Romania faces turmoil after Klaus Iohannis elected president

By bne IntelliNews November 17, 2014

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Romania is set to face severe political turmoil after Victor Ponta, the country's centre-left prime minister, lost the presidential election in a shock result on November 16.

Thousands of people took to the streets of Bucharest and other cities to voice their anger at Ponta's government late on November 16 and demanded his resignation.

Klaus Iohannis, the low-profile mayor of Sibiu in Transylvania, won the election with  54.8% of the vote, after 98.55% of the votes were counted in the largest turnout since 1996. Iohannis, 55, is a Protestant ethnic German and a former physics teacher, who has been mayor since 2000.

Voters saw him as clean and independent, though he is vice-president of the centre-right National Liberal party and had been nominated by them and the Democratic Liberal party. He will take office on December 21.

In the first round on November 2, Ponta had a clear lead on 40.44%, followed by Iohannis on 30.37%. An opinion poll from CSCI/Infopolitic published on November 13 had shown Ponta with a 10-point lead over Iohannis in the run-off, with 54%.

Ponta conceded defeat at 11pm on November 16. “The people are always right. I called Mr Iohannis and congratulated him on his victory,” Mr Ponta told reporters, adding: “My colleagues and I will do our duty towards the country as long as we are in public office.”

An estimated 300,000 votes cast by Romanians living abroad, and not included in exit polls, may have swung the balance decisively in Iohannis’ favour. Some 160,000 of the diaspora voted in the first round.

Ponta was harmed by a scandal over the way many of the Romanians living abroad - who are estimated at some 4mn - were denied the right to vote in the first round because insufficient ballot stations had been set up. Huge queues and chaotic scenes were reported at embassies in London, Paris and other cities with a large Romanian diaspora, with many voters unable to enter the polling booths before the polls closed for the day.

This ignited big protests across the country. Past elections have shown that the majority of the Romanian diaspora typically vote for rightwing candidates. In 2009, for example, diaspora votes were critical in securing the presidency for President Traian Basescu. On November 2, Iohannis took 46% of the votes from Romanians voting from abroad, compared with just 16% for Ponta.

Both Ponta and  Basecu blamed the first round chaos on Foreign Minister Titus Chorlatean, who resigned on November 11.

Ponta was also harmed by a series of corruption scandals including a probe into the sale of software licences and IT equipment to schools – dubbed the “Microsoft case” – which has cast suspicion on top politicians and businessmen, including nine former ministers.

There were also concerns that with a relatively solid parliamentary coalition behind him, on becoming president Ponta might have gone down the road of “Putinisation” as seen in other countries in the region, with examples such as Hungary’s Victor Orban and Turkey’s Recep Tayyip Erdogan. 

Iohannis' win will most likely replicate the often-tense cohabitation seen between Ponta and Basescu over the last two years.

Iohannis made it clear that, if he won, he would like to appoint a new business-friendly government. But with Ponta's PSD the largest party in both houses of parliament, Iohannis may not be in a position to topple the current government. As such, “he would likely attempt to shift the balance in the parliament and induce changes in the composition of the cabinet,” Teneo Intelligence argues.

On November 16 PM Ponta openly stated that he would not resign but his position is now precarious. Although the PSD is the largest party in parliament it relies on support from smaller parties to form a majority. The next regular elections are not due until 2016, and with his position weakened by the November 16 result he may struggle to hold onto power until then.

The first task of the government to be appointed after the presidential vote will be to plan the 2015 budget. While discussions have been underway within the current cabinet, finance ministry officials have said that plans will be discussed with the IMF in December and endorsed in January by the new cabinet.

Romania’s economic performance this year has been a concern, after the country fell into technical recession in the first half of 2014.

While it is still unclear whether there will be significant changes to the government, fiscal tightening is expected now that the elections are over. Teneo Intelligence points out that, “The IMF has postponed the Romanian stand-by program review over Ponta’s fiscal policy loosening in the run-up to elections. The review will probably resume in late November and consolidation measures will likely be worked into the budget proposal for 2015,” the consultancy says.

There is also pressure on the government to make better use of EU cohesion funds and boost infrastructure investment, though this would conflict with plans for a tighter budget. Along with neighbouring Bulgaria, Romania has the lowest absorption rate in the EU. During the 2007-2013 EU budgetary period, Romania absorbed only 37.2% of the €19bn available to it, spending around €7.1bn.

Other important decisions being put off until a new government is formed concern Romania’s ongoing privatisation programme. Following the successful IPOs of Electrica, Romgaz and Nuclearelectrica in 2013 and 2014, another major energy company Hidroelectrica is due to be sold off in 2015. Decisions are also expected in early 2015 on the privatisations of Constanta Port, Bucharest Airports and salt monopoly Salrom.


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