Bloomberg News

Romanian Power Struggle Peaks as President Faces Suspension

July 06, 2012

Romanian Prime Minister Victor Ponta’s ruling coalition is set to take the first step toward ousting President Traian Basescu as the jockeying for power between the country’s rival political camps intensifies.

Lawmakers will vote today on a motion to suspend Basescu, which would lead to a referendum on his removal within 30 days. Parliament is controlled by Ponta’s Social Liberal Union, or USL, which says Basescu overstepped his duties when announcing budget cuts in 2010 and making other economic decisions since.

Ponta, riding public anger over austerity measures, is looking for the decisive blow against Basescu two months after becoming the third premier this year in the country preparing for parliamentary elections in November or December. The impeachment attempt is fueling political turmoil, which pushed the leu to a record low today.

“The notoriously turbulent Romanian politics tend to be ignored as background noise, but this time, the power grab by the ruling USL is serious enough to provide for a more lasting weakness” in the leu, Mateusz Szczurek, ING Groep NV (INGA)’s chief economist for central and eastern Europe, wrote in a note to clients yesterday.

The leu has weakened 1.9 percent against the euro this week, the world’s second-worst performance behind the Sudanese pound. It sank to a record-low 4.5365 against Europe’s common currency today and traded at 4.5358 at 3:20 p.m. in Bucharest, data compiled by Bloomberg show.

‘Many Reasons’

The ruling coalition needs 217 votes to suspend Basescu and will seek support from outside its caucus of 212 lawmakers. There are “many reasons” to suspend Basescu, Hunor Kelemen, who heads the Democratic Union of Hungarians that commands 27 votes, told reporters on July 4.

The two sides, which trace their origins to the National Salvation Front that ruled the country after the collapse of communism in 1989, have been jostling over budget measures and control of the judiciary.

Ponta’s coalition was emboldened by its victory in June 10 local elections, when it garnered almost 50 percent of the vote against almost 16 percent for Basescu’s Democrat-Liberal party. The ruling alliance would get 60 percent in a parliamentary vote to 14.5 percent for the Democrat-Liberals, according to a May 9-15 survey of 1,038 Romanians by the polling company IMAS. The results have a margin of error of 3 percentage points.

Suicide Attempt

The struggle worsened on June 19 after Ponta blamed Basescu for spreading accusations that he plagiarized his doctoral thesis. Two days later, Ponta’s mentor and former Prime Minister Adrian Nastase was sentenced to two-years in prison in a corruption case. A subsequent suicide attempt by Nastase prompted Ponta to say “I hope Basescu is happy now.”

The two leaders also argued over who should represent Romania at a meeting of European Union leaders and expanded their dispute to the Constitutional Court.

The European Commission said today in a statement that the recent developments in Romania “may be putting at risk the progress done by the country in the past years under a Cooperation and Verification Mechanism,” for a judicial overhaul and the fight against corruption.

The Cabinet is determined to meet all the pledges under the country’s precautionary agreement with the International Monetary Fund and the EU, Ponta said today.

“The concerns of our European and international partners are legitimate but we want to assure them that the government will secure the country’s stability,” Ponta said in a speech from Romania’s government palace in Bucharest. “The political conflict won’t affect the state institutions as the government will respect all the decisions of the Constitutional Court and the rule of law.”

Political Maneuvering

Today’s vote is the culmination of maneuvering by the Social Democrats and Liberals to strengthen their power after spending the past three years in opposition.

They have pushed through several changes to ease the impeachment procedure and on July 4 limited the powers of the Constitutional Court by decree to prevent it from impeding a suspension procedure. The coalition changed the heads of the two chambers of parliament, who are the next in line in case the president is removed. The Democrat-Liberal Party challenged the changes at the Constitutional Court.

One of the nine justices on the court was threatened before the panel started debating the legality of a parliamentary motion to suspend Basescu, the court said today. The judges sent an advisory notice to Parliament, allowing lawmakers to continue the suspension debate.

‘Being Honest’

The government yesterday approved a change in the law governing referenda, making a balloting for impeachment valid with a majority of participants, rather than with more than 50 percent of eligible voters.

Basescu said he accepts lawmakers’ right to suspend him and urged them to respect the law and the procedures.

“In times of crisis I wanted for the government and the parliamentary majority to know that I’m their partner,” Basescu told lawmakers yesterday, adding that the suspension isn’t based on facts. “It was my obligation to inform the citizens about the situation of the country’s finances and the referendum might prove me right in being honest with the people.”

Basescu’s Democrat-Liberal party cut state wages by 25 percent and raised taxes to narrow a budget deficit and meet pledges to the IMF and the EU. Former Prime Minister Emil Boc stepped down Feb. 6 to ease political and social pressure stemming from nationwide anti-austerity protests.

His successor, Mihai-Razvan Ungureanu, lost an April 27 no- confidence vote in parliament as the Social Democrats and Liberals gathered 235 votes to topple his government.

EU Mission

Starting at the end of this month, a joint mission of the IMF, the EU and the World Bank will review the country’s progress under the 5 billion-euro ($6.2 billion) precautionary accord secured last year as a safeguard against the European sovereign-debt crisis.

The cost of insuring against a Romanian default for five years using credit-default swaps rose to 420 basis points from 407 basis points yesterday, according to data compiled by Bloomberg.

“What makes me uncomfortable with the whole situation in Romania now is the fact that this process can take a long time,” Luis Costa, an emerging-market strategist at Citigroup Inc. (C:US) said yesterday. “Funding costs are rising, and under the current scenario the central bank will probably have limited power to flood the market with liquidity given fears of potential leu weakness.”

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: Balazs Penz at bpenz@bloomberg.net


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