According to William Jackson, analyst with Capital Economics, the Constitutional Court’s decision is “something of a double edged sword.”
“On the one hand, the decision … could ease criticism from the European Commission (who had warned the government about the pressure being put on the Court) and thus reduce the prospect that the EC might suspend Romania’s precautionary stand-by agreement,” Jackson told MEDIAFAX.
Hence, it does not provide a solution to the political turmoil that has hit Romania over the past few months, he added.
The analyst noted that the leu has not lost ground against the euro since the decision. “In the worst case scenario, whereby political tensions flare up, and the future of Romania’s stand-by agreement is called into question, investors are likely to take their money out of Romania, causing sharp falls in the leu and a spike in bond yields,” Jackson said.
On the other hand, Raiffeisen Bank analysts expect the turmoil to reduce on short-term, but only to return to levels witnessed before the vote for the suspension of the President that took place in the Parliament, at the beginning of July, taking into account the tense relations between Basescu and the current majority in the Parliament, as well as the parliamentary elections which are due towards the end of the year.
Romania’s Constitutional Court ruled on Tuesday the July 29 referendum to impeach suspended President Traian Basescu was invalid, which means the president is set to return to office. President Basescu will return to office as soon as the Court’s decision will be published in the Official Gazette.
Romania’s leu closed up against the euro Tuesday, touching a high at 4.475 units after the Consitutional Court’s decision to invalidate the President’s impeachment vote. The leu fell slightly immediately after the Consitutional Court’s decision, only to return afterwards into positive territory and touch the day’s high at 4.475 per euro in the afternoon.