Sun, Nov 22 2009

Alex Bivol

Macro: Romanian scenarios

Fri, Oct 09 2009 09:59 CET 1381 Views
For most observers, Romania’s "grand coalition" between two parties that fought for dominance during a bitter election campaign, was doomed from the start. A few predicted that the Social Democrats, out of power for four years, were so desperate to be back in government that they would make any deal in order not to rock the boat.

Whatever set of reasons one favours as the explanation for the collapse of the coalition, everyone seems to be in agreement that its timing was disastrous. At least Romania got the latest cash injection under the terms of the bail-out plan agreed with the International Monetary Fund before the Social Democrats resigned in numbers.

However, future payments, money that the government needs to cover the budget deficit and pay civil servants’ salaries and state pensions, hinge on sweeping reforms meant to curtail future government spending. These are reforms that the current cabinet no longer has the parliamentary support to pass. The government has the option to decree them into law, as it has done on October 6 with the pension reforms package, but that leaves it open to a motion of no confidence from a legislature that is mostly hostile.

In the short-term, the only certainty is that there is more uncertainty ahead.

The Romanian constitution forbids dissolving parliament within the last six months of a presidential term. Romania will hold presidential elections on November 22, with a likely run-off on December 6, which means that new elections can be called in mid-December at the earliest and held no earlier than February.

But there is no certainty that would happen because incumbent president Traian Basescu, who is firmly behind the current cabinet, is no longer nailed-on for a second term, as it appeared even a year ago. Should he lose the elections, one of his opponents could be less inclined to call snap parliamentary elections, especially if the winner happens to be Social Democrat leader Mircea Geoana.

Prime minister Emil Boc has won himself a stay of execution by appointing current members of the cabinet to the portfolios vacated by his former coalition partners on an interim basis. He now has until November 14 to present a line-up of his next cabinet, a period that spans nearly the entire presidential elections campaign. Even if parliament rejects Boc’s proposed line-up or if he is toppled through a motion of no confidence before that deadline, Basescu can nominate Boc again, extending the deadlock but buying time until his own future is clear. The outcome of the presidential polls, by and large, will dictate who will have the unenviable task of cleaning up the mess.

Any potential scenario has the same flaw, however, namely that Romania’s government will remain effectively at a standstill until after the presidential elections have passed.

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