Romania’s
Politics Spooks Its Currency
By Irina
Vilcu
May 9, 2025
at 6:30 AM GMT+2
Sinking Leu
Here we go
again. A far-right leader storms through the first round of Romania's
presidential election, while an independent candidate knocks out the pick of
the governing coalition from the race altogether.
Romania’s
repeat vote was supposed to curb anti-establishment forces. Instead, it
emboldened them, and the result is another political earthquake. The government
buckled — along with the currency — and left the country figuring out its
future ahead of a critical runoff vote on May 18.
Investors
wasted no time in pulling their money out. In the ensuing market selloff,
borrowing costs spiked as the sheer scale of the country’s budget deficit
raised immediate concerns that fiscal reforms will be delayed. The spending
hole was a whopping 9.3% of gross domestic product last year, the biggest in
the European Union. Meanwhile, as flagged last week, the fate of €29 billion
($32.7 billion) of EU funding hangs in the balance.
Romania’s
Currency Buckles Under Pressure
The
leu crashes through the key 5 per euro threshold
George
Simion, leader of the nationalist Alliance for the Union of Romanians, emerged
with 41% of the vote in last weekend’s first round. He told Bloomberg he wants
to shrink the state, slash inefficient spending and swing a metaphorical
chainsaw through the bureaucracy. But his promise to change the status quo in
Romania for the first time in more than three decades might be easier said than
done in the country rife with fragile institutions and simmering social
tensions.
While the
rhetoric heats up, the world’s longest serving central bank governor is being
confronted with the worst forex market selloff since 2009. For National Bank of
Romania chief Mugur Isarescu, convincing global investors that the chaos is
under control might be his toughest mission yet.
Around the
Region
Czech
Republic: Michal Strnad’s Czechoslovak Group, which started out trading Soviet
military material under his father three decades ago, has tripled in value in
the past two years, according to the Bloomberg Billionaires Index.
Lithuania:
The Baltic nation is appealing to Germany’s new chancellor to come on board
with a proposal to seize Russia’s immobilized central bank assets as the
European Union debates ways to finance support for Ukraine.
Poland: The
central bank cut interest rates for the first time since October 2023 as the
country prepares to elect a new president in a little over a week’s time. A
number of candidates have called on policymakers to start monetary easing. The
Czechs, meanwhile, trimmed rates to their lowest since 2021.
Hungary:
Zoltan Kurali, a longtime Deutsche Bank executive who previously headed the
Debt Management Agency, has become the central bank’s most influential vice
governor after a shakeup in management roles.
Czech
Republic: A South Korean nuclear-energy project worth more than $18 billion was
delayed after a lawsuit by Electricite de France SA temporarily blocked the
signing of the construction contract.
Erste Group
Bank agreed to buy much of Banco Santander’s operations in Poland for about €7
billion, the Austrian bank’s largest deal ever. It will acquire a 49% stake in
Santander Bank Polska for €6.8 billion and take full ownership of the Spanish
lender’s asset management unit in Poland for about €200 million. The companies
had confirmed a previous Bloomberg News report that they were in talks.
By the
Numbers
Czechs are
leading talks on continuing deliveries of heavy ammunition for Ukraine
stretching into 2026. President Petr Pavel said the country’s initiative
financed by 11 countries was on track to deliver 1.8 million shells to Kyiv
this year.
The US State
Department approved F-16 fighter-jet training and services for Ukraine worth up
to $350 million. Meanwhile, Ukraine’s parliament ratified a deal with the US
over access to the country’s natural resources, with 338 lawmakers in favor.
Students in
Serbia who have driven almost six months of street rallies against the
government are now demanding early elections.
Things to
Watch
Serbian
President Aleksandar Vucic recovered from an illness in the US and headed to
Moscow to take part in events marking the 80th anniversary of victory against
Nazi Germany and to meet with Russian President Vladimir Putin. Slovakia’s
prime minister, Robert Fico, was also due to attend.
Albania
holds parliamentary elections on Sunday with Edi Rama expected to win his
fourth term as prime minister.
Romania’s
central bank holds its monetary policy meeting and is expected to hold interest
rates steady ahead of the presidential runoff on May 18.
Final
Thought
Renata
Kellnerova has kept a low profile in business matters since she became the
region’s richest woman four years ago when her husband died in a helicopter
crash. So, this week’s appearance with a brief live statement to reporters was
a surprise, as was the content. After achieving his goals in three years, the
CEO of her PPF Group will be replaced by two co-chiefs from within the company,
as has been the tradition. Kellnerova, 57, was keen to put on record her
gratitude. Indeed, PPF’s success has made her and her family a $16.6 billion
fortune.
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