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Romanian Stocks, Leu Currency Weaken on Social Democrats Leaving Cabinet

Oct 1, 2009, 1:50:42 PMArticle by Sabina Kotova
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BUCHAREST (Romania), October 1 (SeeNews) – Romanian stocks and leu currency fell on Thursday after left-wing Social Democrats left the coalition government, brokers said.

Romanian Stocks, Leu Currency Weaken on Social Democrats Leaving Cabinet

The Romanian leu weakened to 4.2580 per euro by 1010 GMT from 4.2165 per euro closing on Wednesday.

The composite BET-C index of the Bucharest Stock Exchange, BVB, lost 2.31% to 2,596.27, and the blue-chip BET index fell by 1.88% to 4,314.69 by 1017 GMT on Thursday.

The BET-FI index, which tracks Romania's five regional investment funds, led the decline, dropping 4.63% to 24,107.82 points by the same hour.

“The stock market had a somewhat sharp reaction. It was expected since the political crisis started earlier this week, and it came a bit late, actually. Today, once it became obvious that the coalition is breaking apart, we had a reaction both on the bourse and on the foreign exchange market,” Alin Brendea, vice president of Prime Transaction brokerage, told SeeNews.

Interest rates on overnight leu deposits rose to 11.72%/12.23% on Thursday from 10.96%/11.46% on Wednesday.

All ministers of the Social Democratic Party, PSD, resigned earlier on Thursday after President Traian Basescu endorsed the dismissal of Interior Minister Dan Nica, who is affiliated with the PSD.

“If the current government continues to function, and considering the positive trend on the global market at the moment, there will be no strong correction. But if there will be a no-confidence vote, then this will have an important impact in the longer term,” Brendea added.

The coalition cabinet, in which PSD and their partners from the Liberal Democratic Party, PD-L, had equal number of ministers, took office in December 2008, ousting from power the National Liberal Party, PNL.

Weakening of the leu currency and increased credit risk premiums will be the two likely major economic implications of a disintegration of Romania's two-party government coalition in the current political crisis, analysts said on Wednesday.

The disintegration of the coalition cabinet comes less than two months before presidential elections, scheduled for November 22.

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