Romania faces uncertainty after government loses no-confidence vote

Romanian Prime Minister Viorica Dancila's centre-left government collapsed on Thursday after losing a no-confidence vote in parliament, raising the prospect of prolonged political uncertainty due to a fragmented opposition.

A fresh parliamentary election is not an option for now because Romania is due to hold a presidential poll next month. By law, Romania cannot hold a parliamentary vote less than six months before a presidential one.

The opposition now has 10 days to nominate a new premier who will need the approval of centrist President Klaus Iohannis. The nominee, along with a new cabinet line-up, must then survive a parliamentary vote of confidence before taking office.

"You have talked a lot, but I have yet to hear how you plan to govern the country and with whom," Dancila told lawmakers before the vote.

The next government will face the daunting task of drafting a budget plan for 2020 that accommodates a 40 percent hike in all pensions⁠ — previously approved by Dancila’s Social Democrat Party ⁠— without overshooting already strained deficit targets.

Her government had been on the brink of collapse since the Social Democrats lost their junior coalition partner in August.

Analysts expect the new government to be formed around the main opposition Liberal Party, which spearheaded Thursday's vote, but not without bumps in the road as the opposition is fragmented, with some supporting a plan to trigger an early election.

The next parliamentary election in Romania, a European Union member state, is currently scheduled for late 2020.

"I will listen to parties’ options and will propose a government solution with a very clear mandate to ensure responsible and efficient governing until the next parliamentary election, whenever it will take place," President Iohannis said after the vote.

Negotiations with political parties start on Friday.

Fragile finances 

Moves to overhaul judicial legislation and oust chief prosecutors and judges have dominated the public agenda since the Social Democrats came to power in early 2017.

EU and US officials have strongly criticised the governing alliance for an overhaul of Romania's judiciary that they see as a threat to the rule of law, and for watering down anti-graft legislation. 

Expansionary fiscal and wage policies have increased Romania's budget and current account deficits.

"Political developments are compounded by the fragile state of Romania's public finances and it takes strong political determination and support in parliament for deep reforms and a turnaround of the loose fiscal policy," Romania’s BCR bank said in a note.

The Romanian leu was flat against the euro after the vote but it is down 2.1 percent this year, the region’s second-weakest after the Hungarian forint.

The Social Democrats have seen a series of setbacks this year. The European Parliament rejected the party's first proposed European Commissioner because of conflicts of interest.

Their former party leader Liviu Dragnea has been sentenced to prison for abuse of office. Voters punished the party in a May European election for changes to the judicial system that were seen as undermining the rule of law and triggered massive street protests.

Dancila is the Social Democrats' presidential candidate, but opinion polls show her trailing far behind Ioannis, a strong critic of the outgoing government, who is seeking a second term.