Iulian Ernst -
Moldova’s parliament endorsed PM-designate Igor Gaburici (independent) and his cabinet by a majority of 60 votes out of 101 on February 18, putting an end to the political uncertainty since the parliamentary elections on November 30.
Gaburici represents a pro-EU minority coalition, informally supported by the moderate Communists (PCRM) of Vladimir Voronin. However, the government's ability to pursue radical reforms, particularly judicial reforms that are critical for the country, is debatable given its fragile support in parliament.
Besides the structural reforms that are to be addressed by the newly formed cabinet, it faces major economic and financial problems, most visible in the currency’s depreciation of 25% in the year to date, but also in the alarming situation in the banking sector.
The country’s reintegration - the settlement of the situation in the separatist region Transnistria - is a longer term issue, however equally critical, and here the ambiguous position of Gaburici has created uncertainty. MPs of the Liberal party (PL) have reproached Gaburici's previous statements in favour of federalisation of the country as a solution to Transnistria’s desire for independence.
Gaburici is the second nomination of the minority coalition formed by the Liberal Democrat Party (PDLM) and Democrat Party (PD), which holds 42 seats in parliament, after former and acting PM Iurie Leanca (PLDM) failed to get lawmakers’ support a week earlier.
Unlike Leanca, Gaburin has won the support of the majority of MPs of the Communist party, judging from the number of votes.
The structure of the government and the ruling strategy were nearly identical with the ones proposed to lawmakers by Leanc, except that the candidate for the ministry of justice, Igor Efrim, was replaced by Vladimir Grosu.
Rumours in the local media, and reiterated by MPs of both opposition parties PL and the radical Communist PSRM in the debates preceding the vote on the government, suggest that the PCRM had agreed long ago with the minority coalition over the nomination of Gaburici. Gaburici’s resignation from telecom company Azercell last December was allegedly prompted by such plans.
While gaining the Communists’ support, the minority ruling coalition lost the support of Leanca – who has hinted that he voted against Gaburin and would consider his further steps in the days to come. The decision to form a minority coalition also appears to be unpopular with the pro-EU voters, who had hoped for a government including the third pro-EU party, the Liberal Party of Mihai Ghimpu, who is seen as a guarantee for reforms and ranks comparatively stronger in the perceived corruption polls, compared to the key leaders of the parties in the minority coalition.
The political turmoil over the past two months and half has contributed to the plunge in households’ and investors’ confidence, which have aggravated the fundamental economic problems of lower remittances and weaker external demand. The major problems in the banking system surfacing over the past couple of months have also undermined the credibility of the central bank and the local currency.
Moldova’s currency weakened by nearly 10% against both the euro and the dollar in the two trading sessions of February 16 and February 17, under the official exchange rates calculated by the central bank based on interbank deals. The central bank has hiked the monetary policy interest rate by an unprecedented 5pp to 13.5% in response to the currency’s steep depreciation.
The fundamental causes of the exchange rate re-alignment are foreign trade and remittances, according to central bank governor Dorin Dragutanu. The governor also blamed the exchange rate plunge on household's excessive behaviour over the currency. Households’ sales of foreign currency accounts for 78% of companies' foreign currency demand, Dragutanu explained.
To get to the bottom of the banking crisis, Moldova’s central bank said on January 31 that it had selected Kroll Associates to conduct preliminary investigations into the operations of the three banks currently under special administration - Banca Economii (BEM), Banca Sociala and Unibank.
The central bank cited suspect transactions as its grounds for putting the three banks under special administration. Financial statements issued by the banks at the end of November indicate that massive transfers abroad of funds originating from the three banks were carried out. The size of the suspected transfers is estimated at MDL17.8bn (€937mn) - more than 10% of the country's GDP.
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