Romania looks set for more political paralysis

By bne IntelliNews December 7, 2009

Nicholas Watson in Prague -

Romania just can't seem to catch a break. Investors had been hoping the presidential run-off on December 6 would at last enable the country to put a government in place to tackle the serious economic issues at hand, but with the voting almost evenly split, both sides are claiming victory, threatening another bout of political paralysis or worse.

With 99.95% of the vote counted, election authorities said the incumbent President Traian Basescu had polled 50.33% of the vote, while Mircea Geoana of the centre-left Social Democratic Party (PSD) received 49.66%. Exit polls had put Geoana ahead slightly.

Both sides initially claimed victory, then when it became clear Basescu might have scraped a narrow victory, the SPD has begun contesting the results, saying fraud has been committed. Senior Social Democrat member Liviu Dragnea told the Associated Press that, "Romanians voted for Mircea Geoana, but Basescu's state apparatus is trying to make him the presidential winner through fraud."

All eyes are now on the votes cast by Romanians living abroad, 147,000 of whom voted in the second round, AFP cited the foreign ministry as saying. In the first round, Basescu won 56% of the diaspora vote.

Whatever happens, this election won't provide the clear-cut victory that investors want. The state is in a financial pickle, as the third tranche of a loan from the International Monetary Fund (IMF) was put on hold until a new government is in place and willing to meet the fund's lending criteria. The problems began when Romania's grand coalition government collapsed on October 13; since then, Basescu's nominations for a new prime minister have been turned down in parliament as opposition politicians hoped their man would succeed in the presidential elections, allowing them to form the next government.

If Basescu is declared the winner, the question is whether he will look to a compromise solution for the next government or continue with trying to get a member of his centre-right Liberal Democratic Party (PDL) in as PM. "The latter strategy is likely to result in early parliamentary elections, which will likely only prolong the political uncertainty and critically the time at which the existing IMF programme is put back on track," reckons Tim Ash of Royal Bank of Scotland. "It would appear that more political uncertainty lies ahead, which will continue to unsettle markets."

Ovidiu Fer of the brokerage Wood & Company agrees. "As President Basescu's party holds only about 32% of the seats in parliament, "we could see either a coalition with one of the opposition parties or early parliamentary elections."

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