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Romanian Interior Minister Quits as Strikes Test Cabinet's Deficit Pledge. Article by Irina Savu and Andra Timu for Bloomberg.
By Admin (from 28/09/2010 @ 19:31:51, in en - Global Observatory, read 2647 times)

Romania’s Interior Minister resigned as protests over pay cuts for public employees test Prime Minister Emil Boc’s will to continue austerity measures in the face of efforts to topple his Cabinet.

As many as 10,000 state employees are expected to take to the streets tomorrow and all public worker unions are in talks over calling a general strike. The government reduced wages for civil servants by 25 percent to narrow the budget deficit and comply with terms of an International Monetary Fund-led bailout.

The opposition Social Democrats and Liberals say they will try to oust the government in the second half of October as the IMF forecasts the economy will shrink 1.9 percent this year, extending Romania’s worst recession since the end of communism. Boc’s coalition, with 258 seats in the 471-member parliament, survived a June no-confidence vote by eight votes.

“The current government is really close to losing its majority, and this is the beginning of the end,” said Adrian Moraru, an analyst at the Institute for Public Policies in Bucharest, in a phone interview. “It’s a difficult situation because it seems a new political crisis is emerging on top of the current economic crisis.”

Minister Resigns

Vasile Blaga quit today as Interior Minister after police officers who report to his ministry staged an illegal demonstration on Sept. 24 and will be replaced by Traian Igas, 42, a senator and head of the ruling Liberal Democrats’ group in the Senate. President Traian Basescu later signed off on the nomination.

Romania, which joined the European Union in 2007, is relying on 20 billion euros ($27 billion) of loans from the IMF, European Union and others to fuel an economic recovery.

To qualify for the loans, Boc’s government has cut state wages, increased the value-added tax by 5 points to 24 percent and boosted the retirement age for men and women to 65. The Cabinet has also announced plans to eliminate 74,000 jobs.

The police strike was condemned by Boc and Basescu, who both gave up their police security escorts for what they called an “unauthorized” protest.

‘Honor’ Resignation

“This is a resignation of honor,” Blaga said today at a news conference in Bucharest. “Police have the right to protest just like any other citizen, but they have to do it legally. They and all the other workers from the Interior Ministry have to understand that they are as important as doctors and teachers, so they can’t make an exception.”

Anger over the government’s program has boosted support for the opposition.

La instalarea lui Igaș, Băsescu l-a lăudat pe Blaga pentru „gest” și i-a certat pe polițiști: „N-aveți nicio scuză și nicio scăpare până nu-mi prezentați raportul în CSAT” Foto: Publimedia//Octav Ganea

La instalarea lui Igas, Bãsescu l-a lãudat pe Blaga pentru „gest” si i-a certat pe politisti: „N-aveti nicio scuzã si nicio scãpare pânã nu-mi prezentati raportul în CSAT” Foto: Publimedia//Octav Ganea

The Social Democrats were supported by 37.1 percent of voters, compared with 14.6 percent for Boc’s Liberal Democrats in a survey of 1,093 people conducted Sept. 9-13 by GSS 2000. The poll, commissioned by the opposition Liberals, had a margin of error of 3 percent.

“If the unions manage to get many people out into the streets this may create pressure on government lawmakers,” said Cristian Parvulescu, a political analyst at Asociatia Pro Democratia, a Bucharest-based group that promotes democracy. Boc’s Liberal Democrat party includes “former union leaders who may feel extra pressure to vote against the government.”

Raffaella Tenconi, an economist at Bank of America/Merrill Lynch in London, said she expects Boc’s government will survive the confidence vote, though further fiscal consolidation will be “very challenging” given the depth of the recession.

“We are not surprised to see growing popular discontent given the recently announced austerity measures,” she said. “We expect this trend to continue in coming months, accentuating the low popular support for the ruling party PDL.”

European Discontent

Workers across eastern Europe are taking to the streets to protest budget cuts after the global financial crisis slashed tax revenue and investment flows. The EU is demanding that all of its members bring their budget deficits in line with the bloc’s limit of 3 percent of GDP after Greece’s ballooning debt undermined confidence in the euro.

Tens of thousands Czech firemen, policemen and other state workers rallied Sept. 21 in Prague to protest planned wage cuts, while Slovak unions plan demonstrations against proposed tax increases. Slovenian civil servants went on strike today to protest plans to cut or freeze their salaries. Some 80,000 workers, or half the public workforce joined the strike, according to the Ljubljana-based newspaper Delo.

“It’s an experience from all over Europe that austerity measures, which very often include budget cuts, are leading to similar demonstrations,” Czech Prime Minister Petr Necas said at the rally against his government’s plans. The moves “are quite naturally unpopular.”

‘Delicate Situation’

The decline of Romania’s economy, which contracted a 7.1 percent last year, slowed in the second quarter as demand for goods such as cars, chemicals, steel and textiles increased in western Europe. GDP shrank 0.5 percent from a year earlier, after a 2.6 percent decline in the previous three months, according to the National Statistics Institute in Bucharest.

Parliament approved Boc’s government in December, ending a stalemate that had left Romania without leadership for more than two months and delayed payments from international lenders. Boc replaced six members of his Cabinet, including the finance and economy ministers, on Sept. 2 in an effort to shore up support for his program in the face of increasing protests.

Romania’s political squabbles have helped weaken the country’s currency. The leu has dropped 1 percent against the euro during the past 12 months, the second-worst performance among 25 emerging-market currencies tracked by Bloomberg. The Romanian leu weakened 0.1 percent to 4.2465 per euro as of 4:23 p.m. in Bucharest, while the Bucharest Stock Exchange’s benchmark BET index rose 1.3 percent to 5,279.64.

“Boc’s Cabinet is already facing an extremely delicate situation, and it will lead a hard life if it survives the planned confidence motion,” said Alexandru Cumpanasu, political analyst and deputy head of the Association for Implementing Democracy, in a phone interview. “If we see more protests on a bigger scale in October, then the pressure on lawmakers to vote for the motion will be huge.”

To contact the reporters on this story: Irina Savu in Bucharest at isavu at bloomberg.net; Andra Timu in Bucharest at atimu at bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague at jagomez at bloomberg.net

Source: bloomberg.com

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