Political uproar and its effects over the economy: “Political noise is constant in Romania”

Diana Cioltei, Ana Sabiescu, 2 Oct 2009

Romanian version

The political pressures could increase both in scope and intensity and may affect the already crisis-hit economy, even if so far, the stock market and exchange rates have ignored the political noise. Analysts interviewed by Wall-Street explained how the political climate can influence Romanian economic system.

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Vosganian: Both the leu and 2010 budget in peril due to the political crisis

While the ruling coalition parties, PD-L and PSD blame each other for setting off a political crisis, Romanian economy shows no signs of recovery, but is expected to weaken further.

In order to shield the economy against further blows, “the National Bank must intervene in the market so as to keep a balance in exchange rates under current political pressures”, Varujan Vosganian (photo), former minister of Finance told Wall-Street.

If the economic or political crisis worsens in the following months, Economist Intelligence Unit says the leu could still be much overvalued and vulnerable to devaluation pressures.

The national currency may not be the sole casualty of the political crisis unfolding, but 2010 budget plan too.

“Furthermore, this week is expected the first reading of draft budget for 2010, which has already been delayed due to the political crisis”, Varujan Vosganian stressed.

Romanian government and International Monetary Fund agreed on a budget deficit of 6% for 2010. Gheorghe Pogea, minister of finance said recently the budget was drawn under the assumption of a 5.9% budget gap.

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