Romania parliament set to back new leftist government

Reuters News
Posted: May 07, 2012 5:08 AM

BUCHAREST (Reuters) - Romania's new prime minister said he was confident his leftist government would win parliamentary approval on Monday and finalize a deal with international lenders to restore public wages to their previous levels.

Romania's left-leaning opposition ousted Prime Minister Mihai Razvan Ungureanu's cabinet last month after a wave of public anger against plans for spending cuts.

Although the new leader, Victor Ponta, says he is committed to the 5 billion euro agreement with international lenders, investors are still closely watching his proposals to ease austerity by restoring wages.

"There is only one thing still pending in parliament, which I would like and hope gives its backing to the government," Ponta told reporters. Debate is due to start at about 4:00 p.m. (1300 GMT) and a vote should come a few hours later.

A senior government official said over the weekend Romania had sealed an agreement with the IMF to restore public wages , part of its efforts to ease the unpopular austerity program.

"The accord is finalised in principle," Ponta said.

Under its broader IMF deal, which replaced a previous 20 billion euro bailout, Romania targets a budget deficit of less than 3 percent this year, from 5.2 percent in 2011. The new government held talks with IMF officials at the weekend.

Ponta's Social Liberal Union (USL) says it controls 231 of the 460 seats in parliament. But it is a fragile alliance of three parties and it remains to be seen how its component parts from across the political spectrum handle being in power.

It can also count on support from ethnic minorities and the National Union for Romania Progress (UNPR), which was part of the previous coalition, which should give it a clear majority.

The economy - which shrank more than 8 percent in 2009 and 2010 - could slip back into recession in the first quarter and Ponta also has to hang on to the USL's popularity ratings of more than 50 percent until a parliamentary election in November.

"The new government is caught between a rock and a hard place - they have a lot to deliver but the economy can't support any fiscal expansion," said a Bucharest foreign exchange dealer.

(Reporting by Sam Cage Editing by Maria Golovnina)