Romania President Faces Impeachment Referendum in Power Struggle

Romanian President Traian Basescu has less than a month to regain public support and defeat a referendum on his impeachment after the ruling coalition won the upper hand in a parliamentary vote.

The legislature, dominated by Prime Minister Victor Ponta’s Social Liberal Union, or USL, voted 256 to 114 to suspend Basescu yesterday, saying the president overstepped his duties when announcing budget cuts in 2010 and making other economic decisions. Romanians will vote on July 29 to decide his fate, Senate Leader Crin Antonescu said after the vote.

Ponta, riding public anger over austerity measures, is looking to remove Basescu two months after becoming the third premier this year in the country preparing for parliamentary elections in November or December. The impeachment attempt is fueling political turmoil, which pushed the leu to a record low.

“I have a clear conscience that I fulfilled my duty towards the country and my people,” Basescu told lawmakers yesterday. “Please take care of the country, respect the law, create jobs and -- the most important -- don’t touch the judicial system or the state institutions.”

The leu has weakened 1.6 percent against the euro this week, the world’s second-worst performance behind the Sudanese pound. It sank to a record-low 4.5465 against Europe’s common currency yesterday and traded at 4.5340 at 7:53 p.m. in Bucharest, data compiled by Bloomberg show.

The cost of insuring against a Romanian default for five years using credit-default swaps rose to 430 basis points from 407 basis points on July 5, data compiled by Bloomberg show.

‘Get Worse’

“Unfortunately the situation looks set to get worse before it gets better and could drag on for some time,” Peter Attard Montalto, an economist at Nomura Holdings Inc. (8604) in London, wrote yesterday in a note to clients. “With further upside in euro- leu, we think rate hikes are becoming much more likely. We are more concerned about the long-run fiscal shifts that can occur as we move through the second half of the year and towards the 2013 budget.”

Basescu lost public support after announcing budget measures in 2010. People’s trust in him was about 17 percent in a March 23-April 1 survey of 1,096 people by polling company CSOP, which gave a margin of error of 3 percentage points.

Ponta’s coalition was emboldened by its victory in June 10 local elections, when it garnered almost 50 percent of the vote against almost 16 percent for Basescu’s Democrat-Liberal party. The ruling alliance would get 60 percent in a parliamentary vote to 14.5 percent for the Democrat-Liberals, according to a May 9-15 survey of 1,038 Romanians by the IMAS polling company. The results have a margin of error of 3 percentage points.

Budget Cuts

Basescu’s party cut state wages by 25 percent and raised taxes to narrow a budget deficit and meet pledges to the International Monetary Fund and the European Union. Former Prime Minister Emil Boc stepped down Feb. 6 to ease political and social pressure amid nationwide anti-austerity protests.

His successor, Mihai-Razvan Ungureanu, lost an April 27 no- confidence vote in parliament as the Social Democrats and Liberals gathered 235 votes to topple his government.

The two sides, which trace their origins to the National Salvation Front that ruled the country after the collapse of communism in 1989, have been jostling over budget measures and control of the judiciary.

The struggle worsened on June 19 after Ponta blamed Basescu for spreading accusations that he plagiarized his doctoral thesis. Two days later, Ponta’s mentor and former Prime Minister Adrian Nastase was sentenced to two-years in prison in a corruption case. A subsequent suicide attempt by Nastase prompted Ponta to say “I hope Basescu is happy now.”

EU Warning

The two leaders also argued over who should represent Romania at a meeting of EU leaders and expanded their dispute to the Constitutional Court.

The European Commission said yesterday in a statement that the recent developments in Romania “may be putting at risk the progress done by the country in the past years under a Cooperation and Verification Mechanism,” for a judicial overhaul and the fight against corruption.

The Cabinet is determined to meet all the pledges under the country’s precautionary agreement with the International Monetary Fund and the EU, Ponta said yesterday.

‘Secure Stability’

“The concerns of our European and international partners are legitimate but we want to assure them that the government will secure the country’s stability,” Ponta said in a speech from Romania’s government palace in Bucharest. “The political conflict won’t affect the state institutions as the government will respect all the decisions of the Constitutional Court and the rule of law.”

Starting late-July, a joint mission of the International Monetary Fund, the EU and the World Bank will review the country’s progress under a 5 billion-euro ($6.2 billion) precautionary accord secured last year as a safeguard against Europe’s sovereign-debt crisis.

Yesterday’s vote is the culmination of maneuvering by the Social Democrats and Liberals to strengthen their power after spending the past three years in opposition.

They have pushed through several changes to ease the impeachment procedure and on July 4 limited the powers of the Constitutional Court by decree to prevent it from impeding a suspension procedure. The coalition changed the heads of the two chambers of parliament, who are the next in line in case the president is removed. The Democrat-Liberal Party challenged the changes at the Constitutional Court.

The government on July 5 approved a change in the law governing referenda, making a balloting for impeachment valid with a majority of participants, rather than with more than 50 percent of eligible voters.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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