Left and right agree to form new coalition government in Romania

Difficult decisions ahead for new prime minister, analysts warn

BUCHAREST (AFP) – Romania’s leftist Social Democrats and right-wing Liberal Democrats agreed yesterday to form a new coalition government under Prime Minister Theodor Stolojan, two weeks after general elections.

“We are seeing a historic moment in Romania, where political forces with apparently nothing in common have decided to join forces at a difficult time,” Social Democrat leader Mircea Geoana said after signing the coalition deal.

“Our only objective is to form a stable and efficient government that will allow Romania to get through this period of crisis,” added Liberal Democrat leader Emil Boc.

The two parties vowed in their “Partnership for Romania” agreement to “ensure the country’s economic stability, protect jobs, gradually increase salaries and guarantee an independent justice system.” The Liberal Democrats and Social Democrats, who finished neck-and-neck after the November 30 general elections, hold 329 seats in parliament out a total 471.

The signing of the coalition agreement comes three days after President Traian Basescu named Stolojan, the Liberal Democrats’ deputy president, as the new prime minister.

Stolojan will have to introduce unpopular measures amid the global financial crisis, despite campaign pledges of salary and pension hikes, analysts have said.

“The new government’s main challenge will be to balance the state budget, because when economic growth slows drastically, it will be increasingly difficult for Romania to finance the deficit,” an economist at Moody’s rating agency, Kenneth Orchard, told the daily Ziarul Financiar.

The government has little room to maneuver and will have to “cut expenses, limit consumption with fiscal measures and stimulate tax revenues,” analyst Dragos Cabat told the online newspaper Daily Business.

Stolojan, 65, is no stranger to economic hard times, having served as prime minister between 1991 and 1992, when the state coffers were almost empty and the government had to impose painful economic reforms.

An economist with a no-nonsense reputation who later worked at the World Bank, the Liberal Democrat deputy leader nevertheless resorted to populist pledges ahead of the November 30 elections, promising pay hikes and increased pensions.

Now that the campaign is over, he must forget these pledges, economic analyst Bogdan Baltazar told Daily Business, noting that “salary increases in the public sector were out of the question” in 2009.