Friday, April 27, 2012

Romania’s Government Collapses Amid Austerity Backlash

By DAN BILEFSKY

Some 235 lawmakers voted against the center-right government of Prime Minister Mihai Razvan Ungureanu, four more votes than needed, plunging the country into crisis and raising the prospect of months of political and economic uncertainty.

The International Monetary Fund, which had been reviewing a precautionary loan for Romania of $6.6 billion, said Friday that it would halt the review pending the formation of a new government, Reuters reported.

President Traian Basescu is expected to nominate a new prime minister, who will be required to present his governing program to Parliament for approval. But analysts say the process could drag on for months.

Governments have been collapsing across Europe amid calls by Germany and others for tough austerity to help restore confidence in the euro zone, even as some critics complain that aggressive cuts are undermining economic growth and spurring Europeans to protest. The sovereign debt crisis, accompanied by visceral frustration with the extent of painful spending cuts, has helped unseat leaders in countries including Greece, Ireland, Italy, Portugal and Spain.

On Friday, Chancellor Angel Merkel of Germany showed little sign of backing down from her austerity mantra, insisting that European Union countries adhere to a treaty on deficit reduction they signed on to just last month. “The fiscal package has been agreed to, it has been signed by 25 leaders and has already been ratified by Greece and Portugal,” she said in an interview with Germany’s WAZ media group. “It is not up for negotiation. In addition, the growth that some are now calling for has been a second pillar of our policy alongside solid finances.”

But some question how long Germany can hold out in the face of a gathering double-dip recession and growing political turmoil. The center-right government of the Czech Republic on Friday survived a vote of confidence in Parliament by just 12 votes, staving off early elections for the time being and helping to clear the way for unpopular new spending cuts of the sort that unhinged the Romanian government.

Tomas Sedlacek, a member of the Czech National Economic Council, which advises the government, argued that austerity remained the only solution to unbalanced budgets. “The question is no longer whether it is necessary to introduce austerity, but how to do it,” he said. “Debt can no longer drive an economy.”

But he acknowledged a popular backlash around Europe.

Spain reported that unemployment increased to 24.4 percent in the first quarter and said that more than half of Spaniards under 25 were now without jobs. The figures were the latest setback for the conservative government of Prime Minister Mariano Rajoy, who has been trying to push through austerity cuts in the face of a recession and a recalcitrant electorate fed up with painful and apparently self-defeating belt-tightening.

In the Netherlands, the government struck an emergency austerity deal Thursday with the opposition after its main ally, the Freedom Party, refused to back a deal that would slash more than $18.5 billion off the annual budget and bring the deficit in line with the ostensible European Union limit of 3 percent of gross domestic product.

In France, President Nicolas Sarkozy fared worse in the first round of the presidential election than did his Socialist challenger, François Hollande, who has vowed to ease unpopular spending cuts, increase taxes on the rich and introduce new policies to spur growth.

While neither the Czech Republic nor Romania use the euro, both are members of the European Union and have been trying to meet the stringent budget deficit targets. Yet both countries are suffering from weak growth and voters who show little appetite for enduring further sacrifices.

The backlash in Eastern Europe against austerity has been particularly acute in countries like Romania and the Czech Republic because it has been combined with growing anger at endemic corruption, a legacy of decades of Communist rule.

In recent months, tens of thousands in both Romania and the Czech Republic have staged some of the biggest demonstrations since the fall of Communism in 1989, railing against painful cuts and widespread graft. In a telling sign, protesters in both countries have held similar banners calling for a stop to thievery.

Romania, one of the European Union’s poorest countries, cut government salaries and raised the sales tax to try to tame the budget deficit, but the economy has fallen into recession and everyday Romanians say they are struggling to make ends meet.

Emil Boc, whose four-year-old government was toppled in February in a backlash against austerity, called the vote to topple the current Romanian government “a victory for opportunism in politics and party swapping.” But he added, “I take responsibility for this failure.”

In the Czech Republic, Prime Minister Petr Necas’s fragile coalition has been struggling amid loud protests over spending cuts and corruption scandals that have ripped apart its junior coalition partner and tainted several other politicians in the government. Even after surviving the confidence vote, Mr. Necas might not have enough support to pass unpopular measures, including raising the value added tax by one percentage point, raising income taxes and slowing down increases in state pensions.

A government crisis was created last week after the deputy prime minister, Karolina Peake, and several of her allies defected from the scandal-plagued Public Affairs Party, a junior partner in the governing coalition. One of three center-right parties in the government coalition, Public Affairs came to power two years ago vowing to fight graft. Instead, its leader, Vit Barta, a wealthy businessman, has been accused of corruption and received an 18-month suspended prison sentence in April for bribing party colleagues for their loyalty.

Melissa Eddy contributed reporting from Berlin, and Jan Krcmar from Prague.

NYT

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