What's going on in Moldova - and what next?

The new alliance, controlling 61 of the 101 seats in parliament, coalesced around the common goal of displacing from power the Democratic Party of powerful tycoon Vladimir Plahotniuc.

The former government refused to relinquish power and the Democratic Party deployed paid protesters to block access to governmental buildings. Tensions in the capital Chisinau increased.

This last Sunday was to be the make-or-break day as the new coalition planned to hold a mass rally in the centre of Chisinau and the risk of provocations and violence between supporters of the two camps was high.

Fortunately, this scenario was narrowly avoided as the US, the EU and Russia threw decisively their weight behind the new government, forcing Plahotniuc to cave in.

Over the weekend, as private jets evacuated prominent members of the Democratic Party and their allies, Moldovans celebrated the peaceful power transition.

Looking beyond the euphoria that surrounded the celebrations, the new government is facing many challenges.

What next?

The former Democratic Party government leaves behind a poisonous legacy: hollowed state institutions, a corrupt or controlled justice sector, shaky finances, shadow schemes of extracting state resources, large chunks of servile mass-media and a system of illegal interceptions practiced on a wide scale.

Addressing all these problems will likely be a tall order for the new government.

And the list of challenges does not end here.

The two sides of the new governing coalition are divided on many topics, most notably on the foreign-policy orientation of the country.

Dodon's Party of Socialists has also often supported Plahotniuc's initiatives and interests and is likely to pay lip service to comprehensive reforms of the state.

On the top of this, the agreement among the main international players which helped achieve a non-violent power transition might prove to be a short lived one. It is to be expected that Russia will strive to make the Socialists the dominant political force in Moldova.

While the acute phase of the crisis has been overcome, Moldova should remain in the focus of the European Union.

The EU, the most influential international partner of Moldova, has an opportunity to act. While the Republic of Moldova is a small and poor state, it sits at the EU's borders and has an association agreement with the EU.

Moreover, the EU has a substantial leverage over the country given its dependence on exports and aid from the EU and international financial institutions.

Thus, the EU can play a decisive role in helping Moldova reform after the recent developments.

This would matter not just for Moldova and the EU but stability in Moldova would also serve the interests of another of EU's and Moldova's neighbours – Ukraine.

The EU institutions and individual member states have already shown support to the new government. More needs to be done and it is in the EU interest to consider taking a number of actions that would pave the way for change in the country.

Moldova heavily depends on international donors. As the Democrats did not fulfil a number of EU and IMF's conditionalities, Moldova has missed important cash inflows from international partners.

Mass withdrawals?

This puts the incoming government in a difficult situation. The country's financial situation may be even worse if reports about massive withdrawals of money from the system during the last week will prove to be true.

In order to contribute to the financial stability of the country and support clear reform commitments of the new government, the EU and the international institutions will likely have to mobilise macro-financial assistance.

Over the last year, the Democrats worked to undo some of the banking sector reforms implemented earlier under external pressure.

They appointed a loyalist to run the central bank and sold the third largest bank in Moldova in a murky transaction before elections. Thus, the EU should pay special attention to this sector and consider sending advisors to assist Moldova in re-starting reforms of the banking system.

In recent years, the Republic of Moldova has shown that despite the development of relations with the EU, a country's state institutions can still be captured by oligarchic interests.

Thus, investment in independent state institutions, especially in the justice system, and support for a clean and competitive political system would be key for Moldova's development.

Given that the Constitutional Court has lost credibility by failing to maintain its independent role, the EU could start by deploying an EUJUST mission to support Moldova in reforming the institution.

The creation of anti-corruption courts staffed by judges selected with participation of international donors could also be considered.

Plahotniuc's Democratic Party constrained the participation of the sizeable Moldovan diaspora in politics and violated the rules of party finances.

As recently-released video recordings vividly demonstrate, Russia provided illegal funds to parties in Moldova.

The EU should consider measures that would support the Moldovan authorities in ensuring that the next elections are held with the respect of the highest electoral standards.

This would include insisting on and supporting the strengthening of the transparency of financing of political parties, the investigation of illegal party financing and the broadening of opportunities for the diaspora to participate in the political life of the country.

The European Union has a direct interest in the peaceful development of the Republic of Moldova but also the opportunity to support a neighbouring country going through a difficult and sensitive period.

While the tensest phase of the political crisis has passed, the reconstruction is in its very early stages and Moldova will need its international partners by its side.

This year, the EU and its neighbours celebrate 10 years of their Eastern Partnership initiative, and, as the EU has learned over the past decade, inactivity and disengagement in the neighbourhood often costs more than a pro-active and forward-looking policy.