S & P May Cut Romania's Rating If IMF Pledges Not Met

Publish date: 02-10-2009
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Standard & Poor's may downgrade its sovereign rating on Romania if political events will lead to misfires in fulfilling its commitments for fiscal and economic strengthening, as agreed with the International Monetary Fund and the European Commission, agency's analyst Marko Mrsnik said Thursday.

"If the political situation leads to the government failing to adhere to the economic and fiscal consolidation program, leading to persistent worsening of public finances or if the ongoing deterioration in the banking sector leads to a dislocation in the financial system, further downside risks to the sovereign ratings exist," Mrsnik told MEDIAFAX in an email.
S & P has already placed Romania in the "junk" category, shortly before the parliamentary elections last fall.

Mrsnik said the Romanian authorities have pledged to substantially improve economic conditions upon receiving international assistance and those tasks will be seriously challenged in light of the recent political developments.

"As it was expected, the commitment to implementing the IMF program was to be tested, however, due to intra-coalition disagreements, particularly in light of the upcoming presidential elections," he also said.

Romania's ruling coalition collapsed on Thursday, after leftist Social Democrat ministers resigned en masse to protest the sacking of one of their ministers in the Cabinet. The coalition was thrown into turmoil this week after centrist Prime Minister Emil Boc sacked interior minister and deputy premier Dan Nica and proposed a successor from his own Democrat Liberal Party.

Romania's leu fall more than 1% on the day against the euro shortly afterward, while stocks on the Bucharest bourse lost over 2%.


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