian Basescu, who served the maximum two five-year terms. With Basescu at the helm, the country witnessed growth rates higher than China in 2008 and some of the toughest austerity measures in the European Union two years later in the financial crisis.

Corruption Scandals

In an election campaign that was clouded by corruption scandals and accusations by Basescu that Ponta was a spy before entering politics, which he denied, Ponta tried to boost his popularity by promising higher pensions and salaries. He quarreled with the International Monetary Fund and the EU under a 4-billion euro ($5 billion) bailout accord over a plan to cut social contributions by 5 percentage points.

The lenders put a planned review of the accord on hold in June and said they will resume talks with the government after elections to see the 2015 budget plan and proof that the measure is sustainable.

“There is a high chance that negotiations will prove tight this time,” Irina Cretu, an analyst at NBG Securities SA in Bucharest, said in an e-mailed note before the vote. “The assumed 2015 fiscal gap target stands at 1.4 percent of economic output, whereas the recent European Commission forecast shows Romania’s public budget deficit would increase to 2.8 percent next year.”

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Kevin Costelloe

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