Incoming Romanian PM sets cabinet to calm markets

BUCHAREST (Reuters)

Prime Minister-designate Emil Boc unveiled a centrist cabinet on Sunday aimed at reassuring international lenders propping up Romania's shaky economy. The key finance ministry portfolio has been awarded to former minister Sebastian Vladescu, a technocrat and member of a centrist coalition government in 2005-2007. Parliament is expected to vote on the cabinet on Wednesday with approval all but guaranteed since Boc's coalition has five votes more than the 236-seat majority needed in both houses.

Boc, who has been in a caretaker role since he lost a parliamentary confidence vote in October, said he planned to send a cost-cutting 2010 budget bill to parliament in early January and unblock a 20 billion euro ($28.78 billion) IMF-led aid package. The IMF halted a review of Romania's aid package in November after Boc's government collapsed, extending a policy deadlock and delaying badly needed aid, vital to help Romania avert plunging deeper into recession.

"I propose a slimmer cabinet ... its main task will be to continue modernising the state, relaunch the economy ... observe commitments under international arrangements with the IMF, the European Commission and the World Bank," Boc told reporters. "The next six months will be difficult but we hope we can talk about consistent economic growth by the end of next year."

The proposed government of 17 ministers against a current 21 posts will face three years with no elections if it is not ousted prematurely. Boc's line-up is built around his Democrat-Liberal party and includes an ethnic Hungarian party and independent allies. It retains six ministers from his outgoing team, including Economy Minister Adriean Videanu and Justice Minister Catalin Predoiu.

Boc reiterated his pledge to keep the corporate and income flat tax of 16 percent and of the 19 percent value added tax unchanged during his term.

Analysts say Boc's wafer-thin majority can solve a political crisis short term but may foster long-term instability since after months of wrangling feuding parties look no closer to setting aside differences to tackle urgent reforms.