February 25, 2020 / 2:42 PM / a month ago

UPDATE 1-Romania's bonds slide after top court scuppers early election plan

(Adds detail, background)

By Marc Jones

LONDON, Feb 25 (Reuters) - Romania’s longer-term government bonds fell sharply on Tuesday, a day after the country’s top court overturned President Klaus Iohannis’s re-nomination of ousted Liberal Party leader Ludovic Orban as prime minister.

The move looks set to prolong the country’s political turmoil. Earlier this month, lawmakers toppled Orban’s three-month-old minority government in a confidence vote spearheaded by the opposition Social Democrats (PSD).

Bucharest’s longer-term government bonds were down as much as 1.7 euro cents on Tuesday have fallen around 1.5 euro cents late on Monday after the court ruling. The region’s markets were already tumbling sharply after a spike in coronavirus cases in Italy.

Having reined in spending, pushed privatisations and improved relations with Brussels somewhat since he took charge last year, investors had hoped a new election that reinstalled Orban at the helm could have brought more stability.

Orban’s Liberals, the PNL, are confident of winning an early election. Polls put support for PNL at over 45%, while the PSD support is about 20%, roughly half of what it was when they won parliamentary polls in late 2016.

“There are lots of difficult decisions to be made on the fiscal front this year,” said Aberdeen Standard Investments’ analyst Emilia Matei, especially regarding a proposed state pension hike that could worsen the government’s deficit.

“This is prolonging the political uncertainty.” (Reporting by Marc Jones; Editing by Tom Arnold and Giles Elgood)

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