Romanian ruling Social Democrats withdraw from government coalition talks

Romania's ruling leftist Social Democrat Party (PSD) has withdrawn from government coalition talks, Prime Minister Marcel Ciolacu said on Thursday, deepening a political crisis.

Three votes to elect Romania's president and parliament descended into chaos when a little known far-right NATO critic won the first presidential round on Nov. 24, prompting Romania's top court to annul it on suspicion of Russian meddling.

Although the PSD won the most seats in the Dec. 1 parliamentary election, three ultranationalist and hard-right groupings, some with overt pro-Russian sympathies, won more than a third of the seats to become a hard-to-ignore political force. The PSD was in talks over forming a wide coalition with three other pro-European Union parties in an attempt to cordon off the far right, but the four clashed over reform plans and measures needed to lower the EU's largest budget deficit.

"Unfortunately you cannot build something durable with partners who are incapable of overcoming their own egos and ideological clichés," Ciolacu said on his Facebook account.

"We are willing to vote for a minority government so that Romania has political stability," he said later.

Fitch cut Romania's credit rating outlook to negative on Wednesday, warning the frailty of the pending coalition could further postpone deficit reduction measures urgently needed.

The Bucharest blue chip index was down 1.72% on the day after the PSD withdrawal.

Romanian President Klaus Iohannis, whose term expires on Dec. 21 and who will nominate a new prime minister and stay on until his replacement is elected, said a minority government was not a good idea at times of crisis. The centre-right Liberals, centrist Save Romania Union (USR), the ethnic Hungarian party UDMR and representatives of ethnic minorities have around a third of the seats in the new parliament, which will be sworn in on Saturday.

It was also unclear whether the three other parties were willing to continue coalition talks following the PSD move.

"The USR could return to negotiations with PNL and UDMR," said Sergiu Miscoiu, a political science professor at Babes-Bolyai University. "Otherwise, the Liberals will lead ... a government which will topple in the first gust of wind."

Analysts said the PSD may have opted to avoid the political cost of measures that will be needed to rein in budget spending.

"A minority government will take needed partial measures in the first quarter to try and create credibility for markets and the population, while everyone will be in waiting mode for the presidential election," said political commentator Radu Magdin.