beyondbrics

Romania’s sacked finance minister, Sebastian Vladescu, who lost his job Thursday evening, offered a succinct assessment of his dismissal, and that of five other ministers, from the Romanian cabinet: “It was a political decision, I think it was a mistake”.

Prime minister Emil Boc was under huge political pressure to do something to turn around the fortunes of his government, which has faced an onslaught of criticism since announcing in May a package of harsh austerity measures – including a 25 per cent public sector pay cut.

According to local media, Boc was forced to shed more than blood than he wished in order to save his own skin, by replacing six ministers instead of only three or four – including Adriean Videanu, economy minister.

But should investors be worried? That depends on the accuracy of the second half of Vladescu’s statement.

The leu fell by 0.5 per cent against the euro on Friday morning, touching a two-month low, as investors priced in the potential for disruption.

Vladescu’s replacement Gheorghe Ialomitianu, an economist and  vice-president of parliament’s budget and finance committee, seems to be a safe choice.

His CV reveals experience as a chartered accountant and financial auditor, and he appears to have taken courses in “fiscal control”  — something that will no doubt come in handy during budgetary meetings with the International Monetary Fund. Nevertheless, not enough is known about him yet to completely assure investors.

The bigger question however is whether the reshuffle is enough to end the political infighting and buy the prime minister enough time and support to pass further reforms. On this, the jury is also out.

Prior to the reshuffle, opposition Social Democrats this week announced that they are planning another vote of no confidence before the end of the year (Boc survived a previous vote in June).

Boc has only a thin majority, and relies on a group of independents to get laws passed. Were the government to fall, this could delay the release of IMF funding, as happened last year when Boc’s previous administration ran into trouble.

But it’s not clear that the opposition is committed to taking power just yet. With the economy expected to contract by a least 2 per cent this year, it could be a hard winter in Romania.

So while this is hardly the ideal time to pass unpopular reforms, Boc is expected to stand by his commitment to meet this year’s 6.8 per cent deficit target.

“This reshuffle aims to help us see reform projects continued and help Romania return to economic growth in 2011,” Boc said last night.

Only time will tell if the prime minister’s ship is fatally holed or whether the ejection of six ministers is enough to right its sails.