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ROMANIA: Political outlook hinges on PNL leader elections

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The upcoming leader election in the ruling National Liberal Party (PNL) on 25 September is both the cause and a key to the resolution of the ongoing government crisis. If Prime Minister Florin Citu wins the leadership contest, a PNL-led minority government would become the most likely outcome. Such a cabinet would likely be unstable and could pose risks to fiscal consolidation. If incumbent Ludovic Orban remains in charge of PNL, the party could be expected to renew cooperation with the reformist USR-PLUS, which would bode well for political stability and the fiscal outlook.

On 9 September, USR-PLUS, formerly a junior member of the governing coalition , and the right-wing Alliance for the Union of Romanians (AUR) tabled a motion of no-confidence in Citu's cabinet, following the adoption of the controversial local investment program. The vote will be held after the country's constitutional court (CCR) rules on the constitutionality of the motion in light of alleged procedural violations. The CCR is expected to announce the date of its ruling on 15 September.

If the CCR rules that the motion is constitutional, its outcome will hinge on the largest parliamentary group center-left Social Democratic Party (PSD), which had earlier pledged to support the motion. Unless PSD backtracks, Citu would have little chances of remaining in office.

The timing of a potential vote of no-confidence is important too. Citu's removal from office ahead of the PNL president elections would inevitably hurt his bid for the leadership. For now, Citu appears to be holding an edge over incumbent Orban.

The outcome of the PNL leadership elections is key to the political outlook in the coming months. If Citu is elected as president of the PNL, the party's reconciliation with the former coalition partner USR-PLUS could be ruled out. In such case, the most likely outcome would be a PNL-led minority government including the Democratic Alliance of Hungarians in Romania (UDMR) and supported by the center-left PSD on a case-by-case basis. A significant role of the PSD for the stability and functioning of a minority government could give the center-left party leverage over the policy agenda. Given the PSD's track record of populist spending, this could pose risks to fiscal consolidation. Moreover, such a minority government would likely prove unstable and short-lived thereby prolonging political uncertainty.

Meanwhile, Orban's victory would increase the probability of a renewed cooperation with USR-PLUS and UDMR. This would improve prospects of greater political stability, fiscal consolidation as well as reform continuity. However, Orban would be unlikely to lead the three-party coalition government due to his strained relationship with President Klaus Iohannis, who holds a constitutional mandate to appoint a prime minister-designate of his choice.

The close links between President Iohannis and the ruling PNL limits the prospect of any other party (especially PSD or AUR) leading the government. If for any reason PNL fails to form a functioning government for several months, a technocratic cabinet would emerge as a compromise solution. Snap general elections are unlikely too. The president has a constitutional right (but not an obligation) to dissolve parliament and call early elections after two unsuccessful attempts to form a government. However, Iohannis would likely refrain from exercising this right as opinion polls show that an early vote would benefit the opposition PSD.

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ROMANIA: Political outlook hinges on PNL leader elections

The upcoming leader election in the ruling National Liberal Party (PNL) on 25 September is both the cause and a key to the resolution