Febriary 1 (SeeNews) - Romanian stock indices fell on Wednesday following massive protests triggered by the adoption of a government decree easing or eliminating penalties for corruption offences and the situation is expected to deteriorate further, a local stock broker told SeeNews.
"The transition from optimism to pessimism is very fast, and when investor confidence is shaken, first affected are the stock market, exchange rates and interest rates. Consequently, in the case of escalation of protests and political tensions, it is hard to believe that high dividends will be strong enough to compensate for negative reactions on the stock market," Simion Tihon, equity trader and analyst at Prime Transaction, told SeeNews in an e-mailed statement.
All share indices of the Bucharest Stock Exchange (BVB), the biggest bourse in Southeastern Europe, lost ground in morning trading, with the blue-chip BET index losing 0.71% by 0830 a.m. CET. On Tuesday, the BET index closed 0.45% higher at 7,517.85 points.
"I think the fall of the indices this morning is a consequence of the recent tensions in the political environment, namely the legislative changes made last night. There were protests on Sunday night and Monday as well, but the market has not been impacted by them," the broker said.
The Romanian leu also weakened on Wednesday. Romania's central bank, BNR, set its reference exchange rate at 4.5240 lei per euro on Wednesday, 0.45% weaker compared to 4.5038 lei per euro on Tuesday.
"The level of confidence and optimism earlier this year can be quickly reversed if political instability persists," Tihon added.
Some 50,000 people protested on Tuesday night and Wednesday morning in Bucharest and other Romanian cities against the government decree seen as an attempt to weaken the fight against corruption and help several politicians avoid criminal prosecution on graft charges.
Protests were still ongoing on Wednesday at 15.50 CET in Piata Victoriei square, in front of the government headquarters.
The emergency decree, approved by the government on Tuesday night and hastily published in the country's Official Gazette, decriminalises several graft offences, making abuse of office punishable by jail terms only if that offence has resulted in a loss of more than 200,000 lei ($47,500/44,000 euro).
The government also decided on Tuesday to send to parliament a draft pardon bill which, if adopted, will set free prison inmates serving sentences of up to five years for non-violent crimes.
On Wednesday, the country's national council of magistrates CSM challenged the decree in the Constitutional Court.
The country could be headed towards a political crisis after opposition National Liberal Party (PNL) and Save Romania Union (USR) said also on Wednesday they will file a censure motion against the government. PNL leader Raluca Turcan also urged the other parties in parliament to leave it and thus trigger early elections.
Romania's draft budget for 2017 is also surrounded by controversy. On Tuesday, president Klaus Iohannis said that the 5.2% economic growth rate projected in budget draft is too optimistic.
(1 euro = 4.5240 lei)