What Happens in Romania Stays in Romania

(With regards to the title it was either that or a Béla Károlyi pun) The Romanian leu is under pressure following the Constitutional Court finding that some of the government's austerity measures were unconstitutional. The leu is setting new six week lows against the euro today. The local stock market is also adversely impacted--with a 4.2% slide.

The austerity measures were part of the measures taken to secure IMF funding. Although the markets have taken it hard, it is likely a short-run glitch rather than a game changer.

It could delay the next tranche of the IMF disbursement of 850 mln euros and 1.2 bln euros from the EC. An IMF was thought to be meeting next week, but it could delay now. The court ruled that the 25% cut in public sector wages was ok but the 15% cut in pensions was not.

Although some of the eastern and central European currencies are weaker today, it seems more general that Romanian contagion. That said, over the last three months, Euro/RON is correlated with Euro/HUF 0.37, and Euro/PLN 0.31 and Euro/CZK 0.10. In recent days, the euro has generally trended higher against the zloty and forint and is extending those gains today.
What Happens in Romania Stays in Romania What Happens in Romania Stays in Romania Reviewed by Marc Chandler on June 25, 2010 Rating: 5
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