Romania's Ponta unveils government programme

By bne IntelliNews May 4, 2012

Jacy Meyer in Prague -

Romania's prime minister designate, Victor Ponta, unveiled his proposed government programme to parliament on May 3, which includes plans to reverse controversial public-sector wage cuts. The news will do little to cheer up analysts fretting over the effects of Romania's precarious politics on fiscal consolidation.

Despite the move to pull back the controversial austerity measure, Ponta said he plans to pursue a prudent fiscal policy and continue to cooperate with the IMF and EU on the country's loan programme, Bloomberg reported.

Ponta's cabinet plans to restore public-employee wages this year after a 25% cut in 2010 and implement share sales in state-owned assets after auditing the previous government's privatization plan. The wage cuts have been at the forefront of a huge and long-running backlash against austerity measures amongst the population.

President Traian Basescu asked Ponta to form a new government after the three-month-old cabinet of Mihai Razvan Ungureanu was ousted on April 27 in a no-confidence motion. The new government plans to seek a confidence vote in parliament on May 7.

Ponta also plans to "rethink the tax system on exploring the country's [energy] resources," and put the energy regulator, known as ANRE, under the control of parliament, his governing programme revealed. The cabinet-in-waiting also plans an immediate moratorium on the exploration of shale gas until European studies show the impact of hydraulic fracturing on the environment.

Analysts continue to fret over the effects of Romania's unstable political environment on the country's fiscal consolidation efforts. Moody's worries that "[t]his second government collapse in Romania within three months is credit negative, increasing policy uncertainty and threatening reform implementation."

The ratings agency also notes that the current unpopularity of fiscal austerity in Romania limits the prospects of the government pursuing reforms before elections in November, and that this is likely to hit borrowing costs. "Policy paralysis would make borrowing conditions more challenging for the government, which needs to refinance $13bn of government debt over 2012," Moody's concludes.

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