More European Turmoil: Romanian Government Set To Topple Tuesday As Country Faces Financial Crisis
Latvia, Sweden, the Netherlands, and now EU-member country Romania: the European periphery is ablaze, even as the Euro is at 52 week highs. It would be joke if it really wasn't so sad. Clariden Leu reports that "Romania's parliament looks set to topple the minority government on Tuesday in a no-confidence vote ahead of a November presidential election and raises fresh concerns over the country's IMF aid." For a country, whose financial future is closely tield with IMF goodwill, this could well be a catalyst event: "Economists warn about the impact of political standoff on fiscal reforms and budget cuts needed to ensure the International Monetary Fund continues to disburse aid from its 20 billion euro anti-crisis package."
The centrist and leftist opposition have called Tuesday's vote after Prime Minister Emil Boc's coalition cabinet split earlier this month, plunging the country into political crisis at a time when it is trying to fight against recession.
The opposition is keen to lay the blame for rising unemployment and falling wages on the ruling Democrat-Liberal Party, closely allied to President Traian Basescu, now frontrunner in the Nov. 22 election.
If the government falls, Boc will continue to govern with limited powers until Basescu picks a replacement, which might happen only after the presidential vote. The second round of the election was set for Dec. 6.
A major overhaul of Romania's creaking and complex pension system has to be introduced by the end of the year and economists say the government risks overshooting the IMF's budget deficit target of 7.3 percent of gross domestic product.
After Latvia this creates another Eastern European currency crisis focus:
Regional markets are on high alert. Bucharest's coalition collapse battered the leu and dragged down currencies in neighbouring countries. Dealers say markets also fear that political turmoil in Poland may return and weaken currencies.
The market wants a government -- anybody out there!" said Nicolaie Alexandru-Chidesciuc, ING chief economist in Bucharest.
"Without a government there is no certainty. The market cannot be immune to that."
At the end of the day, you add up enough of these "minor" regional crises, and you have a big regional crisis. Yet nobody cares, as the "trade of the day" is long EUR, short USD, going against it would be "fighting the tape" and "getting in front of a speeding train" and other such trite soundbites. When you have a bubble nobody cares about facts until it is too late. If in the meantime, the status quo is irreparably damaged, it is all good. Mr. Bernanke will pull something out of his magical printing press for that as well.