Romanian PM calls for stability after defeat in presidential elections

Prime Minister Victor Ponta looked to allay fears of political tensions in Romania after suffering surprise defeat in presidential elections, saying on Monday he was committed to dialogue and stability.

Provincial mayor Klaus Iohannis, who was backed by two center-right parties, defied expectations to win Sunday's run-off ballot — a result that maintains a potentially destabilizing split between the country's executive powers.

At a subdued press conference, Ponta agreed to a demand by the president-elect to scrap a corruption amnesty bill pending in parliament, helping his opponent make good on a campaign promise and allay EU concerns over graft in the country.

"I express our desire for dialogue with the new legitimate president of Romania," Ponta said. "I am absolutely confident that he will want to cooperate and do good for the Romanian people and the country."

"Secondly, Romania more than ever needs stability and predictability," he said.

Analysts had said a victory for Ponta might have bolstered Romania, with the main levers of power held by one bloc. By contrast, although he distances himself from the outgoing president's combative style, Iohannis's win may trigger renewed political tensions in one of Europe's poorest states.

"The relationship between Social Democrat PM Ponta and center-right president-elect Klaus Iohannis will likely be strained," said Otilia Dhand at Teneo Intelligence.

However, the leu currency took the surprise result in its stride, and was flat against the euro at 1410 GMT.

"In the near term, the political situation could be volatile, but in the longer term, a president from a different part of the political spectrum than the government … could foster the fragile independence of the judicial system," bank UniCredit said in a note on Monday.

Safeguarding justice

The election result was part of a pattern emerging in ex-Communist eastern Europe for voters to use the ballot box to stop any one group or individual from gaining too much power.

In Slovakia's presidential election in March, Prime Minister and frontrunner Robert Fico was trounced amid fears Fico and his center-left party would amass too much power.

The former Communist state of 20 million is emerging from painful budget cuts imposed during the global slowdown. Growth rebounded to more than 3 percent in the third quarter of 2014, but corruption and tax evasion are rife, and progress to implement reforms and overhaul a bloated state sector is mixed.

Prime minister since 2012, the 42-year-old Ponta often feuded with his rival, outgoing President Traian Basescu, which stymied policymaking and caused a constitutional crisis.

Ponta enjoyed a 10-point lead after the first round ballot, but widespread anger at voting problems overseas appeared to galvanize support for the 55-year-old Iohannis, an ethnic German and former physics teacher.

Iohannis promised during the campaign to safeguard both the independence of Romania's judicial system and progress made in tackling corruption.

The European Union has raised concerns about a failure to tackle rampant high-level graft in both Romania and neighboring Bulgaria. Both have been kept outside the passport-free Schengen Zone since entering the EU in 2007.

Iohannis also pledged economic, health and education reforms, and to create an attractive business climate for foreign investors.

But as president he will face a hostile parliamentary majority that could cause more policy wrangling.

An early flashpoint could be the 2015 budget, in which Ponta will have to balance spending promises such as pension hikes made during the election campaign with an EU commitment to fiscal discipline. His government might also cut loose an ongoing IMF aid agreement that is due to expire next year.

(Writing by Matthias Williams; Editing by Crispian Balmer)