Romania’s suspended President Traian Basescu said the leu probably won’t rebound to levels seen before recent political turmoil after a July 29 referendum because of a lack of investor confidence in the country’s stability.
Basescu told The Money Channel TV today that he wants to help stop a decline of the leu, which was trading close to a record low, should he win reinstatement after the referendum. Prime Minister Victor Ponta told state television TVR late yesterday that the leu will probably strengthen after the vote as political turmoil eases.
“Even the National Bank of Romania doesn’t have the huge resources needed to intervene in the market and keep the leu at an acceptable level, because they’re drawing close to a floor below which the bank’s reserves can’t drop,” Basescu said in an interview. “The central bank has to wait for a moment of calm to efficiently conduct its interventions.”
The leu is the world’s second-worst performer after the Sudanese pound this month, losing 3.9 percent because of a political struggle between Basescu and Ponta’s ruling coalition. It traded at 4.6308 per euro at 4:26 p.m. in Bucharest.
The governing Social Liberal Union wants to impeach Basescu in the nationwide vote after it suspended him for one month from office because he allegedly overstepped his duties when announcing austerity measures in 2010.
Basescu said the Finance Ministry no longer meets some terms of an agreement with the International Monetary Fund and the European Union because it spent about half of its 5 billion-euro ($6 billion) “buffer” it was required to maintain as a shield, to cover various budget expenses. The eastern European country counts on a 5 billion-euro precautionary loan agreement as a backstop against the sovereign-debt crisis.
The Finance Ministry has cut its monthly debt issuances and raised about 1.57 billion lei ($409 million) in July, less than the 2.25 billion lei planned at Treasury auctions as local banks pushed up borrowing costs amid Europe’s debt crisis and the country’s rising political tensions.
Deputy Finance Minister Cristian Sporis reiterated in an interview to Ziarul Financiar on July 10 that the administration frontloaded its borrowing program in the first half of the year, when it benefited from record-low yields.