New Romania government wins parliament backing

Reuters News
Posted: Dec 21, 2012 12:41 PM
New Romania government wins parliament backing

By Luiza Ilie

BUCHAREST (Reuters) - Romanian Prime Minister Victor Ponta's new government won parliamentary backing on Friday, drawing a line under a period of political uncertainty in the European Union state that had raised doubts over its IMF-led aid deal.

Ponta told parliament he would now focus on negotiating a renewal to that support package, which expires in 2013 and is vital to maintain investor confidence in the EU's second poorest member.

The country was plunged into political crisis this year when the prime minister and his leftist Social Liberal Union (USL) tried to impeach his rightist rival, President Traian Basescu.

The European Union criticized Ponta for the tactics he used, saying they threatened the rule of law. The standoff sent the leu currency to a record low and stalled policymaking.

The impeachment effort failed but Ponta's USL, a loose alliance of leftists and liberals, went on to win a two-thirds majority in a December 9 election, cementing his position.

"I must say we will respect and continue the relationship we have with international institutions," Ponta told parliament before the vote.

"Not everything the IMF, the European Commission and the World Bank suggest is perfect. We have a duty to negotiate. But it is extremely important to have a deal for now because ... Romania is in a storm along the rest of Europe."

The leu has bounced back since the standoff but markets remain on edge given the tense relations that remain between the prime minister and the president.

Ponta will also have to overcome criticism from the IMF over delayed reforms such as privatizations to secure its new funding agreement. The European Commission and the World Bank are also contributing funds to the current deal.

Romania's economy is expected to grow only 0.4 percent this year. Three percent of Romanians people live on less than $40 a day and some areas do not have reliable running water or electricity.

The country, which joined the EU in 2007, remains blighted by corruption and organized crime, remains outside the passport-free Schengen zone due to graft concerns and Brussels monitors its justice system.

(Additional reporting by Sam Cage; Editing by Andrew Heavens)