Event

The parliamentary elections that took place last 9 December unsurprisingly brought an overwhelming victory of governing PM Victor Ponta’s centre-left coalition. Victor Ponta’s USL alliance of liberals and social democrats won, indeed, a two-thirds majority. A period of political turmoil was foreseen following the polls since President Traian Basescu, being a fierce rival to Ponta and an opposition party adherent who had even almost been impeached last summer, had declared prior to the vote that he would do everything possible to avert Ponta’s appointment as new PM. However, facing the crushing result, Basescu had no other choice but to name again the head of the USL at the helm of the government, which he did on 17 December.

Impact on country risk

The cohabitation between unpopular right-leaning Basescu and left- leaning Ponta has been bumpy since last May, when Ponta was appointed at the head of the third government in 3 months. Tensions peaked when Ponta attempted to impeach the President for overstepping his powers. The tentative failed due to a too low turnout at the referendum on that issue and gave rise to a plethora of criticism from the international community. With this renewed cohabitation, which should run for a small two-year time up to the Presidential election late 2014, both leaders will have to prove that they can govern efficiently together. The country is indeed facing sluggish growth and is embarked on a course of economic reforms as part of the conditions linked to a two-year standby arrangement with the IMF (supported by the EU and the World Bank). This arrangement expires in March 2013 and is expected to be renegotiated at the beginning of the year. While previous centre-right governments associated with Basescu had imposed drastic austerity measures, Ponta’s campaign promised an easing of those measures while sticking to the public deficit target. Another fear is that the government attempts to put its own people in charge of the anti-corruption institutions, which Ponta blames for having been targeted against his party. Last but not least, Ponta’s comfortable majority will allow him to make changes to the constitution and reduce thereby the President’s powers, although any such move would need backing in a national referendum.

Analyst: Florence Thiéry, f.thiery@credendogroup.com