The intensification of political instability in Romania is not a near-term threat to the country's 'BBB-' sovereign rating, which still benefits from fiscal consolidation and substantial external buffers, Fitch Ratings says in a statement released on Wednesday.
”The key constraints on the rating remain structural weaknesses and exposure to Greece and the eurozone economy. For domestic political instability to weigh on Romania's rating, it would need to impact on policy in a way that threatened fiscal targets or delayed structural reforms, or if it meant the country had difficulty meeting its funding requirements. This has not yet happened”.
”Tensions between the prime minister and president are not new, but Basescu's suspension and the reaction it has provoked, including comments from European Commission officials that Romania must respect the rule of law or risk delays to EU integration, represent a further intensification of political instability”.
”Our chief concern is that this could delay the structural reforms required under agreements between Romania and the IMF and European Union, including privatisation of state-owned enterprises. Privatisation has already been held up by the failed sale of Cupru Min (a copper mine operator), and by the insolvency of Hidroelectrica”.
”Nevertheless, we believe the USL is committed to the IMF and EU programmes”, Fitch notes.