Romania’s ruling Social Liberal Union broke up following a Liberal Party meeting Tuesday evening in which the latter resolved to recall its ministers from the cabinet and switch to opposition.
“While we said an odd alliance between the liberals and the socialists does not look bound to last, the breakup of a 74%-strong parliamentary majority certainly equates to growing political uncertainties looking ahead,” ING said in a report.
Additionally, a leftist government “could be more prone to fiscal experiments,” such as the recently proposed debt relief scheme for low-income bank debtors, the report noted.
Both the leu and the stock market had only marginal reactions to the news Wednesday morning and ING analysts believe a potential depreciation of the local currency against the euro would be short-lived.
“The risks for such an event are limited by news that a fresh government could be installed by next Tuesday, with the press reporting that the ethnic Hungarian party could join the Social Democratic Party in power, altogether accounting for 55% of parliamentary support,” the bank said.