Crisis In Romania: Constitutional Court Votes Pension Cuts Unconstitutional, IMF Loan In Jeopardy, Presidential Palace Stormed, CDS Blows Out
Several days after the Romanian parliament passed a law to cut pensions by 15% in order to qualify for a critical $20 billion IMF loan, the Romanian Supreme Court found this law was not only unconstitutional, but unappealable (along the lines of what our own SCOTUS will do once the Fed's transparency appeal gets to the very top, resulting in confirmation once and for all that American laws are only made for the benefit of the Federal Reserve). The decision was reached hours after dozens of Romanian citizens stormed the presidential palace "to get an audience with President Traian Basescu." As a result of the Constitutional Court's decision, the IMF loan "may now be delayed, and this will be a big blow to the government
of Prime Minister Emil Boc, the BBC's Nick Thorpe reports." Also as a result, Romanian (and by association, neighboring Bulgaria) CDS blew up today and closed +30 to 410 for Dracula's host country, and +20 to 360 bps for the country that served as the reverse engineering center of the former Communist Bloc.
A top court in Romania has ruled out a pension cut demanded by the country's government as part of a deficit-cutting financial austerity measure.
The government wanted to cut state pensions by 15%, as well as slashing wages and welfare allowances.
But the Constitutional Court said the pension cut was unconstitutional, a ruling which cannot be appealed.
Romania wants to cut spending to qualify for a $20bn loan from the International Monetary Fund.
That may now be delayed, and this will be a big blow to the government of Prime Minister Emil Boc, the BBC's Nick Thorpe reports.
The court decision came after dozens of people tried to force their way into the presidential palace to get an audience with President Traian Basescu.
Riot police repelled them from the palace.
The court did not publish its reasoning behind the ruling, but unions say pensions partly funded by worker contributions to are protected by the constitution.
Just wait until Greeks get wind of this ruling, and ask the logical question why their own constitution allows their pensions to be cut by as much as 30%. So much for the smooth and glitch-free passage of austerity across all of Europe. Oh, and it is about time, as we have long been claiming, that investors take a long hard look at Eastern European CDS. It is still not too late.