Five Key Challenges Facing Romania's First Technocratic Cabinet

It’s a first for Romania: a cabinet of technocrats has taken over to steady the ship after the biggest street protests in a quarter century sank the previous government.

Facing public disillusionment at the entire political class, lawmakers in Bucharest Tuesday backed former European Commissioner Dacian Ciolos for prime minister until elections in late-2016. Joining him is a team hand-picked from Brussels and back home. Selecting an ex-member of the former ruling party as deputy premier helped win parliament’s support.

Ciolos, 46, must now decide how far to deviate from the path of his predecessor, Victor Ponta, who quit amid anger at a fatal nightclub fire that many Romanians blamed on corrupt officials. Ponta was already facing trial for graft, contributing to an erosion of trust in the political system of the European Union’s second-poorest nation.

Here are five challenges as the government enters office.

1. Hold power until elections

Ciolos must juggle the interests of several groups.

In parliament, he has a limited support base, meaning he’ll have to negotiate backing for each bill he wants lawmakers to pass. This risks holding up government plans and may become even trickier with the former ruling Social Democrats and the opposition Liberal Party close in polls before local and parliamentary elections next year.

Outside of the political parties, the anti-graft prosecutors who targeted Ponta won’t allow any letup in the corruption crackdown. And the demonstrators who saw off the former premier have high expectations.

“Nothing has changed in the past 25 years," said Andrei Manolache, a 20-year-old law student who said he knew some of the victims of the nightclub fire. "My friends had to die for us to wake up.” Romania must become “a country without corruption, without corrupt politicians, and where doctors and teachers will earn enough so they don’t have to live with what we give them as tips or bribes.”

History offers Ciolos little comfort. Excluding interim appointments, he’s Romania’s 12th prime minister since communism fell in 1989.

2. Restore trust in the government and institutions

Even before the nightclub deaths, Romanians had been losing faith in their leaders. About three-quarters of people surveyed in September said they have very little trust in the government, and only 8 percent had confidence in political parties. President Klaus Iohannis, elected last year on pledges to clean up politics, came out top of the trust ranking, conducted by pollster Inscop.

All parties want the new cabinet to boost transparency. The American Chamber of Commerce in Bucharest has called for “zero tolerance to bribery and corruption” and “clear and enforced legislation that leaves no room for interpretation, abuses or lack of accountability."

Investors who sold Romania’s currency, the leu, as demonstrators flooded the street of Bucharest and after Ponta stepped down have shown encouragement at the prospects for a technocratic cabinet.

3. Stabilize government finances

Ponta’s pre-election initiatives to trim sales taxes and raise state wages drew criticism from Romania’s international creditors, resulting in the suspension of the government’s backstop loan facility with the International Monetary Fund.

Ciolos must present a 2016 budget that accommodates the tax cuts, which have already been approved, while keeping the deficit within 3 percent of economic output. The EU had said the last government’s fiscal plans would swell the shortfall beyond that threshold.

“Room for maneuver is limited given wide parliamentary support for fiscal-widening measures, which could lead to a budget deficit of 3.3 percent in 2016 without any compensatory measures,” said Silviu Pop, an economist at ING Bank Romania.

4. Maintain economic growth

Ponta’s fiscal easing helped reinvigorate consumers trampled by years of austerity. That’s driven economic growth to among the EU’s fastest rates, with gross domestic product surging to 3.6 percent from a year earlier in the third quarter.

While the pace of expansion must at least be maintained to move living standards closer to Romania’s western neighbors, the central bank and the IMF have warned that lower taxes and pay rises for state employees risk damaging the nation’s longer-term prospects. Infrastructure investments, in particular, should be increased, they say.

5. Intensify anti-corruption efforts

Public anger hasn’t dissipated since the Oct. 30 nightclub fire that killed at least 56 people, with the disquiet prolonged by news that safety rules were disregarded and checks not carried out.

The rage means Ciolos will have to further step up Romania’s anti-corruption efforts, which have been building for more than a year and notched a post-communist high in convictions in 2014. The government will be under pressure to boost transparency at state institutions and state-owned companies such as rail-freight operator CFR Marfa SA, and Posta Romana SA.

New Justice Minister Raluca Pruna must also decide what to do when the terms of the chief prosecutor and chief anti-corruption prosecutor expire in 2016.

“It’s possible that the recent developments will create a backlash that will embolden people to come and tell us about corruption actions that they’re witnessing and denounce more acts of corruption,” said Livia Saplacan, spokeswoman at the Anti-Corruption Directorate.

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