The authorities have not learned the lessons of the 2009-2010 crisis or from the agreements with the IMF that brought budgetary balance through austerity measures. Now, Romania is once again facing profound imbalances, especially in the budgetary area, and the correction could be harsh.
„There was not enough reflection here, there was no wisdom. We didn’t even learn from mistakes. Because we repeated the mistakes of the past decade in this decade,” said Daniel Daianu, the President of the Fiscal Council, in an interview with Prima News.
He warns that Romania is approaching a critical moment: "Perhaps there is this logic: we push the envelope now because we need to make investments, and then we enter a curve of sacrifice. And I say this without euphemisms. Romania will have a curve of sacrifice, not long from now. I'm sorry to say that."
Budget deficit at alarming levels
Last year, Romania ended with a budget deficit of 8.65% of GDP in cash terms, the highest in the region. Estimates for 2024 are even more worrying: the ESA deficit - the European standard - is already calculated at 9.28%. Romania has committed to reducing it to 7% by the end of this year, but the measures taken so far are considered insufficient.
"The space for reducing expenses is very small because pensions and public sector salaries have already been frozen. Measures are also needed to generate additional revenues, not just control expenses," explains Daianu.
According to him, to reach the 7% target, a correction of at least two percentage points of GDP is necessary.
External pressure and risks of downgrade
A recent analysis by Erste Group warns that Romania risks losing its "investment grade" rating if swift measures are not taken. "Paralyzed policy jeopardizes the country's rating," warns Erste, mentioning that the second fiscal package, crucial for consolidation, has been postponed due to the electoral year.
"The 7% target is in great danger," the Erste report states, noting that the estimated ESA deficit for 2024, at 9.3%, exceeds even that of 2020, the year of the pandemic.
Erste also estimates that without corrective measures, Romania could reach a public debt of over 100% of GDP by 2035, a dramatic increase from the current level of 55%.
Rating agencies are on alert
In recent months, all three major rating agencies have downgraded Romania's outlook from "stable" to "negative." This is a clear signal that investors expect serious and credible reforms, otherwise the state's financing costs could increase significantly.
"We are not in a hopeless situation, but if we do nothing, we will be forced to take much harsher measures. This is exactly what happened in 2010. The difference is that now we no longer have the excuse of surprise," warned Daianu.