The outcome leaves recession-hit Romania with a disputed winner as president and with only a caretaker government in office, just when Bucharest faces pressure from European Union partners and the International Monetary Fund for budget reforms. “There’s instability and unpredictability in Romania. In these conditions, I can’t imagine who would want to be minister of finance,” said Dorel Sandor, a political analyst.

International observers said the vote largely met their standards. But social democrat officials contested the result, saying that with only 70,000 votes dividing the candidates there was scope to manipulate the outcome, for example in mishandling 138,000 void ballot papers.

The election followed a bitter campaign in which Basescu, a plain-speaking ex-Bucharest mayor, and Geoana, a former foreign minister, exchanged accusations of corruption.

Geoana seemed set for victory after he won the support of the national liberal party candidate, Crin Antonescu, who was knocked out in an earlier voting round. But his “unity” message was undermined by mistakes, including a late-night meeting with a controversial businessman days before the poll.

For many Romanians it was a reminder of close ties between social democrat party barons and big business. Many in the Bucharest elite had hoped for a Geoana win, thinking he could have secured stability by forming a new government to replace the Basescu-backed administration of Emil Boc that collapsed in October.

Geoana’s social democrats and Antonescu’s party would together have a parliamentary majority. By contrast, Basescu’s parliamentary allies, the democrat liberals, lack a majority and the president’s uncompromising approach has alienated potential allies. Basescu has already failed twice in appointing a post-Boc government.

If he fails twice more, he has the right to call parliamentary elections. But Alina Mungiu-Pippidi, head of the Romanian Academic Society think-tank, said Basescu should stop the debilitating infighting and reach out to political rivals, including the social democrats. “I don’t think the country can wait [for effective government]. I think Basescu knows this.”

The turmoil is putting mounting pressure on the economy, which is set to contract by 7.5-8 per cent this year, the biggest drop in the EU outside the Baltic states. A €1.5bn payment from a €20bn IMF/EU rescue was suspended in October when the government collapsed before it could enact key reforms, including the 2010 budget.

It is unclear whether the present caretaker government has the political mandate to push through the tough measures the IMF wants, included a cut in the budget deficit from about 7.3 per cent this year to 5.9 per cent next year.

The government has borrowed at expensive rates from commercial banks to fill the gap left by the missing IMF/EU money – and could do so again. But Liviu Voinea, director of GEA, a Bucharest research group, says that if the deadlock with the IMF continues for more than another three months “the costs of this political crisis will be almost unbelievable.”

Bucharest Herald