Political changes improve economic sentiment in Romania

Markets in Romania seem to have improved their sentiment following the political changes of the last couple of days as there may be higher chances of improved regulations and government decisions.

The Bucharest Stock Exchange (BSE)’s main index, BET, rose by 3.1 percent on Monday as banks and energy firms capitalized on the result in European Parliament elections.

The main ruling party, PSD, lost the EU elections to liberals (PNL) and was almost on par with the third major party in Romania, the USR-Plus Alliance.

PSD also suffered two more major blows: the validation of the referendum called by president Klaus Iohannis to prevent PSD from further weakening the courts and the three-and-a-half year prison sentence against its leader Liviu Dragnea.

At the same time, the junior member of the coalition, ALDE, suffered a severe defeat in elections as it got only around 4 percent of votes, below the electoral threshold of 5 percent, and will not have any representatives in the European Parliament.

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Analysts say that the results increase chances of regulatory changes – mainly the cancellation of the controversial government decree (OUG) 114/2018.

This decree introduced a tax on bank assets as well as taxes on energy and telecom firms, and capped gas prices from internal output, hitting local banks, energy and telecom firms.

“There is an enthusiasm following Sunday’s vote, and it shows us on today’s news that some people in the government could be removed, like Mr Valcov, who seems to have been the artisan of emergency decree 114, “said Horia Gusta, CEO of SAI Certinvest, cited by Agerpres.

A key message was already sent on Tuesday by a leader of USR, a major winner of the European elections in Romania, as the decree will be discussed in a committee of the lower chamber of the Parliament.

“I will propose the rejection of OUG 114/2018, this decree is a disaster for the Romanian economy and must be rejected entirety. We will see if party representatives in the (IT&C) Committee have understood something of Sunday’s vote,” Catalin Drula said.

The political leaders behind the new regulations are now out of the political scene in Romania. Liviu Dragnea is now in prison, while his main economic advisor, Darius Valcov, is expected to be ousted by the new PSD leader, PM Viorica Dancila, who had been very loyal to Dragnea but is now pushing away his former allies.

Experts also point out that the major change in the elections was due to the rise of a new generation of voters, mainly in the big cities, who voted against the ruling parties.

This seems to suggest that economic power is beginning to translate into political power – and this is good news for the local markets.