God forsake the deficit

How does having the largest deficit in Europe sound like? Not an achievement to be proud of, but rather one to decry when the 10y yields are the highest amongst EU member states and when your sovereign rating is barely above junk status.

Romania finds itself in a situation from which escape is difficult, if not outright impossible. The governmental deficit (cash, not ESA) will be around 8,4% by the end of 2025. It decreased compared to 2024, but it will miss the forecasted target for 2025 by 2,1%.

But how bad can it be?

Bad. In order to correct the fiscal deficit, in July 2025 the government imposed austerity measures, most taking effect the following month. In other words, the government had 7 months to take action on the growing deficit, but had to wait. Why?

Well, last year Romanians voted in all imaginabile elections: local, regional, national, european and presidential. Business as usual for the local, regional and european with mainstream parties maintaining their hold onto power.

November comes and we get some "sandwiched" elections, weekly having to go to the polls:

1st week: presidential.

2nd week: national (parliament).

3rd week: second presidential round.

The logic was simple: cram the national in-between the presidential rounds. Why? The strategy was for one of the mainstream parties (PNL - liberals or PSD - social democrats) to win the first presidential round, which would have given them even more votes in national. PNL and PSD have run the country together for the past years. Getting more votes would have meant a stronger alliance, right?

The logic collapsed right from the beginning. The first round of the presidential election were won by a far-right candidate coming out of nowhere - Călin Georgescu - and Elena Lasconi, a mayor from a small Romanian town with no clear platform behind aside from fighting corruption (USR).

Both mainstream parties lost. A week later, parliament elections, and the mainstream parties lost seats, but still get enough to form a majority in order to rule the country. The far-righters are the big winners.

With a week left until the final presidential round, the country split into two different emotions: anxiety and excitement. Some were anxious about the prospects of a guy coming out of nowhere with connections to a mercenary group to run the country, while others were excited about a new, prophet-like figure, coming to rescue the Romanians.

The Constitutional Court annulled the election on the basis of foreign interference and lack of fairness. Călin Georgescu claimed to not have spent a single dollar, while, in fact, later investigations showcased that millions were thrown in the battle.

A new date was decided: May 2025. The Mayor of Bucharest was set to enter the battle, the mainstream coalition parties that formed a government brought back an old liberal politician and Georgescu was barred from running.

In the meantime, the deficit was making headlines, breaking record numbers while politicians reassured the nation that it will be okay. They froze public sector wages, froze the public pensions, limited public spending, hoping that it will go down.

The big issue is that Romania has the governmental revenue of a fiscal paradise, whilst not being one. The deficit was never solely about expenses (below EU average).

Though how can you raise revenues without throwing the country in the far-right embrace? Well, you do not. You wait. You put those public costs measures in place and wish for a favorable result in May.

What happened?

The mainstream guy lost. The far-right candidate, George Simion, got around 41% of the votes and the May of Bucharest came in second. The government collapsed, shooting 10y yields to a value it has not seen in decades.

And the rest is history. More to come.

A little about myself: I left Romania in my youth and traveled the world, lived in Italy (UWC Adriatic), graduated from Bowdoin College and later hopped places on a Watson Fellowship. I am now back in Romania, consulting on legal and economic affairs various trade unions, progressive organizations and working closely with the government.

My work is primarily in Romanian, you can find it here or here .