Dilemma of PM replacement prevents Romania from borrowing cheap from foreign markets

President Băsescu publicly launched the topic of changing the prime minister two months ago, but in the meantime his position has changed. However, markets have taken in this uncertainty and hesitate to lend long-term until the situation is clarified.

Romania keeps delaying the time when it goes to international capital markets, where it could benefit from the unhoped for decline of Romania's CDS (cost of insuring the country's debt against default) because investors traditionally interested in Romanian government bonds are said to have been worried until not long ago about whether Romania's prime minister would stay in office or not, and have been waiting for this matter that can be a major source of political turmoil, to be clarified, say banking sources.

"Paradoxically, several elements have emerged that would have normally justified the use of this window of opportunity, which can close at any point: from the sealing of a new arrangement with the IMF and the EU, to the exceptional signals regarding exports and the exit from recession, which all translated into the significant decline of CDS (credit default swaps). The technical mechanism for foreign funding is functional, it has been said repeatedly that we could use a systematic presence on the market, but unfortunately Romania cannot sell this story, which is finally becoming more convincing, because of the endless talks on who will be prime minister," say the quoted sources.

About two months ago president Traian Băsescu launched the topic of prime-minister Emil Boc being potentially replaced by an independent/technocrat. There have been numerous political discussions, lists of potential candidates have been drawn up, with ZF even proposing a list of potential candidates from among the business community. But, in what has become typical political behaviour for the Romanian president, on Sunday he told a conference that he continues to endorse his "partner" Emil Boc.