Romania’s leadership duo pledge pro-EU era but challenges loom

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Romania’s president has promised a more “normal”, pro-EU era after an election victory that gives his party a rare chance to draw a line under a period of corruption scandals and conflicts with Brussels.

Klaus Iohannis won a second five-year term on Sunday, easily defeating Viorica Dancila from the Social Democrat party. Ms Dancila had been ousted last month as prime minister in a parliamentary confidence vote, with Ludovic Orban, one of Mr Iohannis’ allies from the National Liberal party, installed as premier in her stead.

The results are a blow to the Social Democrats, seen as the successor to the Romanian communist party, who have been in government for 20 of the 30 years of the post-communist era but suffered a public backlash over corruption claims. Liviu Dragnea, the party’s former leader, was sentenced to jail in May on corruption charges.

The fact of Mr Iohannis and Mr Orban being in power together presaged a much-needed sense of stability, said Oana Popescu Zamfir, director of the Bucharest-based Global Focus think-tank. “We are going to have president and government who are on the same side of the barricades, so it looks like they will have a bit more staying power and a bit more coherence,” she said.

Mr Iohannis said in his victory speech that the real winner was “modern Romania, European Romania, normal Romania”.

However, he and Mr Orban — no relation to Viktor Orban, Hungary’s premier — face a long list of challenges and potentially a narrow window in which to address them, with local and general elections due next year.

Public spending and the government’s deficit have ballooned. The country needs to restore a climate of predictability for investors and cope with the EU’s highest rate of social expenditures, which equate to 70 per cent of public revenues.

“My priorities are in the economic field, to regain the confidence of the business environment in governmental institutions,” Mr Orban, who is Romania’s fourth premier in three years, told the Financial Times in an interview last week.

With a razor-thin parliamentary majority the government would have to be “very cautious”, he acknowledged, saying “we can do only the things which are supported by all the partners in the parliament”.

The deficit would probably be above 3 per cent this year, exceeding the level usually allowed by EU spending rules, because of rises in pensions and public sector salaries enacted by the previous government, Mr Orban added.

“We will try to reduce the deficit as much as is possible,” he said, noting that it would be very difficult. He said he would work to convince the European Commission to give the country scope to bolster public investment.

Laura Stefan, an analyst with the Bucharest-based Expert Forum think-tank, said: “The populist agenda went way too far and I don’t know how much of it can be undone swiftly.”

On average, public sector employees are paid 80 per cent more than private sector workers, said Iancu Guda, the president of Romania’s financial analyst association. “We urgently need measures to cut social expenses by minimum 10 per cent, because we cannot afford this,” he warned.

Mr Guda also noted that a 40 per cent increase in pensions planned by the social democrats, to be implemented next year, would send the country’s deficit soaring to 6 per cent of gross domestic product.

The Social Democrats made a hole for Mr Orban’s party “to step right into” ahead of local elections next year, said Ms Stefan.

Ms Stefan said that another important step for the government would be to try to restore predictability and independence in the judiciary. All of the country’s top prosecutorial positions are held by interim appointees.

Romania has been under special rule of law monitoring from Brussels since it joined the EU in 2007. Previous Social Democrat attempts to decriminalise corruption, and the dismissal of the country’s former top anti-graft prosecutor, sparked some of the largest protests in the country since the collapse of communism.

Romanians also hope that more stability will help stem emigration rates. According to some statistics, more than 3m of Romania’s 17m population have left the country in the past decade, a rate of per capita exodus among the highest in the world.

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