Ruling coalition in Moldova avoids no-confidence motion by boycotting it

Ruling coalition in Moldova avoids no-confidence motion by boycotting it
PM Pavel Filip (right) congratulates parliament speaker Andrian Candu (left)
By Iulian Ernst in Bucharest October 4, 2016

Moldova’s ruling coalition summoned lawmakers at short notice on the morning of October 3 to vote on the no-confidence motion against the government. Government MPs then boycotted the meeting, thus rejecting the motion and thwarting opposition plans to stage a demonstration outside the parliament. 

The motion was submitted by the opposition, which objected to the government’s plans to use public money to repay around $680mn of the $1bn stolen from three failed banks. The government feared having the arrangement with the International Monetary Fund (IMF) - announced as a nearly done deal during the summer - postponed or even cancelled in October, with a significant impact on the upcoming presidential elections. The IMF set resolving the situation in the banking sector as a condition for finalising the agreement. 

The three opposition parties that signed the motion said that another no-confidence motion will be submitted as soon as this week. Separately, opposition MPs said they would ask the Constitutional Court for an opinion.

On September 26, Moldova’s government approved an emergency procedure on the repayment from the state budget of the MDL13.6bn (€610mn or $680mn) in emergency aid extended in 2014-2015 to the three failed banks. The amount is equivalent to around 10% of the country’s GDP.

The rest of the up to $1bn stolen has already been paid de facto by the central bank indirectly, as a result of the exchange rate variation since the emergency loans were extended to the three banks at virtually zero interest rate.

The fragile majority headed by the Democratic Party (PDM), created in February after MPs defected from other parties to join the government, took the risk of being dismissed ahead of the October 30 presidential elections by attempting to push through the procedure.

The option of street protests also remains open for both the pro-EU and the pro-Russian opposition. Public protests against the government’s bill would have embarrassed the ruling majority since paying 10% of GDP from voters’ pockets bears electoral costs, no matter how economically reasonable the move might be. It would also have helped the pro-EU opposition reach common ground and maybe even agree on a single presidential candidate – which is broadly seen as the key to beating pro-Russian candidate Igor Dodon.

However, the extra-parliamentary parties of Maia Sandu (PAS) and Andrei Nastase (PPDA) - two of the four important candidates in the October 30 presidential elections - were caught on the wrong foot on October 3, and lost the opportunity to organise a joint protest against the government’s bill in front of the parliament as planned. The two are in the process of deciding which of them should run as the single candidate of the pro-EU opposition, and both are very confident in their own chances. Attending a joint protest would have at least dissipated the impression of competition between the two and among their supporters. 

Prime Minister Pavel Filip admitted that he was aware of the boycott when going to parliament in the afternoon of October 3.

“Of course I was aware [of the ruling coalition’s strategy], because we enjoy a stable parliamentary majority,” he told the Moldovan media.

The procedure visibly annoyed the initiator of the motion, presidential candidate Dodon, who heads the pro-Russian Socialist Party (PSRM). Dodon may not have expected to overthrow the government, but the debate and vote would have served his electoral campaign.

“It is as if they announced the wedding but neither the bride nor the groom, not even the godparents, showed up. It’s a shame and a total insult,” Dodon said. He also claimed some procedures were breached, namely that the motion was not discussed by the parliament’s expert committees before being submitted to lawmakers for the vote.

The procedure is similar to that employed in the appointment of Filip and his cabinet on the afternoon of January 20, after a 30 minute meeting of lawmakers, who were also summoned at short notice after weeks of negotiations among the pro-EU parties.

The procedure also hinted at the ruling coalition’s commitment to using all the legal procedures and a little bit more - plus a large amount of ingenuity - for meeting its goals. At this moment, the goal of the senior ruling Democratic Party (PDM), or more precisely of the PDM’s sponsor oligarch Vlad Plahotniuc, is clearly to block both Sandu and Nastase from entering the second round of the presidential elections. Plahotniuc seems more inclined towards a cohabitation with Dodon. This could be because Plahotniuc and his party could keep pretending to defend pro-EU ideals, and thereby capitalise on voters’ and foreign partners’ support. However, in recent years, improvisation has played a big role in political developments in Moldova and uncertainty remains high in this regard.

Plahotniuc’s PDM has never enjoyed significant popular support, but it still managed to form a majority by bringing lawmakers from other parties onto its side. This was rumoured to have been achieved through a combination of coercion and incentives. Plahotniuc’s reported control over a significant number of judges and prosecutors has also helped the process.  

In March, the government and the central bank signed a memorandum of understanding on the conversion of the emergency aid extended to three troubled banks into government bonds. On June 13, Moldova’s government endorsed and submitted a bill on the planned issuance of MDL13.6bn of government bonds to lawmakers for approval. The service of the 25-year bond is estimated at 0.5% of GDP during 2017-2019, for 5% interest paid by the government.

Lawmakers have called for public debates on the issue. However, given the population's anger over the thefts in the banking system and low living standards, this would have meant de facto rejection of the bill.

The proposed bonds will have maturities of between one and 25 years and the coupon was set at 1.4% for maturities of one to nine years and 5.3% for longer maturities. The coupon paid by the government on the bonds was calculated based on the central bank’s inflation targeting policy, under which the monetary authority envisages long-term inflation of 5% p.a., the government has explained.