BLACK SEA BLOG: Romanian president tinkers and appoints a spy

By bne IntelliNews February 8, 2012

Bogdan Preda in Bucharest -

In Romania, the week started with intense coverage by most television stations of one of the worst snowstorms to hit the country in recent years, which left 35 dead from hypothermia and half the country at a standstill. But just a little later on February 6, the focus shifted to the stormy resignation of Prime Minister Emil Boc and his cabinet. As if those two subjects hadn't eaten up enough journalistic resources, a third landed just a few hours later: the president nominated Mihai-Razvan Ungureanu, the head of the country's external intelligence service, to succeed Boc.

With three such stories breaking on the same day, one has to agree Romania has the capacity to surprise, at least journalistically speaking.

The first question that comes to mind is why on earth did Boc wait for so long before he resigned, despite evidence that the popularity of his government, which came under public criticism during street demonstrations in January, had fallen so dramatically? The second is why President Traian Basescu waited for so long to push Boc out if he had a top quality candiadte like Oxford-educated Ungureanu as a ready replacement? After all, the Boc government's loss of popularity has caused the Democratic-Liberal Party, which Basescu supervises, to plummet in voters' preferences ahead of legislative elections due in November.

The answers came later in the day from Basescu, seen by all observers as the main conductor of Romanian politics. The powers-that-be were initially unsure they would have enough lawmakers around to vote in a new cabinet in the second half of December; then a parliamentary vacation followed in January; then Romania needed a credible government in place to pass the fourth review of its economic policies by the International Monetary Fund (IMF), the European Commission and the World Bank, which only left town in early February. And last, but not least, as Basescu noted in a televised speech on February 6, Romania also needed Boc's cabinet to still be around on January 31 when the state sold $1.5bn of bonds for a surprisingly low yield of 6.875% in the US. Total demand for the bonds stood at $7bn.

Boc's explanations

On resigning after 1,100 days as prime minister, Boc said his gesture was necessary in order to "ease the political and social situation in the country." In the weeks and months preceding his resignation, he had said reports he might step down were just speculation. But Basescu's statements delivered February 6 showed that a change of government had been planned.

That's because the governing Democratic-Liberal Party realises it stands to lose badly in the legislative elections this autumn unless it improves its image with the voters, and would thus miss out on the chance over the next four years to reap the benefits of the drastic measures it took to keep Romania afloat during the fallout from the financial crisis.

Boc's government, made up mainly of members of the Democratic-Liberal Party, last year and in 2010 under pressure from the IMF to keep in check the country's spending and deficits, took a series of very unpopular measures, such as cutting wages of government employees by a quarter, increasing the VAT rate to 24% - among the highest in the EU - taxing state pensions, as well as cutting on other state aids and subsidies.

Boc's government, however, failed to boost much-needed foreign investments and EU non-reimbursable aid worth billions of euros. Eventually, he and his government came under scrutiny from the population and the opposition for mismanagement of various public policies and corruption, which culminated in the street protests in January.

Even as he steps down as PM, Boc is taking seriously his role in charge of sprucing up the party's image, as he said February 7 that nearly all of the ministers from his cabinet would be replaced with new ones to be headed by Ungureanu.

What lies ahead

Romania needs a credible government in place - and it needs it quickly - in order to avoid falling into the same pot of countries with little to no economic credibility such as Greece or Hungary. But it also needs it so that the power brokers among the Democratic-Liberals, such as Boc and Basescu, have time to prepare for this year's elections, which could yet come early. "Investors will be encouraged by the speedy nomination of a new PM, and the re-commitment to the IMF programme, which has been an anchor for reform," Tim Ash, head of emerging markets at the Royal Bank of Scotland, wrote in a note.

Ash adds that Romania's economy is still expected to post positive growth this year, albeit much reduced growth of around 1-1.5% in 2012, which would be an achievement, "given that the likes of Croatia, Hungary and the Czech Republic - and the Eurozone - are expected to dip into recession."

The opposition, made up mainly of the Social Democrats and the National Liberal Party, now grouped in the Social-Liberal Union alliance for the elections, had said it would vote against any new government, but instead is now pressing for early elections and for President Basescu to also step down. Basescu and his Democratic-Liberal Party rejected such demands. The opposition wants elections sooner because it wants to ride the wave of unpopularity engulfing the governing party; the Democratic-Liberal Party wants to buy more time to fix its image.

Ironically, though, one of the few people who knew of Boc's resignation ahead of time was former premier Adrian Nastase, the former Social Democrats' boss, who revealed it was coming on February 5. Nastase, one of the most influential members among the Social Democrats, was sentenced to two years in prison at the end of January, charged with embezzling public funds to fund electoral campaigns. He denies the charges, saying it's a political vendetta and fears by the Democratic-Liberal Party that he may resurface among the country's leaders. Nastase will remain free pending his appeal.

Who he?

Prime Minister-designate Ungureanu's chances of forming a new cabinet and surviving as PM until November largely depend on the number of compromises that the Democratic-Liberal Party and the opposition can agree on. But that would mean that the Democratic-Liberal Party will have to give in to a lot of demands from the opposition, which is unlikely.

Forty-two year old Ungureanu, who served as foreign minister between 2004 and 2007, is not the type of a politician fond of temporary services, especially as it could turn him into a party politician, a stance that he has so far avoided. His acceptance of Basescu's request to form a new government may signal that he's ready to compromise for the top jobs in the longer run, although he hadn't recently expressed any desire to return to politics or run for the country's presidency.

Meanwhile, Romania has until the end of this year to put together projects aimed at absorbing the many billions of euros of EU funds that have been delayed by the government's failure to put in place the framework to develop aid programmes.

Ungureanu's cabinet will also have to address many of the thorny social and economic issues that triggered Boc's resignation. Despite the fact that Romania is doing better economically than many other countries in emerging Europe, a lack of implementation of public policies and laws, a high degree of corruption, and falling living standards have all triggered an sharp increase in discontent at home.

Preliminary results of a national census carried out at the end of 2011 indicate that the country has a population of about 19m inhabitants, a drop of 12% over the last decade. Eurostat statistics show that more than 2m Romanians are resident in other EU countries, having left the country to work abroad, most of them in Italy, Spain, France, Germany and the UK. The numbers are in fact believed to be higher if illegal workers are included, making Romanians the most numerous migrants within the EU.

Those numbers are probably the best indicators of the failures of successive governments to put in place the much-needed policies and create the kind of environment that would encourage Romanians to strive for a better life at home rather then abroad.

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