Bloomberg News

Romania’s Cabinet Falls After Losing No-Confidence Vote

April 27, 2012

Romania's Prime Minister Mihai Razvan Ungureanu. Photographer: John Thys/AFP/Getty Images

Romania's Prime Minister Mihai Razvan Ungureanu. Photographer: John Thys/AFP/Getty Images

Romanian President Traian Basescu designated opposition leader Victor Ponta as Prime Minister after Mihai-Razvan Ungureanu’s three-month-old government lost a no-confidence vote in Parliament.

Ponta, 39, is a former prosecutor and has been heading the Social Democrats since 2010. He will begin talks to form a new government in the next 10 days and then seek the support of Parliament in a vote. The leu weakened the most in more than six weeks against the euro and stocks fell after the government collapsed today.

Governments are crumbling across the European Union as German Chancellor Angela Merkel pushes for austerity to prevent the euro area from breaking up and a debt crisis from spreading. 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.

“This is a democratic process which showed that the Ungureanu government lost its parliamentary majority,” Basescu told reporters in Bucharest while naming Ponta. “There is no reason for panic in the markets because the country has a financing buffer at the Finance Ministry.”

Markets Fall

The leu depreciated 0.4 percent to 4.4008 per euro at the close of the trading session in Bucharest, compared with a record low of 4.4012 in June 2010. The country’s benchmark BET index (BET) slid as much as 0.9 percent to 5,304.44.

The Social Democrats and Liberals toppled Unugureanu’s government with 235 votes in favor of toppling the administration, four more than the 231 needed to oust the Cabinet in the 460-member legislature.

Romania, which secured a 5 billion-euro ($6.61 billion) precautionary loan from the IMF and the EU in 2011 to protect it from the debt crisis, is trying to reassure investors it will keep fiscal discipline and cut the budget deficit to 1.9 percent of gross domestic product this year after 4.4 percent in 2011. It hasn’t drawn any funds so far.

“The missions will continue their technical work with the Romanian authorities and provide them with the preliminary findings and policy recommendations,” the IMF said in an e- mailed statement today. “The missions expect to return to Bucharest to resume the formal discussions with the new government when it is formed. We have every expectation that Romania will continue to observe its economic policy commitments to its international partners.”

Deputies Defect

Ungureanu was unable to fend off defections in the former ruling coalition in his first no-confidence motion. His predecessor, Emil Boc, survived 10 such motions before he stepped down Feb. 6 to ease political and social pressure stemming from anti-austerity nationwide protests. The opposition used today’s motion to accuse Ungureanu’s government of a lack of transparency in the sale of state-owned assets and in approving money transfers to local authorities, ahead of local elections scheduled for June 10.

Falling Support

Voter support for the coalition that backed Boc and Ungureanu’s governments fell by more than half in the past two years to about 18 percent after slashing public wages 25 percent and increased taxes to meet international pledges. Protests, sometimes violent, over austerity measures led to Boc’s resignation on Feb. 6.

The debt crisis in Europe has already resulted in the ouster of leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia, Slovakia, and Finland.

Dutch elections may be held Sept. 12, Prime Minister Mark Rutte said after the Freedom Party withdrew its support for the minority Cabinet on April 21. French bonds slid after Socialist Francois Hollande took more votes than incumbent Nicolas Sarkozy in the first round of presidential election.

Final results from today’s vote showed that nine of the 248 lawmakers present supported the Romanian government while four ballots were spoiled.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net;

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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