Romanian PM favourite to win presidential election

By bne IntelliNews October 31, 2014

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Romania’s Prime Minister Victor Ponta is widely expected to win the country’s November 2 presidential election, which follow a campaign dominated by personal issues and corruption scandals, with economic policy taking a back seat. 

For several months this has clearly been a two-horse race with Ponta and the centre-right Liberal Christian Alliance (ACL) candidate Klaus Iohannis well ahead of any other candidates. 

Polls indicate that Ponta will not gain sufficient votes for a first round victory on November 2, but the PM is expected to defeat Iohannis in a run-off on November 16. 

Recently, Iohannis has gained somewhat on Ponta, though the latter is still expected to take 40% of votes in the first round to his rival’s 29%, according to the latest poll published by CSCI/InfoPolitic on October 30. No other candidate is expected to take over 8% of the vote. 

The current popularity of Ponta and his Party of Social Democrats (PSD) stems largely from the softening of earlier austerity cuts since the party came to power in the 2012 parliamentary elections. This includes a decision approved by the parliament in September to cut social security contributions, which was politically popular but went against recommendations from both Romanian President Traian Basescu and the International Monetary Fund. 

Iohannis, meanwhile, has a much lower national profile than Ponta. One of the ethnic German minority present in Transylvania since the 12th century, and the mayor of the provincial town of Sibiu, he is running mainly on his clean reputation. He has been mayor of Sibiu since 2000, being re-elected by landslides in both 2004 and 2008 as he turned the town into a prosperous tourist hub. 

He was selected as the candidate for the ACL, formed earlier this year through the merger of Romania’s two main centre-right parties, the National Liberal Party and the Democratic Liberal Party, with the aim of fielding a single candidate against Ponta. 

Ponta’s camp have found relatively few grounds to attack their rival, focussing mainly on his personal wealth. Most recently, Ponta supporters criticised Iohannis for owning six houses, to which Iohannis responded on Realitatea television on October 27 that Ponta owned seven properties. 

Mihai Bogza, president of the Foreign Investors Council which represents international investors in Romania, told the Business Review Foreign Investors Summit on October 14 that there had been very little focus on the economy during the election campaign. Instead, the pre-election period has been dominated by a series of breaking corruption scandals that have hit politicians from both left and right. 

A scandal concerning the sale of software licences and IT equipment to schools - dubbed the “Microsoft case” - has cast suspicion on top politicians and businessmen, with no less than nine former ministers named by the Anti-Corruption Directorate (DNA) as suspects. 

Ponta has carried out a series of reshuffles within the PSD in the run-up to the election, both to secure his position against potential rivals and to improve its reputation by purging members hit by scandal. On October 21 the party’s governing body said it was suspending three high ranking members, national executive committee member Sebastian Ghita and vice presidents Dan Sova and Marian Vanghelie, from their positions within the party. “I auto-suspended them,” Ponta told a press conference, citing their alleged involvement in various scandals. 

Basescu, a long-time political foe of Ponta’s, also increased the pressure on his expected successor by accusing him on October 14 of being a former spy. “Victor Ponta must admit that he was an undercover officer of SIE [Foreign Intelligence Service], between 1997 and 2001," Basescu said in an interview with Realitatea. Basescu claimed the news was “a reality which I am ready to prove". Ponta has denied the allegation. 

However, Basescu, who must stand down as president in November after serving two consecutive terms, has been almost equally critical of Iohannis, saying on September 30 that both candidates were “equally immoral and equally unfit to lead Romania”, Romanian daily Ziare reported. 

If, as is widely expected, Ponta succeeds Basescu, this will bring an end to an often acrimonious, always uneasy two-year cohabitation between the two. One of Ponta’s first actions after becoming prime minister in 2012 was to launch an attempt to have Basescu impeached by national referendum. 

While the attempt was unsuccessful, it drew sharp criticism from the EU and has also raised questions about Ponta’s respect for the rule of law and the justice system should he become president. There are fears that Ponta could follow Victor Orban, prime minister of neighbouring Hungary, or Turkish President Reycep Tayyip Erdogan in the Putinisation” of another European country. 

As president, he would most likely have strong support from the parliament, where the PSD is the largest party in both the Chamber of Deputies and the Senate, though it falls short of a majority in either. In the lower house, the government - composed of the PSD, UDMR, PS and national minorities - holds 227 of the 405 seats, and Romania’s next prime minister would almost certainly be selected from the PSD. Unlike under the Ponta-Basescu cohabitation, this would make it easier for a future government to carry through its agenda. 

Romania has had a mixed economic performance this year, falling back into technical recession in the first half of 2014 after appearing to rebound from the crisis in 2013 when GDP expanded by 3.5%. Foreign direct investment (FDI) also dropped by 13.8% in the first half of the year, with uncertainty over changes to the tax regime one of the main contributing factors, though it rebounded later in the year. 

Romania has also failed to utilise EU cohesion funds for investments into infrastructure. 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, spending around €7.1bn.

Another important decision being put off until a new government is formed concerns 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 IPO’d 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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