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Romania Leu Hits 7-Mo Low Vs Euro After Court Ruling On Austerity Pack

Romania’s leu jumped to a near seven months low against the euro in mid trade Friday, after the Constitutional Court ruled some of the government’s austerity measures are not constitutional.
Romania Leu Hits 7-Mo Low Vs Euro After Court Ruling On Austerity Pack
25 iun. 2010, 11:57, English

The leu traded at 4.2755 units per euro, the weakest rate since November 2009.

At around GMT0940, the Bucharest shares were plunging 4.62% on the day, with the country’s five regional investment funds SIFs losing 6.7%.

The Court decided the government decision to cut magistrates’ pensions by 15% was unconstitutional, whereas the same decision for other categories of retirees were open to interpretation.

„This is negative news, because the laws will be sent back in parliament to be revised and voted, which means their enforcement will be delayed. Following the announcement, traded volumes (on the interbank market) rose significantly to EUR45 million from EUR12 million previously,” said one dealer.

Vlad Muscalu, analyst at ING Bank Romania, said investors expected the court to rule in favor of the government’s decision, because such measures would have supported the leu and would have increased the country’s chances to get a new disbursement of a EUR13 billion loan package from the International Monetary Fund.

„A negative decision could prove very challenging for the leu and the interest rates on the money market. Adjusting the measures would complicate the evolution of the fiscal reform and would probably put off the next IMF installment,” he added.