Romania Coalition Nears Collapse as Top Party Spurns Premier

(Bloomberg) -- Romania’s government has been thrown into turmoil after the top ruling party withdrew its support for Prime Minister Ilie Bolojan, whose own bloc is now rallying to salvage his control of the four-way coalition.

The clash raises the prospect of the collapse of the pro-European alliance that took office last year in a bid to keep the far-right out of power after the country’s worst political crisis in more than three decades. The Social Democrats’ move was the culmination of months of bickering over austerity drive, which they say has inflamed social tensions.

“Bolojan needs to go,” Social Democratic leader Sorin Grindeanu said during the deliberations on Monday evening before party members voted overwhelmingly to pull their backing for the premier. “Most of us think that being stuck in the current government is a political trap for the Social Democratic Party.”

The premier hit back at the “irresponsible” move, saying that it means “endangering the finances of our country, blowing up the government, all done with a total lack of respect for the citizens of our country.” He refused to resign and said that his Liberal Party, a junior member of the coalition, supported him and would hold a party meeting on Tuesday to address next steps.

Bolojan reiterated that stability was needed for his “non-negotiable” drive to curb a budget deficit that’s grown to become the widest in the European Union and push through reforms required to unlock billions of euros in recovery funds by August. 

President Nicusor Dan said on Monday that despite their differences, the ruling parties agree on the need to approve the steps tied to the recovery funds and maintain the fiscal targets. 

Still, the Social Democrats have said that Bolojan’s austerity measures disproportionately harmed the party’s electorate, to the benefit of the far-right opposition amid a deep anti-establishment mood in the Black Sea nation.

The unfolding crisis is impacting investors’ perceptions of Romania, which already pays the highest borrowing costs in the EU as the domestic tension added to impact of Middle East conflict on global markets.

The yield on the 10-year local government bond rose 8 basis points to 7.19% on Monday, the highest this month. Some of Romania’s dollar bonds were among the worst performers in emerging markets and yields on euro-denominated notes also rose.

Losing the support of the Social Democrats would leave Bolojan without a parliamentary majority, forcing him to choose between pushing on with a minority government, moving into the opposition or backing another candidate for premier to restore the alliance. 

Once the Social Democrat ministers resign from his cabinet, the prime minister will have 45 days to seek a vote of confidence in parliament. He would still retain full powers throughout that period, after appointing interim replacements for the vacated posts. 

Bolojan said repeatedly over the past few days that he is ready to lead a minority government but that wouldn’t be the ideal solution considering the need for reforms in the country.

He also said that his Liberal Party would refuse to form another coalition with the Social Democrats in the current format. 

For his part, Grindeanu said that if a pro-European coalition is no longer possible, the Social Democrats are prepared to go into opposition. “We won’t form a new majority with the far-right,” he said.

But given that the far-right dominates Romania’s parliamentary opposition, that doesn’t provide many options for a stable pro-EU government.

Without the Social Democrats’ backing, any minority government led by Bolojan would be at the mercy of no-confidence votes, said Andrius Tursa, an analyst at Teneo consultancy, in an email. One such vote is already planned by the far-right opposition Alliance for the Unity of Romanians in mid-May, he added.

--With assistance from Peter Laca.

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