The fate of the Romanian government hung in the balance yesterday with Prime Minister Sorin Grindeanu refusing to resign in a political crisis that threatens to undermine a sweeping tax overhaul. Grindeanu's leftist Social Democrat Party (PSD) withdrew its support for his cabinet late on Wednesday. Independent observers said the PSD's decision reflected anger within the ranks over Grindeanu's failed attempt to decriminalize several corruption offences through decree.

The decree, seen as the biggest retreat on reforms since Romania joined the European Union in 2007, would have exempted abuse-of-power offences of sums below 200,000 lei ($48,000) from prosecution, shielding hundreds of politicians from justice.

Proposed weeks after Grindeanu, 43, took office after December's parliamentary election, the changes to anti-graft rules caused the largest street protests in Romania since the 1989 fall of communism. Grindeanu had to annul the decree.

Senior party members met to discuss next steps yesterday. PSD vice-president Ecaterina Andronescu said a vote of no-confidence against Grindeanu was a serious option. "It is clear as day this cabinet cannot function any more without our support," said Andronescu.

If Grindeanu refuses to go, the PSD can file a no-confidence motion in parliament and nominate a replacement. The PSD and its junior ally ALDE have a comfortable parliamentary majority.

Another senior PSD member who declined to be named said a vote in parliament could take place as early as Monday.

Under Romanian law, the president must endorse a premier after consultations with political parties. The nominee then must secure a vote of confidence in parliament.

President Klaus Iohannis's office said he would only appoint a new premier if the incumbent resigns or loses a confidence vote.

"President Iohannis requests the urgent resolution of the internal coalition crisis," spokeswoman Madalina Dobrovolschi said. "It is strictly the responsibility of parties in the ruling coalition."

For the PSD's tax changes to come into effect, they need to be approved six months before the enforcement date. So unless a new government approves tax changes this month it is doubtful they will be implemented from January 2018 as planned.

The changes would help rein in the fiscal gap as a 25 percent wage hike for about 1.2 million public sector workers needs to be partly offset by changes to the social security tax system that would bring more money into state coffers.

"The PSD stepped in to remove support for Grindeanu at the right moment. Just two weeks before parliament's summer recess. Grindeanu's decision to effectively block their graft-related plans to try to cushion corrupt officials have weighed decisively on his fate," said analyst Cristian Patrasconiu.