Event

Over 85% of Romanian voters consented in Sunday’s referendum to impeach President Traian Basescu. However, the referendum needed a double majority to pass so that the low turnout (about 46%) invalidated the outcome. The referendum followed a vote by the parliament to dismiss the unpopular president on flimsy charges of overreaching his powers, following a simplification of parliamentary impeachment procedures. However, the constitutional  court – despite being under government pressure – ordered that a majority vote with a majority turnout was needed to confirm the parliamentary vote, thereby reversing another parliamentary decision. The constitutional court had earlier complained publicly about government attacks on the court, which threatens its independency. The erratic actions by the Romanian government remind of neighbouring Hungary, whose government has been at loggerheads with the international community over a series of measures that weaken democratic oversight and institutional independency.

Impact on country risk

President Basescu and PM Victor Ponta have been on a collision course ever since Ponta’s government entered office early May. Even before that, the latter had been trying to impeach Basescu. It will now be crucial to see whether Ponta does indeed accept the defeat in the referendum, as he indicated, or whether he would be prepared to plunge the country into a constitutional crisis merely for the sake of a personal vendetta. His centre-left USL-coalition is already expected to win a general election scheduled for November, so that the recent actions will only damage Romania’s standing with the international community. After all,  the consequences could be a further delay of the country’s entry into the Schengen Area and a suspension of EU financial support. A big difference with Hungary however, is the fact that Romania has a multi-billion IMF support package with a strong track record that helps to shield the country from economic turmoil. Nevertheless, the political paralysis has already sent the Romanian leu to an all-time low.

Analyst: The Risk Management Team, f.thiery@credendogroup.com