The recovery in Romania’s economy after two years of severe recession is now coming under threat, analysts warn, victim to months-long political crisis that has engulfed the EU country.

Prime Minister Victor Ponta told the International Monetary Fund this past week that his centre-left government was determined to continue cost-cutting reforms and stick to plans to sell stakes in major energy companies that underpin recovery plans.

But analysts say that economic policy is “frozen”, held hostage by the political war underway between the ruling Social-Liberal Union coalition and centre-right President Traian Basescu, targeted by an impeachment move launched six weeks ago.

Romanians, who cast ballots in a controversial referendum last month, voted overwhelmingly for President Basescu’s removal, but the polls’ validity is being disputed and there have been allegations that judges have been pressured and intimidated.

“Stop the circus, try building something,” urged the Ziarul Financiar daily recently, voicing the exasperation of the business community.

“The economy is clogged, money is no longer changing hands, the public administration is blocked, major decisions are delayed and no major contracts are signed,” economic analyst Doru Lionachescu of Capital Partners consulting firm said.

The first victim of the political row has been the local currency, the leu, which has lost nearly five per cent of its value over the past few weeks.

The depreciation will lead to hikes in the prices of fuel and of other imported goods.

Romania emerged from two years of severe recession by posting 2.5 per cent growth in 2011, but the economy has lost steam.

It dipped into recession at the beginning of this year, and and expectations of a recovery are evaporating quickly.

The forecast for growth this year has been cut from 1.5 to 1.0 per cent, and a drought which has severely affected wheat and maize crops will hurt overall economic performance.

While some of Romania’s slowdown is a spillover from the troubles of its larger EU partners, the political gridlock threatens to aggravate the situation.

Faced with endless squabbling, Central Bank governor Mugur Isarescu abandoned his courteous tone and came close to using a four-letter word in a public address, hoping this will draw the politicians’ attention. “We depend on the international markets and they will punish us severely,” he stressed. (AFP)