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INTERVIEW-Romania opposition wants new IMF deal, early election

Thu, 2 Feb 2012 15:43 GMT

Source: reuters // Reuters

* Opposition leftist USL favourite to win November vote

* USL leader wants early election, easing of IMF conditions

* Aims to cut VAT gradually to 20 percent by 2016

* Analyst says new IMF deal would ensure predictability (Adds analyst comment)

By Sam Cage and Radu Marinas

BUCHAREST, Feb 2 (Reuters) - Romania's government is unable to push through reforms and should resign now to give the austerity-hit country the chance to right itself under new leaders, opposition head Victor Ponta told Reuters on Thursday.

In an interview, Ponta said his leftist USL alliance - favourite to win a November parliamentary election - would continue to work with the International Monetary Fund (IMF) but aims to ease austerity measures such as value added tax (VAT).

Anti-government protests spread around the country last month and opinion polls show the USL with more than 50 percent of votes. Ponta said he was keen for elections to be brought forward even if that meant temporarily installing technocrats.

"To have early elections like in Spain, or to have a technocratic government like in Italy, that would be a solution to cool down a little bit the social unrest and to give fresh air and fresh energy," he said.

Some analysts say the USL may not stick to the fiscal discipline of centrist Prime Minister Emil Boc, who cut public sector pay and raised VAT to maintain a 20 billion euro ($26.4 billion) IMF-led bailout.

"Every day that a government which has lost the support of the people and even the support of the parliament stays in power, it's a day lost for reforms and the stability which we need," said Ponta, a 39-year-old lawyer from Bucharest.

"The austerity measures were something necessary not only in Romania but across Europe," he said at the USL's offices by Bucharest's version of Paris's Arc de Triomphe. "But our economy is perhaps still the weakest in the EU."

Romania is the European Union's second poorest member with an average wage of less than 350 euros a month and, while the economy grew about 2.5 percent last year, austerity and the euro zone debt crisis will keep a lid on a slow recovery.

Income per capita is less than half the EU average and Boc and his ally, President Traian Basescu, have been rocked by three weeks of occasionally violent protests demanding their resignation over austerity cuts and perceived corruption.

Ponta marks a change of guard for his PSD party, founded chiefly by former communists and now the dominant force in the USL, though some analysts and opponents say he remains under the influence of its founder, Moscow-educated Ion Iliescu.

A keen sportsman and former national rally champion who speaks five languages, Ponta is young enough to have no links to former dictator Nicolae Ceausescu. He spoke confidently of the USL's plans and said he would work with the IMF.

"It's an agreement signed by the Romanian government and whether it's that government or a new one, we should keep it," he said.

The USL would sign a new deal when the existing one expires in 2013, but does not plan to draw on the available funds, he said.

"It is premature to talk about post-electoral plans or alliances, though a fresh deal with the IMF would be beneficial for ensuring much needed predictability," said Ionut Dumitru, chief economist at Raiffeisen Bank in Bucharest.

Ponta said he would not immediately cut value added tax to 19 percent from 24 percent - as pledged - but would aim to cut it gradually to 20 percent by 2016.

The USL would also stick with the flat 16 percent tax rate on income and profit if possible, a change from a previous commitment to a progressive tax policy which some businessmen say deters investment.

"Predictability of taxation is very important," Raiffeisen's Dumitru said. "If it is implemented it would create premises for a healthy economic policy." ($1 = 0.7577 euros) (Editing by Louise Ireland and Alessandra Rizzo)