Reactions to the fiscal measures announced by the government

While the government says that the unpopular measures announced are absolutely necessary, those affected are threatening to strike

Corina Cristea, 04.07.2025, 14:00

A combination of tax increases and spending cuts, to be applied at least until the end of next year, is the recipe that the government in Bucharest intends to use to extricate Romania from its complicated financial situation, marked by a very large budget deficit. The figures show that, from 2021 to the present, budget expenditure has increased by 43 per cent, and public debt is approaching 1.1 trillion lei (approximately 220 billion euros), or 58 per cent of the GDP. Recovery is imperative, say the Romanian authorities, as this will determine whether the country will be downgraded by rating agencies to a level not recommended for investment.

Romania cannot afford to be classified as junk, which would come with higher interest rates on the loans that Bucharest is forced to resort to. The first package of measures aimed at correcting the excessive deficit, for which the executive has decided to take responsibility in Parliament, includes, among other things, two VAT thresholds of 11% and 21% respectively, an increase in excise duties on cigarettes, alcohol and fuel, the payment of health insurance by people with pensions over 3,000 lei (600 euros), a two-hour increase in teaching hours and a reduction in the amounts paid for sick leave for common illnesses, additional taxation of bank profits and at least 30% of gambling winnings, but also restricting the group of public sector employees who will receive holiday vouchers. Predictably, the measures have generated discontent among those affected, many of whom have already resorted to spontaneous protests after the government decided to restrict bonuses.

Thursday’s dialogue between the major trade union confederations and Prime Minister Ilie Bolojan has not, at least so far, produced the effect expected by employee representatives. They have pointed out that the fiscal measures to reduce the budget deficit are focused solely on employees and pensioners and that, without a uniform distribution of the effort to cut spending, there will be more and more social conflicts. There is a risk of growth in the grey and black economies and, of course, of certain businesses closing down because they will no longer be profitable, say businesspeople.

From the sovereignist opposition, the Alliance for the Union of Romanians (AUR) believes that the measures announced by the government will cause a shock to the country’s economy. As an alternative, AUR proposes, among other things, an immediate reform of the political system by reducing the number of MPs, cutting budget expenditure by 15% over two years and ending Romania’s financial and logistical contribution to the continuing war in Ukraine. Forced to come up with unpopular measures and determined to bring order to the budgetary system, the prime minister says that by the end of this month, other measures will be adopted related to special pensions, state institutions – through spending cuts and reorganisation – and state-owned companies – whose subsidies will be reduced, requiring them to spend efficiently and perform well. (MI)