Romanian Prime Minister-designate Victor Ponta is preparing to ask lawmakers to approve the country’s third Cabinet this year to complete agreement on a stalled International Monetary Fund precautionary accord.
Lawmakers began debate on a confidence vote in the proposed government in Bucharest today, after the previous Cabinet collapsed in a vote called by the Social Democrats and Liberals, who support Ponta. The two parties together control 232 votes in Parliament, one ballot more than needed to win parliament backing, and can count on the support of two other parties to increase their majority margin.
“With the support of independents and minorities parties, I’m counting on a stable majority that will allow us to carry out our governing objectives until the elections later this year,” Ponta said before the vote.
The new government needs to meet pledges to the IMF and the European Union to keep a precautionary agreement of 5 billion euros ($6.5 billion) and rebuild investor confidence after the collapse of the previous administration plunged the country’s currency, the leu, to a record low on May 1.
Ponta’s government vowed to stick to a budget deficit target of as much as 3 percent of gross domestic product this year and satisfy voter demands to restore public wages to pre-austerity levels. Fitch Ratings and Moody’s Investors Service warned that a reversal of fiscal consolidation measures and populist policies may put pressure on Romania’s investment-grade rating.
“Although the new leadership has announced that retaining International Monetary Fund, World Bank and EU support is a priority, its own past rhetoric and the current unpopularity of fiscal austerity in Romania limit the prospects of the government pursuing reforms before elections,” said Atsi Sheth, a senior analyst at the ratings company, in Moody’s Weekly Credit Outlook today. “Policy paralysis would make borrowing conditions more challenging for the government, which needs to refinance $13 billion of government debt over 2012.”