Moody’s Sees No Major Near-Term Impact from Romanian Govt Collapse

Romania’s minority cabinet, led by Prime Minister Emil Boc, lost a no-confidence vote sought by the opposition over its performance on Tuesday, only a month before the country holds presidential elections.

“The economy seems to be relatively well insulated from politics, and the IMF/EU are expected to continue to abide policy slippages until after the elections. Come the new year, however, the IMF and EU will likely pressure the government to re-commit to the reform process outlined in the stabilisation programme,” Moody’s said in a statement.

The agency currently rates Romania at Baa3 with a stable outlook. The ratings would come under downward pressure if the IMF financing programme unravelled due to implementation problems, which could be related to political instability.

"So far, however, the IMF/EU have been remarkably tolerant of the slow pace of progress," Moody’s said.

Romania signed a 20 billion euro ($29.8 billion) aid deal with the IMF, the European Union and the World Bank in March to support its crisis-hit economy. The agreement includes restructuring of the public sector, a new unified wage scheme, a new pension law and overhauling of the education system and aims to cut government spending in view of Romania's widening budget deficit.

“The outlook is stable, balancing the poor macro picture against the financial support package from the EU and IMF and associated measures to reform fiscal policy and the public sector,” the agency added.

($ = 0.6712 euro)