“Since 12 January, thousands of Romanians in Bucharest and other cities have been rallying against government austerity measures. These protests, described as the largest and most violent in the country in a decade, are a credit negative development that will make it more difficult for the Romanian government to continue along the path of fiscal and structural reform,” the rating agency said in a report.
Initially in support of Raed Arafat, a senior health ministry official who resigned after a row with President Traian Basescu over a controversial healthcare bill, the protests turned into anti-government rallies and led to clashes between participants and law enforcement officers.
The government since then has withdrawn the healthcare bill and reinstated Arafat in his previous position. However, the protests continued, with participants demanding the resignation of Basescu and of the government led by Prime Minister Emil Boc.
“Although recent events delay the implementation of healthcare reform, it would be credit positive if the final bill meets the conditions prescribed by the International Monetary Fund, the European Union and the World Bank, while also enjoying political and popular legitimacy because of Arafat’s participation in its formulation,” Moody’s noted.
However, the chances for that to happen are slim because of the continued protests, the agency said.
“Moreover, since 2012 is a national election year in Romania, the endorsement of the protests by opposition political parties is hardly surprising. It does, however, bode ill for building on the fiscal discipline that the government demonstrated over the past year,” Moody’s said.