Romania’s New Govt Faces Economic Dilemma

Author : Sorin Grama | Thursday, December 20, 2012
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Victor Ponta’s new government faces a challenge in reconciling Romania’s tough commitments to the IMF while carrying out its election pledge to ease the burden of austerity on the population.Romania’s Prime Minister-designate on Wednesday presented his new cabinet, which is expected to gain the backing of parliament on December 21.

The 27 seats in the cabinet have been split between the major parties in the coalition, the Social Liberal Union, USL. The new cabinet includes three Vice-Prime Ministers and three delegate ministers. The former government had only 16 ministries.

“I wanted the main ministries in our government to correspond to every European Commissioner, to ensure that our goals for the next four years are met,” Ponta said.

The proposed government has retained some ministers from Ponta’s last seven-month-old cabinet.

Among the main changes is the replacement of the finance minister and a division of the Economy Ministry into three, separating out a ministry for industry and trade, another for energy and a third for small and medium-sized companies.

Analysts say the main dilemma is how to ease the economic burden on people while at the same time maintaining the austerity measures agreed with the IMF and the EU.

“It is obvious that this super-sized government aims to please all parties and all different interests within the ruling coalition,” political analyst Ana Bulsi said.

“But its main challenge will be to maintain commitments related to the agreement with IMF, mainly to finish the privatization of some state-run companies, which is being delayed for months,” Bulsi added.

Ponta’s previous government postponed a deadline for the sale of minority stakes in such energy companies such as Romgaz and Nuclearelectrica, as well as in the freight railway firm CFR Marfa and the airline, Tarom.

The sale of stakes in the chemical company Oltchim and in the gas pipeline operator Transgaz is also delayed.

Romania depends on a 20 billion euro rescue package from the IMF, the European Union and the World Bank. It obtained the loan in May 2009 in exchange for agreeing to push through austerity measures aimed at taming the country’s yawning deficit.

An IMF mission is to come next month to Bucharest to hold discussions on the next review of the programme.

Ponta’s centre-left coalition, the USL, at least has the advantage of a comfortable majority. It holds 395 seats in the new parliament, which will be the largest in the history of post-communist Romania, containing a total of 588 MPs.

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