By Peter Apps, Political Risk Correspondent
LONDON, Oct 23 (Reuters) - Political worries about the fate
of budgets and IMF-led bailout packages have undermined both the
Latvian and Romanian currencies in recent weeks while across
emerging markets investors are watching politics more closely
[].
Below is an overview of the current political situation in
emerging European Union states.
BULGARIA
Roughly 100 days after taking office, the approval rating of
Bulgaria's new centre-right government has risen after it took
steps to rein in endemic corruption and crime, an opinion poll
showed [].
Support for the ruling GERB party of Prime Minister Boiko
Borisov rose to 52 percent in October, up 12.3 percentage points
from the results of the July general election.
It aims for a balanced budget next year but has pencilled in
a deficit of 0.7 percent of GDP []. For the main
economic assumptions of the draft budget, double click on
[].
But the government was forced to abandon plans to increase
alcohol taxes which it had hoped would raise an extra $45
million a year for the health and pension systems.
[].
CZECH REPUBLIC
The Czech government fell earlier this year and now has a
technocrat administration. Elections had been scheduled for
October, but were delayed by a court ruling until next year.
This has allowed the current government of experts to pull
together a 2010 budget locking in a smaller deficit than this
year, thanks to tax increases and spending cuts aimed at
protecting the country's relatively secure financing position.
Parliament approved the 2010 budget on Friday in the first
of three readings, with the final vote expected in December.
Overall spending and revenue cannot be changed in the further
readings, but deputies may shift money from one department to
another. [].
Another risk for the Czech Republic -- that it might end up
blocking the EU's Lisbon Treaty -- seems to be receding.
President Vaclav Klaus welcomed a proposal by the EU presidency
for removing his objections to signing the document, increasing
the chances of it going into force []
HUNGARY
Hungary's main political challenge is passing its 2010
budget, with the socialist-backed government aiming to cut the
deficit to 3.8 percent of GDP from 3.9 percent this year under
its agreement with the IMF. Parliament is due to vote on Nov. 3.
The centre-right opposition Fidesz party, which has a big
opinion poll lead over the minority socialists [],
has already said it would repeal or rewrite the budget if it
wins elections scheduled for April or May.
Thousands of protesters met in front of parliament earlier
this month to denounce the budget[], and
firefighters and railway workers have gone on strike
[].
POLAND
The relative strength of the economy and resulting
popularity of Poland's government has allowed the country
largely to avoid some of the political, economic and market
problems seen elsewhere.
Opinion polls this week showed a jump in support for the
ruling Civic Platform (PO) after Prime Minister Donald Tusk
dealt firmly with a lobbying scandal which had threatened to
hurt the image of his centre-right government [].
Tusk ditched four ministers and four aides earlier this
month after allegations that some had had contacts with
businessmen trying to dilute plans to raise gambling taxes. All
have denied any wrongdoing.
Tusk can ill afford to let any whiff of corruption
undermined his party's support before next year's presidential
and municipal elections, in which he is widely expected to
challenge incumbent President Lech Kaczynski.
LATVIA
Badly affected by the economic crisis, Latvia lost one
government earlier this year, and tension within its ruling
coalition continues to pressure the lat <EURLVL=> and raise
worries about an IMF/EU bailout.
The key issue is whether Latvia will make good on promises
to cut 500 million lats ($1 billion) from its planned 2010
budget deficit, a requirement of the 47.5 billion euro package.
Sweden, currently president of the European Union and home
to the banks most exposed to Latvia, had accused the government
of backtracking on its pledges. Latvia said in mid-October it
would fulfil its promises to international lenders
[], although this requires the coalition to endure.
Latvia's finance minister suspended the head of the tax
office on Thursday, with local media speculating this may raise
tensions in the coalition and possibly prompt its collapse
[].
Investors, analysts and policymakers still worry that any
failure of the deal would prompt an immediate devaluation of the
lat. This might damage the rest of the region and leave the EU
with a massive bill to recapitalise banks -- although the risk
of wider contagion is seen falling as the economic crisis
recedes [].
Prime Minister Valdis Dombrovskis backed away on Thursday
from a tough creditor protection plan that would have protected
domestic creditors against the mainly Swedish banks that
dominate the Baltics. Swedbank <SWEDa.ST>, the largest, had said
it would review its operations in Latvia if the idea became law
[].
ROMANIA
The collapse of Romania's government this month put the leu
<EURRON=> under pressure, raising concerns about a 20 billion
euro IMF-led aid package.
The IMF will begin a second review of the package from Oct.
28 to Nov. 9 with teams from the European Commission and World
Bank, but says a follow-up mission may be needed due to "ongoing
political developments" [].
The IMF says successful completion will require a
broad-based political commitment to a 2010 budget with a deficit
no higher than 5.9 percent of GDP.
President Traian Basescu chose a respected central banker to
form a new government, but opposition parties have refused to
back him, extending political deadlock before a presidential
election on Nov. 22. []
Basescu's public support tumbled in the latest opinion poll,
narrowly losing his lead for the first time since he came to
power in 2004 to opposition Social Democrat leader Mircea
Geoana, who walked out of government three weeks ago.
[]
Economists say a Social Democrat-led administration would be
less fiscally restrictive than its predecessor, possibly making
it more difficult to slash budget costs to meet IMF terms.
