Boc2 government's most difficult task: Maintaining external credibility

"And you used to laugh at me when I told you about Balkan behaviour... yesterday during the dinner with the PM-I in the States I had to constantly explain him the situation in Romania and reassure him that we are not defaulting. Isarescu should give me a medal since he no longer has to pump even more money (to protect the RON i.e.). All these American funds bet on the Romanian bonds over those in the West and are scared now."
This is the concrete effect of the political crisis in Bucharest on the international financial markets as reflected in the e-mail message sent to a ZF journalist by a Romanian trader working for an investment bank in London.
Foreign players have no time to waste with the details of the Balkan behaviour on the political stage in Romania and the news of a governmental coalition breaking apart equals a major warning sign that automatically induces reduction in exposures.
Premier Emil Boc rushed to discuss with the ambassadors of the EU countries in Bucharest, PSD (Social Democrat Party) leader Mircea Geoana promised to call the IMF, but all that mattered to financial markets was that government had broken up.
The RON was heavy hit: despite NBR's interventions to contain depreciation, rates quickly reverted from 4.19 to 4.27 RON/EUR, while the Bucharest Stock Exchange remained in the red for the second day in a row on Friday. RON's and investors' losses totalled several hundred million euros in just one week.
The only anchor of foreign credibility Romania still has is the agreement with the IMF, as the financing from the World Bank and EU expected until December depends on meeting its terms. A potential slippage could induce a dramatic chain effect, from the country rating downgrade, as the major financial rating agencies have already warned, to the increase in the price of foreign loans and to the collapse of the RON.
The Danes at Danske Bank see the exchange rate at 4.40 RON in December and at 4.60 RON in March 2010, while ING believes that the NBR will have an increasingly hard time to protect the RON, with dim prospects of a new interest rate cut on November 3, because of the risk of derailing the agreement with the IMF.