Romanian govt survives austerity confidence vote

Romania's centrist coalition government survived a no-confidence vote in parliament over planned drastic spending cuts.

Romanian govt survives austerity confidence vote

 

Romania's centrist coalition government survived a no-confidence vote in parliament on Tuesday over planned drastic spending cuts, a key step towards securing international aid for its recession-hit economy.

Romanian Prime Minister Emil Boc pulled together enough support from independent deputies, giving him a mandate to cut public spending to secure a vital 20 billion euro ($26.83 billion) International Monetary Fund-led aid package.

The tight victory margin, however, raised questions over whether the fragile centre-right coalition will be able to push through reforms beyond the proposed spending cuts of 25 percent in public sector wages and 15 percent in pensions.

"The vote shows that the government is fragile and it will not be easy from now on," said Nicolaie Alexandru Chidesciuc, chief economist at ING in Bucharest.

"Any measures to reduce spending will not help economic recovery unless coupled with a rise in investment spending."

The EU's second-poorest member has pledged to reform its sprawling, highly-unionised public sector, but labour resistance is casting doubt over the austerity drive and raising the spectre of Greek-style debt woes in the country of 22 million.

Investors are nervous about the debt and deficit position of emerging European economies like Romania after Hungarian assets slumped in early June on comments from officials that it might suffer a crisis similar to Greece's.

The opposition pulled in 228 votes in support of its no-confidence motion in the government, compared with 236 needed to win, and opposition leader Victor Ponta said it would now challenge the cuts at Romania's constitutional court.

The austerity measures can apply before any court judgment, but if declared unconstitutional they would have to be revoked. The IMF requires the measures to pass that stage before releasing the latest 2 billion euro tranche of aid.

"I am very disappointed and upset because the lives of millions of Romanians lay in the hands of eight members of parliament," said Ponta, who heads the leftist Social Democrats.

"The fact that eight more people were needed to prevent pensions and wages being cut can only upset me."

Strike flops

Some members of Boc's governing Democrat-Liberals voted for the motion, including former local TV star Teo Trandafir, who paused to show other deputies which way she was casting her ballot before raising her arms in triumph.

The country's leu currency edged higher after the vote and was 0.1 percent up on the day at 4.222 per euro by 1629 GMT, while the cost of insuring Romania's sovereign debt fell.

Unions had hoped up to a million Romanians would support a planned one-day general strike on the day of the vote in an attempt to pressure deputies but there was little disruption.

Labour leaders said they were focusing on staging protests outside parliament, but only about 2,000 people braved high temperatures to demand that the government step down.

Uncertainty over Romania's ability to enforce austerity measures, aimed at capping the budget deficit at 6.8 percent of GDP this year, has pushed yields on the country's debt higher in recent weeks.

In the end, parliamentarians shied away from the consequences of voting down the government, which would have tipped Romania into a fresh political crisis and slammed asset prices, fearing that would have been far worse than the spending cuts.

Reuters

Last Mod: 15 Haziran 2010, 20:50
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