REUTERS/Romanian govt faces collapse, markets eye IMF aid

Romania's parliament looks set to topple the minority government on Tuesday in a no-confidence vote ahead of a November presidential election and raises fresh concerns over the country's IMF aid. The centrist and leftist opposition have called Tuesday's vote after Prime Minister Emil Boc's coalition cabinet split earlier this month, plunging the country into political crisis at a time when it is trying to fight against recession. The opposition is keen to lay the blame for rising unemployment and falling wages on the ruling Democrat-Liberal Party, closely allied to President Traian Basescu, now frontrunner in the Nov. 22 election. If the government falls, Boc will continue to govern with limited powers until Basescu picks a replacement, which might happen only after the presidential vote. The second round of the election was set for Dec. 6. "There is 75 percent chance the government will fall," said Mircea Marian, commentator for daily Evenimentul Zilei. Economists warn about the impact of political standoff on fiscal reforms and budget cuts needed to ensure the International Monetary Fund continues to disburse aid from its 20 billion euro anti-crisis package. A major overhaul of Romania's creaking and complex pension system has to be introduced by the end of the year and economists say the government risks overshooting the IMF's budget deficit target of 7.3 percent of gross domestic product.

UNCERTAIN PROBLEMS

Regional markets are on high alert. Bucharest's coalition collapse battered the leu and dragged down currencies in neighbouring countries. Dealers say markets also fear that political turmoil in Poland may return and weaken currencies. "The market wants a government -- anybody out there!" said Nicolaie Alexandru-Chidesciuc, ING chief economist in Bucharest. "Without a government there is no certainty. The market cannot be immune to that." Some observers say Romania's record of fragile political alliances means that a group of opposition politicians may renege on party plans and support the government, possibly averting a collapse of Boc's cabinet. Even so, the centrist politician is likely to face more hurdles in coming weeks, because he needs parliamentary approval for ministers replacing leftist politicians from the Social Democrat Party (PSD) who quit the ruling coalition this month. The PSD and another opposition centrist grouping, the Liberal Party, want a technocrat cabinet to replace Boc after Tuesday's vote. But observers say this is unlikely to happen. Enjoying a strong lead ahead of the election, Basescu is likely to continue supporting his political ally Boc.