Romania's ruling Liberals to negotiate new cabinet with rival leftists

BUCHAREST (Reuters) - Romania's ruling Liberals late on Monday chose to negotiate a new parliamentary majority with their former rivals, the opposition leftist Social Democrats (PSD), rather than rebuild a centrist coalition government which splintered two months ago.

Political infighting has extended a policy deadlock at a time the European Union state grapples with rising energy costs and its deadliest COVID-19 wave since the start of the pandemic as vaccine uptake is the second-lowest in the bloc.

The Liberals "decided with an absolute majority of votes to begin negotiations with PSD to coagulate a majority which ensures Romania has the stability needed to overcome political and sanitary crises," the party said in a statement.

A resulting coalition will include the Liberals' current junior ally, ethnic Hungarian party UDMR.

However, talks will likely take weeks, PSD leaders said, adding their list of demands included hikes in pensions, child subsidies and the minimum wage. Romania is struggling to contain large budget and current account deficits.

Negotiations will likely be fraught, as not all Liberals support an alliance with the Social Democrats. The party came to power in a general election in late 2020 strongly campaigning against efforts by the PSD to weaken the fight against corruption and the rule of law.

The PSD, parliament's biggest party with 157 seats to the Liberals' 134, is also likely to request key ministries.

President Klaus Iohannis, who retains a firm grip on the Liberal Party and who has the final say in designating a prime minister, will also complicate negotiations.

The Liberals chose against rebuilding a centrist coalition with former ally USR Plus, which withdrew from the cabinet in a row over a controversial regional development fund in early September, stripping Prime Minister Florin Citu of a parliamentary majority.

Nearly a third of all COVID-19 deaths in Romania since the onset of the pandemic early last year have occurred in just the past few weeks as daily infection numbers have soared to record highs and hospitals ran out of intensive care beds.

(Reporting by Luiza Ilie; Editing by Dan Grebler)