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Defections hit Romania government before censure vote

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April 24, 2012, 3:30 p.m. | World — by Reuters

A wave of defections is quickly eroding the majority of Romania's centrist coalition government, though it should still retain enough backing in parliament to survive a no-confidence vote on April 27.
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Reuters

BUCHAREST - A wave of defections is quickly eroding the majority of Romania's centrist coalition government, though it should still retain enough backing in parliament to survive a no-confidence vote on April 27. Six MPs have resigned from the Democrat-Liberal party (PDL) to join the opposition USL alliance in the last week, reflecting discontent over austerity policies and concern over their seats in parliament with an election due in November.

Data published by parliament on April 24 showed the USL was only 13 seats short of the 231 majority its needs to topple the government in a motion filed over its plans to sell natural resources.

Analysts initially said the opposition had almost no chance of toppling Prime Minister Mihai Razvan Ungureanu - who came to power in February after anti-austerity protests, inheriting the previous coalition. But his position is looking more uncertain.

Should the government lose, it would create uncertainty over Romania's commitment to a 5 billion euro International Monetary Fund-led aid deal and probably hit markets and send the leu currency - already close to all-time lows - tumbling.

"This is the censure motion with the greatest chance in their four year term, although the opposition is still short of a majority," said independent political analyst Bogdan Teodorescu. "Of course one cannot rule out surprises."

Backing for the PDL, the main party in the coalition, has more than halved to 15-18 percent since a 2008 election while the leftist USL alliance currently has 50-59 percent support in opinion polls.

"PDL has lost its political colour and identity," veteran PDL senator Dorin Paran, who joined the USL this week, told a news conference.

FISCAL RISKS

Ungureanu still hopes slowly returning economic growth in the European Union's second poorest nation will give his government a chance in the November election.

And despite sticking to the terms of the IMF deal, his government plans to ease some austerity by increasing state wages, which could pose some risks to Romania's budget gap target of 1.9 of gross domestic product in cash terms.

That compares with 4.1 percent last year, as Romania seeks to put its economy on a more solid footing after a housing bubble burst and sent it into deep recession.

Fitch and Moody's both have Romania with low investment grade rankings, while Standard and Poor's rates it as junk.

"The risk of fiscal slippage is probably moderately lower than in previous elections. That is partly because ... the measures the government has taken have been relatively accepted by the population," said Richard Hunter, Fitch's corporate ratings director for EMEA and Asia Pacific.

"But that risk is always difficult to predict, particularly with the number of no confidence votes you have had."
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