By Radu-Sorin Marinas and Matthias Williams
BUCHAREST (Reuters) - Romanian Prime Minister Victor Ponta could face a leadership challenge next year from within his own ranks, as the ruling Social Democrat party looks to contain the fallout from an embarrassing presidential election defeat.
Senior party officials told Reuters that the Social Democrats (PSD) may hold a special congress in February or March to take stock, after Ponta surrendered a ten-point lead to lose last Sunday's election to underdog Klaus Iohannis.
Political squabbles have hobbled Romania's development in the 25 years since the eastern European country emerged from Communist rule, and noises against Ponta's leadership are an early sign of the instability that could follow his defeat.
"Political structures in the PSD could decide to hold a congress in the next months," said a senior PSD official, who spoke on condition of anonymity. "If a congress is agreed, of course Ponta's position as leader will be challenged."
Backed by a well-oiled party machine, Ponta led opinion polls throughout the campaign and comfortably beat Iohannis in the first round. Shrugging off several scandals, Ponta courted voters with tax cuts and pension hikes, and touted his record of easing austerity measures since he took power two years ago.
But his leadership became the focus of anti-government protests that erupted during the election. Long queues and bureaucratic hassles prevented many overseas Romanians, the majority of whom were against Ponta, from voting. The uproar helped turn the tide in Iohannis's favor.
His critics see Ponta as a throwback to the bad old days of one-party rule in Romania, and they feared that as president he would try to undermine the independence of the judiciary and reverse the country's fragile progress in tackling corruption.
That could hurt the party's chances at it gears up for local elections and then a general election due at the end of 2016.
"There might be challenges to the current leadership of the party, no one can predict more at this stage," another senior ruling party leader said. "We may need to reform our party, to find out why young people are not with us, why young people still perceive us a communist party," he added.
Despite the discontent among the party top brass, nobody has yet broken cover to emerge as a challenger to Ponta.
There is a precedent for a leadership challenge in Ponta's own rise to power. In 2010, he became Social Democrat leader in a special congress months after the party's candidate Mircea Geoana narrowly lost the last presidential election.
"(A congress) is said to be taking place in February, but the situation is so volatile that no one knows anything with certainty," PSD senator Serban Nicolae told Reuters.
For his part, Ponta has rejected talk of his resignation and vowed to stay on as prime minister as long as the party wants him to. He has rejected as political smears several allegations against him, such as that he was a spy in the 1990s or that he plagiarized large parts of his doctoral thesis.
Several high-profile ruling party members, including Ponta's own father-in-law, have been hit by corruption allegations in recent weeks. When challenged during a presidential debate, Ponta pointed to scandals that had dogged Iohannis's own camp.
"MAGNIFICENT BUDGET"
An ethnic German mayor whose run for president was backed by two center-right parties, Iohannis said on Tuesday his National Liberal Party might try to topple Ponta's government next year by forging new alliances in parliament.
Ponta's coalition has a comfortable-looking majority of nearly 60 percent in parliament and expects to survive the defeat, but Romania's history of political defections suggests the alliance could come unstuck as elections loom closer.
Iohannis's own party was a member of the government until February. The ethnic Hungarian UDMR party that joined the ruling alliance in its place has pledged to stay for now.
"We don't have an ideology, left, right. We, the UDMR, represent our community identity," Szabo Odon, a lawmaker from the UDMR, told Reuters. "So we need to see who is the one who can ensure further stability in Romania."
One incentive to keep Ponta in power for the moment is letting him be the face of the 2015 budget. Given Romania's need to keep spending tight while honoring the promises that Ponta made on the campaign trail, the budget could contain some unpleasant surprises.
"At the moment the PSD has an ample majority," said Vasile Blaga, the leader of the Democrat Liberals, one of the parties that backed Iohannis. "They have everything they need to come up with this magnificent budget, in which they promised to solve everything without raising taxes."
(Editing by Giles Elgood)