The first package of fiscal measures
Prime minister Ilie Bolojan has unveiled the first package of fiscal measures the government is seeking to implement.
Roxana Vasile, 03.07.2025, 14:00
Prime minister Ilie Bolojan on Wednesday unveiled in a press conference the austerity measures that will come into effect in Romania as of August 1st. The reason for these extremely unpopular measures is the country’s immense budget deficit, which risks causing Romania to fall into what rating agencies call the “junk” category, namely one not recommended for investment.
In order to make savings to the budget, the government has introduced two types of VAT duties, both of which have gone up, of 11 and 21%. The 11% tax will be levied on medicine and food, public services like water and sewerage, as well as irrigation, books, firewood and thermal energy. This level will also be valid for the hospitality industry, at least until October. The rest of products will see a 21% VAT. Excise duties will go up by 10% on alcohol, fuel and cigarettes, except that the diesel oil used on Romanian territory by passenger transport companies will be subject to a financial compensation scheme.
Public sector salaries and pensions will be frozen until the end of next year. Pensions of over 3,000 lei (the equivalent of some 600 euros), will contribute 10% to health insurance, and some reliefs will be eliminated, so that the number of contributors to the system will go up from a little over 6 million today to more than 8 million. The number of lecture hours in the pre-university and university system will go up, leading to savings on the number of teachers paid by the hour. The granting of school grants will also be amended. An increase in dividend tax or an additional tax on bank profits are being considered from 1st January next year. Banks in Romania are enjoying some of the best returns in this part of Europe. A surcharge will be levied on earnings from gambling.
Moreover, prime minister Ilie Bolojan says more fiscal measures will be announced by the end of the month, such as spending cuts and the reorganisation of state institutions and companies. In the meantime, the coalition government formed by the National Liberal Party, the Social Democratic Party, the Democratic Union of Ethnic Hungarians in Romania and the Save Romania Union wants the first measures announced to be adopted as soon as possible by taking responsibility for them in Parliament.
Trade unions are highly critical of the measures and are warning that they will lead to more inflation and a drop in the purchasing power. The Ombudsman was requested to warn the Constitutional Court about an emergency order providing for cuts in the bonuses of public sector employees and thus a decrease in salaries. Protests have in the meantime continued across the country in various public sector areas. Education trade unions said they would stage a protest next week, while students took to the street as early as last week. Strikes are not being ruled out, either.
