UPDATE 2 - No-Confidence Vote Brings Down Romania's Minority Government

The two chambers of parliament supported the no-confidence motion in a 254-176 vote in a joint session. A further four votes were invalid, while the rest of the 471 lawmakers either abstained or were absent. The motion needed 236 votes to pass.

According to Romania's constitution, now President Traian Basescu must nominate a new prime minister, whose cabinet will have to win parliament approval. The prime minister-designate will have 10 days to form a new cabinet and present it to parliament.

Basescu has already started talks with parties represented in parliament. The talks are expected to end late on Tuesday evening.

“[…] given that no party has a majority in Parliament and there is no formal alliance between parties yet, we see risks that some time has to pass until a new government (backed by a majority in Parliament) would be established,” Raiffeisen Bank said in a note to investors.

The no-confidence motion was submitted last week by opposition National Liberal Party, PNL, and the Democratic Union of the Hungarians in Romania, UDMR over the government's overall performance. It is the first time since the fall of Communism in 1989 when a Romanian government is brought down by a vote of no confidence in parliament.

Boc’s cabinet, which took office last December, collapsed two weeks ago after the Social Democratic Party, PSD, left its coalition with the Democrat-Liberal Party, PD-L, led by Boc to protest the dismissal of a minister. Boc then set up an interim government made up only of members of PD-L.

One of the cabinet's main priorities was the implementation of a reform package prescribed by the International Monetary Fund (IMF) under a 20 billion euro ($29.6 billion) funding agreement which Romania signed in March. The package includes restructuring of the public sector, a new unified wage scheme and overhauling of the education system, and aims to cut government spending in view of Romania's widening budget deficit.

PD-L controls 170 seats in parliament, while PSD has 162. PNL and UDMR control 88 and 31 seats, respectively.

“[…] we think that the parties would refrain from any alliance before the Presidential elections scheduled on November 22. Accordingly, we think that political instability would remain high in the next period,” Raiffeisen Bank added.

The two main candidates for the president’s post are the incumbent head of state Basescu and PSD leader Mircea Geoana. Latest opinion polls show Basescu in the lead with more than 30% support, while Geoana has 20%.

($ = 0.6746 euro)