Romanian president calls for more austerity

By ALISON MUTLER

BUCHAREST, Romania

Romania's president called on the government Friday to show solidarity as it grapples with a recession and austerity measures, a day after a major Cabinet shake-up briefly plunged the country into turmoil.

President Traian Basescu spoke after he swore in six new ministers to replace those ousted by the prime minister. Basescu said cost-cutting measures had to continue, but that the unpopular government must show unity to win public trust.

"We can't ask for austerity if we don't have solidarity," he said.

Romania is mired in its worst recession of the past two decades. The government has slashed public sector wages by a quarter and hiked sales tax from 19 to 24 percent on July 1 to reduce the budget deficit -- measures derided by Romanians but requested by the International Monetary Fund.

The cutbacks are aimed at meeting conditions for a euro20 billion ($26 billion) loan from the IMF, the European Union and the World Bank to bail the country out of serious financial difficulty it encountered last year, when its economy contracted by 7.1 percent. Some of the money was used to pay pensions and wages.

Prime Minister Emil Boc fired the finance, labor, agriculture, transportation and communications ministers, saying it was necessary to continued economic reforms. Before he, too, could be fired, Economy Minister Adriean Videanu told Boc he wanted to quit the government to return to party business.

Boc named six replacements, relieving some of the immediate political instability. But there were concerns that the new economy and finance ministers are little known names in Romania.

Analysts said the upheaval in the government was more about politics than reforms, calling the reshuffle an attempt to boost the popularity of a government whose approval ratings are as low as 13 percent. Boc did not fire any of the ethnic Hungarian ministers, likely because he counts on the support of their party in Parliament.

In a sign of the tensions, former Agriculture Minister Mihail Dumitru told the daily newspaper Gandul that he was subject to political pressure "numerous" times over E.U. funds and staffing in the ministry.

The pressure included phone calls at midnight, and people visiting his mother, who lives in a small mountain village, the paper quoted him as saying in its Friday edition.

"I told the people that you can't give out (E.U.) funds based on political criteria, there are certain procedures ... and they replied, 'You can handle it, you know how to trick them'," he said, without naming any of the alleged culprits. Dumitru will now work as an adviser on agriculture to Basescu.

"The Cabinet reshuffle underlines the tense political situation and the deep divisions in parliament over the government's austerity measures," said David Oxley, an emerging market economist for Capital Economics in London.

"The outlook for the economy remains grim," he said, predicting growth would return to Romania "at the earliest" in 2013. The IMF has predicted Romania's economy will shrink by 1.9 percent this year, before returning to growth in 2011.

political instability plagued Romania for much of 2009, prior to the December presidential elections won by Basescu. Boc's previous government collapsed last year, which led to the temporary suspension of Romania's IMF agreement.

In the wake of the Cabinet shake-up, the opposition Social Democrats said they would file a motion of no-confidence. But it was not clear it could succeed because Boc's Democratic Liberal Party retains support from minority ethnic Hungarians whose party is also in government.