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Published: Friday February 7, 2014 MYT 3:00:09 AM
Updated: Friday February 7, 2014 MYT 3:01:08 AM

Romanian finance minister quits, party sources blame policy row

BUCHAREST (Reuters) - Romanian Finance Minister Daniel Chitoiu resigned from the coalition government on Thursday, a move two senior party sources said came after he lost the support of his Liberal Party in a policy row.

The sources told Reuters that Chitoiu had failed to keep his party informed about a plan by its partners to reschedule the bank debts of low-income borrowers for two years. The policy is seen as a populist appeal to poorer voters in an election year.

"He resigned, he was blamed for not discussing those plans with the party," one source said.

Health Minister Eugen Nicolaescu is set to take over, the sources said, adding an announcement on this would be made on Friday.

Political squabbling has set back Romania's development for most of the 24 years since the fall of communist rule. Its economy trails other emerging EU countries such as Poland and the Czech Republic.

But Chitoiu's exit is unlikely to unnerve investors, even at a time of turbulence in emerging markets. A key aid deal with the International Monetary Fund - crucial to the country's credibility - was secured earlier this week. Moreover, the finance minister's responsibilities were diluted in 2012 with the creation of a separate budget ministry.

"A new minister will be appointed, so it really doesn't matter," said Ionut Dumitru, the chief economist at Raiffeisen Bank in Bucharest. "We have a deal on track with the IMF and commitments that are underway, and investors know this."

Chitoiu, an economist, has also served as a deputy prime minister since 2012. After news of his exit broke, he told reporters he was leaving the government to focus on party activity for the upcoming elections.

Chitoiu's departure was agreed in a closed-door meeting of senior Liberal party members. It signals the rising political temperature in the European Union's second-poorest member ahead of presidential and EU elections this year.

Prime Minister Victor Ponta has envisaged a scheme for Romanian borrowers who earn less than 1,601 lei (£300.02) per month and do not have debts older than three months, to halve their monthly instalments for two years.

His Social Democrat party has governed Romania in coalition with the Liberals since late 2012, an alliance that holds more than two-thirds of the seats in parliament.

Chitoiu had thrown his weight behind the proposed bank lending scheme, which he announced on Monday. But the Liberal party has not publicly endorsed the policy and several senior party members had torn into Chitoiu for backing it.

The IMF mission chief to Romania told Reuters on Tuesday improved macroeconomic fundamentals have helped the Black Sea state withstand recent turbulence in emerging markets, but it must be careful to avoid market uncertainty in an election year.

The IMF struck an agreement with Bucharest this week over a 4 billion euro ($5.44 billion)standby aid facility, despite disagreements over an excise tax on fuels between Ponta and the president, Traian Basescul. ($1 = 0.7353 euros)

(Editing by Matthias Williams and Toby Chopra/Larry King)

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