Investor headaches in eastern Europe

Last year, Hungary’s government used a convincing election victory to undermine the constitution and rule of law. This outbreak of authoritarianism in eastern Europe seems to have set a trend. But in Romania, according to an EU official quoted on, “they are not changing the constitution. They are breaking it.”

Romania’s prime minister Victor Ponta has exploited his new parliamentary majority to suspend the president from office and override constitutional rules governing his impeachment. The government has stripped the constitutional court of power to overturn legislative decisions and replaced the national ombudsman with a party loyalist.

All this puts off potential investors and threatens to hamper the economy further by jeopardising help from the International Monetary Fund. Romania could lose a €5bn precautionary credit line set up in case a worsening euro crisis prompts foreign banks to cut credit lines to local banks.

So far, Romania has kept its side of the deal, lowering the budget deficit to 5.2% of GDP last year from 9% in 2009. But now it seems “the temptation to backtrack on fiscal tightening will be strong”, says Andrew Peaple in The Wall Street Journal. Investors in eastern Europe have a new headache.

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