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Romania has new government headed by old Prime Minister Emil Boc. Parliament approved the new cabinet by a wide margin (276 to 135) just before Christmas. The coalition consists of the Democratic Liberal Party (PD-L) and the Democratic Union of Hungarians in Romania (UDMR), with support from independent MPs and representatives of national minorities. The government’s formation ended an almost three-month interregnum that threatened to push Romania into insolvency: Romanian law prohibits caretaker governments from passing budgets, and a budget for 2010 was a key condition for the IMF to release the next tranches of its loan to Romania.[1] The new government immediately set out to fast-track the process of approving the 2010 budget, choosing to start budget negotiations even before they had finished filling some cabinet posts. The markets reacted positively, with the leu rising to a three-month high on the news that Parliament had approved the new cabinet.

 

 

Analysis and forecast: Decreasing Risk

 

While many people expected more drama during the vote on the Boc governement, the large number of “yes” votes means that a fair share of opposition MPs also gave a green light to the new cabinet. The fact that Romania finally has a government speaks volumes about recently re-elected President Traian Bãsescu’s political prowess. By tapping the ever-loyal Boc as head of government, Bãsescu made sure that he would continue to have major influence on government politics. Furthermore, by applying the “divide and conquer” principle, he managed to coax the UDMR away from the opposition coalition, which promptly dissolved. The third Boc administration stands a much better chance of completing the remaining three years of the election cycle than the previous coalition government. The UDMR will not risk another period in opposition because its only chance of rebuilding its electoral support is by staying in government. The government can maintain the independents’ and the national minorities’ loyalty through behind-the-scenes political favours. In the future, more votes can be gained from opposition MPs who were inches away from being part of government just a month ago. Of course, Boc will not be able to count on the massive support his cabinet received during its confirmation vote. The biggest threat to his government is possible social uproar due to the IMF-mandated austerity measures – a problem on which the opposition can capitalize.

 

 


[1] See: „Most Significant Risk Factors that Could Hinder Economic Recovery in Romania” Political Capital Risk Watch http://www.riskandforecast.com/post/risk-watch/most-significant-risk-factors-that-could-hinder-economic-recovery-in-romania_333.html