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Portfolio > Economy & Markets

Romanian PM Falls to Austerity

By Marlene Y. Satter

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Emil Boc, prime minister of Romania, followed a succession of eurozone government officials into defeat on Monday, resigning from office in the wake of massive protests against austerity measures imposed by his government.

Reuters reported that President Traian Basescu named Catalin Predoiu, Boc’s justice minister, as his replacement. It is not yet known whether Predoiu will form a new government or maintain the status quo until Basescu has a chance to consider further action.

The Romanian government has had a difficult time shaking off its Communist economic legacy, and is the second poorest country in the 27-member European Union. Its goal of entering the eurozone has been challenging as it seeks to right its financial ship, and it had struggled to get by without monetary assistance from the International Monetary Fund.

However, it has imposed highly unpopular austerity measures that include a 25% cut in wages in the public sector and a sales tax increase, in exchange for an IMF bailout of 20 billion euros ($26 billion), a loan extended with the proviso that Romania make deep cuts in government spending.

Boc, who pushed through the unpopular measures, stepped down after thousands of Romanians came out through heavy snow in freezing weather to protest his actions. He was quoted saying, “I took this decision to release the tension in the country’s political and social situation, but also in order not to lose what Romanians have won.”

Officials face elections by November at the latest, and Victor Ponta, who leads the leftist USL opposition alliance, has said that he wants an early election. While he added that he is committed to working with the IMF, his party has more than a 50% level of support in polls; Boc, and his party, had sunk to below 20%.

The IMF does not expect Boc’s departure to affect the situation. Jeffrey Franks, the IMF mission chief in Bucharest, was quoted saying, “I see no reason necessarily for this to have a material effect on the aid agreement. We have every expectation the agreement will continue.”

Raiffeisen economist Ionut Dumitru was quoted saying, “It’s crucial that the new government maintain the reforms passed together with the IMF and the European Commission–if the next government stands by these reforms, Romania will be fine.”

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