Romania’s senior ruling Social Democratic Party (PSD) on January 16 proposed MEP Viorica Dancila for the prime minister position, after it forced the resignation of Mihai Tudose by withdrawing its political support.

President Klaus Iohannis has scheduled consultations with political parties for January 17 with a view to nominating a prime minister candidate. By law, it is the president who nominates the prime minister, after consultations with the major political parties. The nomination then has to be validated by lawmakers.

Irrespective of the president’s decision on whether to nominate Dancila for the prime minister seat, the proposal is likely to have negative consequences for investors. It indicates the ruling party’s commitment to go further with the amendment of the judicial system in the most radical direction, despite public protests and the European Commission's concerns.

If nominated and endorsed by lawmakers as prime minister, Dancila is expected to act as a mere intermediary for PSD leader Liviu Dragnea, and to focus on the amendment of the judicial system. In terms of economic policies, Dragnea has supported loose fiscal policies and risky amendments to the fiscal system. 

On the other hand by not endorsing Dancila, Iohannis (who in 2016 refused to nominate another Dragnea loyalist Sevil Sahideh) would open the door to a major political crisis — a scenario possibly envisaged by the PSD as a bargaining strategy. The main opposition parties, the National Liberal Party (PNL) and save Romania Union (USR), do not have enough seats in parliament to form a majority, even if backed by the ethnic Hungarians’ UDMR.

Reflecting this, the local currency lost 0.7% d/d after the proposal, which is a wide depreciation even in the context of the enhanced flexibility of the exchange rate as announced by the central bank (which focuses on interest rate predictability).

Dancila is seen as one of the most devoted partners of the PSD leader. A graduate of Romania’s University of Oil and Gas, Dancila was a high school teacher in Videle, the same small town where Interior Minister Carmen Dan was a school secretary. Videle is in Teleorman county, whose county council was for several years headed by Dragnea. Dancila served first on Videle city council then from 2008 on Teleorman county council, where both she and Dan worked under Dragnea’s supervision. In 2014 she was elected a member of the European parliament.

Speaking after the proposal was announced, Dragnea appeared to deny being personally behind the choice of Dancila. “It was the proposal made by the PSD leadership,” Dragnea stressed. He pointed out that Dancila is an MEP and hence has close ties with European Commission officials and, as the leader of the women’s organisation within the PSD, she is an influential leader of the senior ruling party.

The PSD leader is unable to take up the prime minister position himself as he has a suspended sentence for voter manipulation, but to a large extent pulls the strings behind the scenes. The brief stints as prime minister of both Tudose and his predecessor Sorin Grindeanu ended when they clashed with Dragnea. 

“She has never criticised the party’s plans to amend the laws regulating the functioning of the judicial system,” Dragnea also stressed, hinting at one of the possible conflicts between the party and Tudose. Even if Tudose never openly criticised the bills, he repeatedly took steps to prevent some more extreme decisions, including by not endorsing controversial bills as government emergency ordinances but sending them to lawmakers for debate. Such decisions were not in line with PSD hardliners’ plans and helped precipitate his resignation.

Despite Dragnea’s statements, Dancila is not an influential leader of the senior ruling party. She has vocally advocated in favour of the amendments to the judicial system in the radical form promoted by the PSD, including by defending the controversial government decree 13 in the European parliament in February 2017. The decree was seen as a means to weaken the fight against corruption and allow top officials to avoid prosecution. It was subsequently abolished after the largest street protests since the fall of communism. 

The junior ruling party, the Alliance of Liberals and Democrats (Alde) has not yet commented on Dancila’s nomination. However, Alde leader Calin Popescu Tariceanu is a close political partner of Dragnea and his party is therefore very likely to back Dancila as the country’s next prime minister.